James Giffen, Who Was Embroiled in Kazakhstan Bribery Case ‘Kazakhgate,’ Dies at 81

 

"The government charged him with funneling $78 million in bribes to Kazakhstan, but dropped the case after a judge decided he had acted with C.I.A. approval.

James H. Giffen, an American businessman with close ties to the president of Kazakhstan who became embroiled in one of the largest international bribery cases in U.S. history, only for a judge to effectively throw out the charges after it emerged that Mr. Giffen had been working with the C.I.A.’s approval, died on Oct. 29 in Manhattan. He was 81.

His son, David, said the cause was cancer.

At the time of his arrest, in March 2003, Mr. Giffen was one of the best-connected Americans working in the former Soviet Union.

His merchant bank, Mercator, was a critical go-between for Western energy companies eager to exploit Kazakhstan’s vast, largely untapped oil fields. He was a close friend and counselor to Kazakhstan’s president, Nursultan Nazarbayev, and kept a luxury apartment in Almaty, the country’s largest city and its former capital.

And all along, he was a back channel operative for the Central Intelligence Agency and the State Department.

Washington was eager to bring Kazakhstan and its resources into the Western fold, especially in the 1990s, and Mr. Giffen was a valuable asset in that campaign.

He briefed government officials on the latest developments in Central Asia, carried sensitive messages between Mr. Nazarbayev and the White House, and was often the first American called on by the Kazakhs when they wanted to engage with the U.S. government.

“He was Washington’s de facto ambassador to Kazakhstan,” wrote Robert Baer, a former C.I.A. case officer, in his book “See No Evil: The True Story of a Ground Soldier in the CIA’s War on Terrorism” (2002).

The 2005 film “Syriana,” loosely based on Mr. Baer’s memoir, includes a fictionalized version of Mr. Giffen, played by Tim Blake Nelson.

By the time the film came out, Mr. Giffen’s luck had changed. Since the late 1990s, the Department of Justice had been investigating his control over a series of Kazakh-owned Swiss bank accounts and offshore shell companies, working off a tip from Dutch prosecutors who had in turn been tipped off by one of Mr. Nazarbayev’s political opponents.

The resulting charges claimed that Mr. Giffen had funneled some $78 million in payments from oil companies into the pockets of top Kazakh government officials, including Mr. Nazarbayev. The scandal became known as Kazakhgate, and at the time it was the biggest case ever brought under the Foreign Corrupt Practices Act, which makes bribing foreign governments or companies illegal.

Mr. Giffen’s lawyers argued that whatever he did had been with the U.S. government’s tacit approval, if not its explicit direction. During the discovery phase of the trial, the lawyers asked the C.I.A. and other agencies for documents to prove their claim, but they were repeatedly rebuffed.

The case dragged on for seven years, until the C.I.A., partly relenting, agreed to let the judge, William H. Pauley III, read some of the documents without making them public.

Whatever Judge Pauley read turned him swiftly against the government. The Justice Department eventually dropped all but a misdemeanor charge — for failing to check a box on his tax returns. Mr. Giffen was ordered to pay a $25 fine. Mercator was also fined $32,000 for giving two snowmobiles to a top Kazakh official.

Judge Pauley was unsparing in his praise for Mr. Giffen, who, while still a wealthy man, had lost a significant amount of his fortune and career fighting the case.

“In the end, at the age of 69, how does Mr. Giffen reclaim his good name and reputation?” the judge wrote. “This court begins that process by acknowledging his service.”

 

James Henry Giffen was born on March 22, 1941, in Stockton, Calif., the son of Lloyd Giffen, a haberdasher, and Lucille (Threlfall) Giffen, a kindergarten teacher. He studied political science at the University of California, Berkeley, graduating in 1962, and received a law degree from the University of California, Los Angeles, in 1965.

His marriage to June Hopkins ended in divorce. After living for several decades in Westchester County, he moved to Manhattan. He died in a hospital there. Along with his son, he is survived by his daughter, Allison Giffen; his partner, Terry Nixon; his brother, Richard Crane; and four grandchildren.

Mr. Giffen developed his interest in the Soviet Union after his father-in-law predicted that despite the Cold War, trade between the communist bloc and the West would someday increase. Mr. Giffen turned his law-school thesis into a book, “The Legal and Practical Aspects of Trade With the Soviet Union,” which was published in 1969.

On a research trip to the Soviet Union he met a Turkish-Armenian businessman named Ara Oztemel, who, among other endeavors, imported valuable metals from Kazakhstan. Mr. Oztemel hired Mr. Giffen to run an in-house consulting service for companies looking to do business with the communist East.

Over the next 20 years he became a leading expert on trade with the Soviet Union — and one of its top benefactors.

After several years with Mr. Oztemel, he became a vice president at Armco Steel and founded Mercator in 1984.

Mr. Giffen was among the first Western businessmen to meet Mikhail Gorbachev, discussing agriculture imports just months before he became the Soviet premier in 1985. A few years later, as the president of the U.S.-U.S.S.R. Trade and Economic Council, he chartered a jumbo jet to take several hundred American business executives to Moscow, where Mr. Gorbachev joined them for dinner.

Starting in the 1970s, Mr. Giffen became a key voice in the American government to help Soviet Jews emigrate, eventually helping to bring tens of thousands to the United States.

The fall of the Soviet Union in 1991 brought new opportunities, especially in Kazakhstan, where Mr. Giffen’s expertise in the energy and metals sectors brought him in close contact with Mr. Nazarbayev. The two became close friends: Mr. Giffen taught the Kazakhstan president how to play golf at Winged Foot, a private golf club near his home in Westchester County, N.Y.

The revelation about Kazakhstan’s Swiss bank accounts was deeply embarrassing to Mr. Nazarbayev, who repeatedly lobbied President George W. Bush to drop the bribery case. It is unclear whether such pressure played a role in the Justice Department’s decision to reduce the charges to a misdemeanor.

Not everyone felt that Mr. Giffen was the patriot that Judge Pauley declared him to be. To others he was simply acting in his own interest, which happened to overlap with that of the American government.

“In my view, you have got to stretch pretty hard to think Giffen was a hero for U.S. interests,” Raymond Baker, an expert on global financial regulations and the author of the forthcoming book “Invisible Trillions,” said in a phone interview.

Yet Mr. Giffen was also a victim of shifting government priorities. The Foreign Corrupt Practices Act had been in effect for decades but rarely enforced. He was hardly alone in thinking that it was OK to grease the wheels of global commerce, especially with the C.I.A.’s endorsement. When the Department of Justice decided to start taking the law seriously, Mr. Giffen became its first big catch.

“Is it fair for an enforcement agency to not enforce a law on the books for 25 years, and then one day announce to the world that it will begin enforcing the statute in connection with conduct that occurred during that 25 year period?” Andy Spalding, senior editor of The FCPA Blog, said in an email. “In many ways, that is the Giffen question.””

The security case for bringing home manufacturing is obvious. Is there an economic one?

"ATTITUDES TO MANUFACTURING were a small but telling split in the cold war. The Soviet Union had such a focus on industry that its statisticians kept services from the country's measure of national income. A year after the conflict ended, Michael Boskin, then the White House's chief economist, is said to have joked it did not matter whether the "chips" America produced were made from semiconductors or potatoes. There are echoes in the present geopolitical face-off. Xi Jinping, China's president, is so focused on hard tech that he has cracked down on consumer-tech firms.

But Mr Boskin's laissez-faire approach is no longer in vogue among Western policymakers. They have introduced a sweep of policies intended to "onshore" manufacturing. In July America's Congress passed the Chips and Science Act, which will dole out $52bn to the chip industry over five years, mostly to subsidise domestic production. Japan and Europe are also spending big on chips. The majority of the EU's [euro]43bn ($49bn) package will subsidise "mega fabs", or cutting-edge chip-fabrication plants. In August America also passed a climate-change package, worth nearly $400bn, stuffed with "made in the USA" subsidies to be spent over ten years. West Virginia is getting wind farms; electric-vehicle battery factories are coming to Ohio.

Arguments for onshoring fit into two categories. The first concern security. More than 90% of advanced chips, many needed for manufacturing weapons, are made in Taiwan--far closer to China than is comfortable for the West. The second concern economics. Advocates claim that manufacturing can create mountains of well-paid jobs. Economists are doubtful. A paper published in 2018 by Teresa Fort of Dartmouth College, Justin Pierce of the Federal Reserve Board of Governors and Peter Schott of the Yale School of Management finds that the number of jobs in American manufacturing has fallen considerably since 2000, but output has not. That is in part because American industry has become more technologically intensive and therefore productive. It is thus unlikely more high-tech factories will mean many more jobs.

But there is another, more subtle economic case for onshoring. Gary Pisano and Willy Shih, both of Harvard Business School, argue that there can be broader "spillover" benefits to innovation from having a strong manufacturing base. One way this happens is when research and development (R&D) on products is done next to the manufacturing of them. This eases collaboration between the two stages, which is especially important in the early days of new products. A working paper by Teresa Fort of Dartmouth University, Wolfgang Keller of the University of Colorado and colleagues looks at innovation among American firms. It finds that those that locate their manufacturing near their R&D produce more patents and citations. Indeed, the smaller the geographic distance between the manufacturing and innovation arms of a firm, the more innovation ensues.

What about when firms deem it better value-for-money to move production elsewhere? Another working paper by Lee Branstetter, then of Carnegie Mellon University, Britta Glennon of the University of Pennsylvania and colleagues, examines just that. In 2001 Taiwan lifted rules banning the offshoring of production to China, but only for some products. The study finds that offshoring did reduce the quantity of patents related to these products. But it also freed up resources for R&D in adjacent types of products, leading to more patents in these areas.

Mr Pisano and Mr Shih suggest that the benefits of locating R&D and manufacturing near one another depends on the type of work. For instance, when your columnist researched and wrote this article, there was no reason for him to be located near the printer or distributor of The Economist because software neatly separates the two steps . By contrast, new biotech drugs often require R&D to be near production facilities, because drug design is closely linked to the manufacturing process. Semiconductors, the subject of many of the recent round of industrial policies, lie somewhere in between these two types of work. A few firms like Nvidia, in California, only design chips and send the designs overseas to be made by other companies like TSMC, a Taiwanese chip firm. But Taiwan also has a burgeoning chip-design industry, in part because of its advanced-manufacturing prowess, which makes it easier for startups to prototype and test new ideas.

To subsidise or not to subsidise

That manufacturing sometimes boosts innovation does not justify the enormous price tag carried by subsidies. Even many economists who sing industry's praises concur. Governments tend to be poor at picking industries and technologies to support. And as Mr Pisano notes, if there truly were big enough benefits to be found from moving R&D and manufacturing near one another, firms would do it themselves.

The case of American competition with Japan in the 1980s and 1990s offers a useful parallel. Just like now, policymakers in Washington worried about losing market share in advanced-tech manufacturing. But as Mr Branstetter and colleagues noted in a paper in 2013, a falling market share did not stop American firms from better capitalising on the software boom that followed. One difference between the countries was openness to immigration. American firms could simply draw on a bigger pool of programmers. Mr Branstetter also notes that Japan's government incentivised hardware manufacturing, delaying a pivot to software.

In a twist of fate, such openness to foreign talent may support manufacturing at home. Another working paper by Ms Glennon finds strong evidence that restrictions on H1 B visas, which are intended for employment of high-skilled foreigners, lead to more offshoring, as firms are forced to head abroad for talent. That is an inconvenient finding for the many politicians who both support domestic manufacturing and are loth to increase immigration.” [1]

·  ·  · 1. "Biden's billions; Free exchange." The Economist, 5 Nov. 2022, p. 70(US).

Gamybos pervežimo į gimtinę saugumo pagrindais pliusas yra akivaizdus. Ar yra akivaizdus ir ekonominiais pagrindais?

"POŽIŪRIS Į GAMYBĄ buvo nedidelis, bet daug pasakantis, šaltojo karo skilimas. Sovietų Sąjunga taip susitelkė į pramonę, kad jos statistikos specialistai neįtraukė paslaugų į šalies nacionalinių pajamų matą. Teigiama, kad praėjus metams po konflikto pabaigos Michaelas Boskinas, tuometinis Baltųjų rūmų vyriausiasis ekonomistas, juokavo, kad nesvarbu, ar Amerikoje gaminami „lustai“ (angl., chips) buvo pagaminti iš puslaidininkių, ar iš bulvių (angl. taip pat chips). Dabartinėje geopolitinėje akistatoje yra atgarsių. Xi Jinpingas, Kinijos prezidentas, yra taip susikoncentravęs į kietąsias technologijas, kad ėmėsi griežtų veiksmų prieš vartotojų technologijų įmones.

Tačiau pono Boskino „laissez-faire“ požiūris nebėra dabar madingas tarp Vakarų politikos formuotojų. Jie įvedė daugybę politikos priemonių, skirtų gamybai „gimtinėje“. Liepos mėnesį Amerikos Kongresas priėmė lustų ir mokslo įstatymą, pagal kurį per penkerius metus lustų pramonei bus skirta 52 mlrd. dolerių, daugiausia siekiant subsidijuoti vidaus gamybą. Japonija ir Europa taip pat daug išleidžia lustams. Didžioji ES [eurų] 43 mlrd. (49 mlrd. dolerių) paketo dalis bus subsidijuojanti „megafabs“ arba pažangiausioms lustų gamybos įmonėms. Rugpjūčio mėn. Amerika taip pat priėmė klimato kaitos paketą, kurio vertė beveik 400 mlrd. dolerių.  Vakarų Virdžinija gauna vėjo jėgaines; į Ohają atvyksta elektrinių transporto priemonių akumuliatorių gamyklos.

Argumentai dėl paramos suteikimo suskirstyti į dvi kategorijas. Visų pirma, tai susiję su saugumu. Daugiau, nei 90 % pažangių lustų, kurių daug reikia ginklams gaminti, yra pagaminta Taivane – daug arčiau Kinijos, nei patogu Vakarams.

 Antrasis susijęs su ekonomika. Advokatai tvirtina, kad gamyba gali sukurti kalnus gerai apmokamų darbo vietų. Ekonomistai abejoja. 2018 m. publikuotame Teresos Fort iš Dartmuto koledžo, Justino Pierce'o iš Federalinio rezervo valdytojų tarybos ir Peterio Schotto iš Jeilio vadybos mokyklos 2018 m. nustatyta, kad nuo 2000 m. darbo vietų Amerikos gamyboje gerokai sumažėjo, tačiau gamyba – ne. Taip yra iš dalies dėl to, kad Amerikos pramonė tapo technologiškai intensyvesnė ir todėl produktyvesnė. Todėl mažai tikėtina, kad daugiau aukštųjų technologijų gamyklų sukurs daug daugiau darbo vietų.

Tačiau yra ir kitas, subtilesnis ekonominis perkėlimo į žemę atvejis. Gary Pisano ir Willy Shih, abu iš Harvardo verslo mokyklos, teigia, kad turint stiprią gamybinę bazę naujovėms gali būti teikiama platesnė „išsiliejimo“ nauda. 

Vienas iš būdų, kaip tai nutinka, yra tada, kai produktų moksliniai tyrimai ir plėtra (MTEP) atliekami šalia jų gamybos. Tai palengvina bendradarbiavimą tarp dviejų etapų, o tai ypač svarbu ankstyvomis naujų produktų kūrimo dienomis. Teresos Fort iš Dartmuto universiteto, Wolfgango Kellerio iš Kolorado universiteto ir kolegų darbiniame dokumente nagrinėjamos Amerikos firmų naujovės. Nustatyta, kad tie, kurie gamina šalia MTTP, pateikia daugiau patentų ir citatų. Iš tiesų, kuo mažesnis geografinis atstumas tarp įmonės gamybos ir inovacijų šakų, tuo daugiau naujovių atsiranda.

O kaip tada, kai įmonės mano, kad kainos ir kokybės santykis yra geresnis perkelti gamybą kitur? Kitame Lee Branstetter, tuometinio Carnegie Mellon universiteto, Britta Glennon iš Pensilvanijos universiteto ir kolegų darbo dokumentas nagrinėja būtent tai. 2001 m. Taivanas panaikino taisykles, draudžiančias gamybą perkelti į Kiniją, tačiau tik kai kuriems produktams. Tyrime nustatyta, kad perkėlimas į užsienį sumažino su šiais produktais susijusių patentų skaičių. Tačiau tai taip pat atlaisvino išteklių gretimų produktų tipų tyrimams ir plėtrai, todėl šiose srityse atsirado daugiau patentų.

P. Pisano ir J. Shih teigia, kad MTEP ir gamybos arti vienas kito nauda priklauso nuo darbo pobūdžio. Pavyzdžiui, kai jūsų apžvalgininkas tyrinėjo ir parašė šį straipsnį, nebuvo jokios priežasties jam būti šalia „The Economist“ spausdintuvo ar platintojo, nes programinė įranga puikiai atskiria du veiksmus . 

Priešingai, naujiems biotechnologiniams vaistams dažnai reikia, kad moksliniai tyrimai ir plėtra būtų šalia gamybos įrenginių, nes vaistų kūrimas yra glaudžiai susijęs su gamybos procesu. 

Puslaidininkiai, daugelio pastarojo laikotarpio pramonės politikos etapų objektas, yra kažkur tarp šių dviejų darbo rūšių. Kai kurios įmonės, tokios kaip „Nvidia“, Kalifornijoje, kuria tik lustus ir siunčia dizainus į užsienį, kad juos pagamintų kitos bendrovės, pvz., Taivano lustų įmonė TSMC. Tačiau Taivanas taip pat turi klestinčią lustų projektavimo pramonę, iš dalies dėl savo pažangios gamybos meistriškumo, todėl startuoliams lengviau kurti prototipus ir išbandyti naujas idėjas.

Subsiduoti ar ne subsidijuoti

Tai, kad gamyba kartais skatina naujoves, nepateisina milžiniškos subsidijų kainos. Net daugelis ekonomistų, kurie liaupsina pramonę, sutinka. Vyriausybei paprastai sunku pasirinkti pramonės šakas ir technologijas, kurias reikia remti. Ir, kaip pažymi ponas Pisano, jei iš tiesų būtų pakankamai didelės naudos, kai MTTP ir gamyba būtų perkelta šalia viena kitos, įmonės tai padarytų patčios.

Amerikos konkurencijos su Japonija atvejis devintajame ir dešimtajame dešimtmetyje yra naudinga paralelė. Kaip ir dabar, Vašingtono politikos formuotojai nerimauja dėl pažangių technologijų gamybos rinkos dalies praradimo. Tačiau, kaip 2013 m. paskelbtame dokumente pažymėjo G. Branstetter ir jo kolegos, mažėjanti rinkos dalis nesutrukdė Amerikos įmonėms geriau pasinaudoti vėliau kilusiu programinės įrangos bumu. Vienas skirtumas tarp šalių buvo atvirumas imigracijai. Amerikos įmonės galėtų tiesiog pasinaudoti didesniu programuotojų būriu. Ponas Branstetteris taip pat pažymi, kad Japonijos vyriausybė skatino aparatinės įrangos gamybą, o tai atitolino perėjimą prie programinės įrangos.

Likimo vingiu toks atvirumas užsienio talentams gali paremti gamybą namuose. Kitame ponios Glennon darbiniame dokumente randama svarių įrodymų, kad H1 B vizų, skirtų aukštos kvalifikacijos užsieniečiams įdarbinti, apribojimai skatina didesnį gamybos perkėlimą į užsienį, nes įmonės yra priverstos ieškoti talentų užsienyje. Tai nepatogi išvada daugeliui politikų, kurie palaiko vietinę gamybą ir nori padidinti imigraciją. [1]

Problema išsprendžiama, jei duodamas didelis vizų skaičius programuotojams, tačiau mažas vizų skaičius visiems kitiems. 

·  ·  · 1.  "Biden's billions; Free exchange." The Economist, 5 Nov. 2022, p. 70(US).

Kodėl sankcijos neveikia?

 „Kuo daugiau rusiško kuro nepatenka į rinką, tuo daugiau Vakarų Europai tenka mokėti, kad jį pakeistų – o kylančios kainos riboja Kremliaus nuostolius." [1]

1. "From crisis to catastrophe; The West v Russia." The Economist, 5 Nov. 2022, p. 66(US).

Why did the sanctions fail?

"The more Russian fuel cannot get to market, the more Western Europe has to pay to replace it--while rising prices limit the Kremlin's losses." [1]

 

1. "From crisis to catastrophe; The West v Russia." The Economist, 5 Nov. 2022, p. 66(US).