The Counter-deception Blog
Examples of deceptions and descriptions of techniques to detect them. This Blog encourages the awareness of deception in daily life and discussion of practical means to spot probable deceptions. Send your examples of deception and counter-deception to colonel_stech@yahoo.com.Wednesday, August 31, 2005
Intelligent Spaghetti? Use your noodle!
August 29, 2005
But Is There Intelligent Spaghetti Out There?
By SARAH BOXER
Is the super-intelligent, super-popular god known as the Flying Spaghetti Monster any match for the prophets of intelligent design?
This month, the Kansas State Board of Education gave preliminary approval to allow teaching alternatives to evolution like intelligent design (the theory that a smart being designed the universe). And President Bush and Senator Bill Frist of Tennessee both gave the thumbs up to teaching intelligent design.
Long before that, Bobby Henderson, a 25-year-old with a physics degree from Oregon State University, had a divine vision. An intelligent god, a Flying Spaghetti Monster, he said, "revealed himself to me in a dream."
He posted a sketch on his Web site, venganza.org, showing an airborne tangle of spaghetti and meatballs with two eyes looming over a mountain, trees and a stick man labeled "midgit." Prayers to the Flying Spaghetti Monster, his site says, end with "ramen," not "amen."
Then, Mr. Henderson, who says on his site that he is desperately trying to avoid taking a job programming slot machines in Las Vegas, posted an open letter to the Kansas board.
In perfect deadpan he wrote that although he agreed that science students should "hear multiple viewpoints" of how the universe came to be, he was worried that they would be hearing only one theory of intelligent design. After all, he noted, there are many such theories, including his own fervent belief that "the universe was created by a Flying Spaghetti Monster." He demanded equal time in the classroom and threatened a lawsuit.
Soon he was flooded with e-mail messages. Ninety-five percent of those who wrote to him, he said on his Web site, were "in favor of teaching Flying Spaghetti Monsterism in schools." Five percent suggested that he would be going to hell. Lawyers contacted him inquiring how serious he was about a lawsuit against the Kansas board. His answer: "Very."
This month, the news media, both mainstream and digital, jumped in. The New Scientist magazine wrote an article. So did Die Welt. Two online encyclopedias, Uncyclopedia and Wikipedia, wrote entries on the Flying Spaghetti Monster. The Web site Boingboing.net mounted a challenge: "We are willing to pay any individual $250,000 if they can produce empirical evidence which proves that Jesus is not the son of the Flying Spaghetti Monster."
Now, Mr. Henderson says on his Web site, "over 10 million people have been touched by His Noodly Appendage." But what does that mean? When push comes to shove, will the religion that has come to be known as Pastafarianism do what it was intended to do - prove that it is ridiculous to teach intelligent design as science?
Mr. Henderson, who said in an e-mail message that his divine vision was induced by "a lack of sleep and a mounting disgust over the whole I.D. issue," has wit on his side. His god not only resembles human brains (proof, a fan writes, that "we were created in His image") but also looks like the kind of bacteria that proponents of intelligent design hold up as too complex to be the work of evolution alone.
Two dozen academics have endorsed the pasta god. Three members of the Kansas board who already opposed teaching intelligent design wrote kind letters to Mr. Henderson. Dozens of people have posted their sightings of the deity (along with some hilarious pictures). One woman even wrote in to say that she had "conceived the spirit of our Divine Lord," the Flying Spaghetti Monster, while eating alone at the Olive Garden.
"I heard singing, and tomato sauce rained from the sky, and I saw angel hair pasta flying about with little farfalle wings and playing harps," she wrote. "It was beautiful." The Spaghetti Monster, she went on, impregnated her and told her, "You shall name Him ... Prego ... and He shall bring in a new era of love."
Parody is a lot of fun. And parody begets more parody, especially on the Internet. It's contagious. But has anyone ever converted to a parody religion?
The history books show that parody isn't always the smartest strategy when it comes to persuasion. Remember Galileo? Some recent scholars say that it may not have been his science so much as his satire, "Dialogue Concerning the Two Chief World Systems," that got everyone steamed up. Under threat of death, Galileo ended up recanting his view that the earth revolves around the sun, and had to wait 350 years for vindication.
And yet the Church of the Flying Spaghetti Monster flourishes. It even has schisms. A rival faction, based on SPAM (Spaghetti & Pulsar Activating Meatballs), has formed. And there's bickering, Mr. Henderson said in an e-mail message, about whether the god is made of spaghetti or linguini. Those people, he noted, "give me a headache."
Creationism Is Endorsed in New Survey
August 31, 2005
Teaching of Creationism Is Endorsed in New Survey
By LAURIE GOODSTEIN
In a finding that is likely to intensify the debate over what to teach students about the origins of life, a poll released yesterday found that nearly two-thirds of Americans say that creationism should be taught alongside evolution in public schools.
The poll found that 42 percent of respondents held strict creationist views, agreeing that "living things have existed in their present form since the beginning of time."
In contrast, 48 percent said they believed that humans had evolved over time. But of those, 18 percent said that evolution was "guided by a supreme being," and 26 percent said that evolution occurred through natural selection. In all, 64 percent said they were open to the idea of teaching creationism in addition to evolution, while 38 percent favored replacing evolution with creationism.
...
Eugenie C. Scott, the director of the National Center for Science Education and a prominent defender of evolution, said the findings were not surprising because "Americans react very positively to the fairness or equal time kind of argument."
"In fact, it's the strongest thing that creationists have got going for them because their science is dismal," Ms. Scott said. "But they do have American culture on their side."
This year, the National Center for Science Education has tracked 70 new controversies over evolution in 26 states, some in school districts, others in the state legislatures.
President Bush joined the debate on Aug. 2, telling reporters that both evolution and the theory of intelligent design should be taught in schools "so people can understand what the debate is about."
...
More of those who believe in creationism said they were "very certain" of their views (63 percent), compared with those who believe in evolution (32 percent).
...
RE: Who gives them the right to impose educational standards?
Ø RE: Who gives them the right to impose educational standards?
The voters!
Most of us do not believe in evolution and 2/3 of us believe in creationism. A recent poll indicates most of us think parents--not schools--should teach children what to believe about this stuff. Screw education--keep voting for the Talliban! You cannot go wrong in American politics catering to the public’s baser instincts.
at this point in American politics, it's the Republican base that is galloping both rightward and dumbward simultaneously. It could make for an interesting -- make that, Menckenian -- primary process. And a dimmer, diminished United States.
Dark Ages Primary
By Harold Meyerson
Wednesday, August 31, 2005; A23 WashPost
What I want to know is, who walked the Earth first: the dinosaurs or Strom Thurmond?
It seems that the advocates of fast-forward "intelligent design" -- the folks who, by totaling up the biblical begats, believe that the universe was created in 4004 B.C. -- are erecting mini-theme-parks that feature secondhand dinosaur sculptures they've acquired in their scavengings. By putting such Tyrannosaurus Wrecks on display, they mean to prove to the public that people and dinosaurs once roamed the world together, just as their biblical time-clock and that old Raquel Welch movie clearly demonstrated.
Silly stuff, certainly, but at the rate we're going, it may make it into the 2008 or 2012 Republican platform. Now that the president has endorsed intelligent design, the social conservatives and religious zealots who constitute an ever larger and louder wing of the Republican base have been emboldened in their crusades for fundamentalist values and against any science whose findings and methods run counter to their beliefs.
School districts throughout the Bible Belt (and yes, it's time to start resurrecting the coinages of H.L. Mencken, scourge extraordinaire of early 20th-century Bible-Belt boobs) are busy demoting Darwinism to history's dustbin. In late September, a Harrisburg, Pa., court will hear yet another in a seemingly endless string of cases in which a local school board has sought to compel high school science teachers to point out the religious errors in the theory of evolution. The court will doubtless rule against the school board. But now that the president himself has said that intelligent design should be part of the curriculum, too (which gives a whole new, afterlife-specific meaning to the notion of No Child Left Behind), such school board creationism probably will expand exponentially.
After all, recent polling shows that just 35 percent of Americans believe that evolution is supported by evidence, while another 35 percent believe it is not. In a number of red states, of course, the numbers tip more sharply toward creationism. And should this strain of scientific illiteracy pick up more steam, it may broaden its targets from the merely biological sciences. After all, it's the geologists who've demonstrated that Earth is 4.6 billion years old, and the astronomers who've concluded, after measuring the speed of light (was that calculation really necessary? helpful?), that the universe has been around for roughly 14 billion years. Yet our tax dollars are still going to support that Hubble Space Telescope, which keeps discovering stars that are billions of years older than the universe itself, according to the short-order cosmologists of creationism.
I'm going to assume -- a clear leap of faith on my part -- that none of the Republican presidential hopefuls in 2008, with the possible exception of Rick Santorum, actually believes this stuff. But what they believe and what they feel compelled to say to get through the Republican primaries and caucuses may not be one and the same. Already, to curry favor with the faith-above-science right, Bill Frist has hemmed and hawed about the transmission of AIDS and diagnosed Terri Schiavo as no more than inattentive. Mitt Romney and George Pataki -- Republican governors of the bluest of states, but also budding presidential candidates -- have vetoed bills legalizing "morning-after" pills in their states, lest they incur the wrath of the zealots in the Iowa caucuses or the South Carolina primary. And George W. Bush's Food and Drug Administration simply refuses to make a ruling on those morning-after pills, its data validating the safety of the medication trumped by the political need to placate the religious right.
So let the first presidential primary of the Dark Ages begin! I want to know if George Allen believes in the Rapture, and whether he thinks such likely primary rivals as Rudy Giuliani will be left behind. I want to know if that well-known dinosaurphile, Newt Gingrich, is dangerously geologistic, if he really believes that the big lizards have been extinct for millions of years. I'm waiting for Bill Frist to deny, if pressed by an indignant Iowan, that blood circulates. And I wonder if John McCain believes Rick Santorum is descended from apes. And if yes, how far?
Republicans often gloat about Democratic voters driving their presidential hopefuls to the left during primary season. But at this point in American politics, it's the Republican base that is galloping both rightward and dumbward simultaneously. It could make for an interesting -- make that, Menckenian -- primary process. And a dimmer, diminished United States.
meyersonh@washpost.com
-----Original Message-----
Subject: Who gives them the right to impose educational standards?
Christian Schools Bring Suit Against UC
Civil rights action says the system's admissions policy discriminates against students who are taught creationism and religious viewpoints.
By David Rosenzweig, Times Staff Writer
Amid the growing national debate over the mixing of religion and science in America's classrooms, University of California admissions officials have been accused in a federal civil rights lawsuit of discriminating against high schools that teach creationism and other conservative Christian viewpoints.
The suit was filed in Los Angeles federal court Thursday by the Assn. of Christian Schools International, which represents more than 800 religious schools in the state, and by the Calvary Chapel Christian School in Murrieta, which has an enrollment of more than 1,000.
Under a policy implemented with little fanfare a year ago, UC admissions authorities have refused to certify high school science courses that use textbooks challenging Darwin's theory of evolution, the suit says.
Other courses rejected by UC officials include "Christianity's Influence in American History," "Christianity and Morality in American Literature" and "Special Providence: American Government."
The 10-campus UC system requires applicants to complete a variety of courses, including science, mathematics, history, literature and the arts. But in letters to Calvary Chapel, university officials said some of the school's Christian-oriented courses were too narrow to be acceptable.
According to the lawsuit, UC's board of admissions also advised the school that it would not approve biology and science courses that relied primarily on textbooks published by Bob Jones University Press and A Beka Books, two Christian publishers.
Full Text at LATimes
http://www.latimes.com/news/local/la-me-christian27aug27,1,7818465.story?ctrack=1&cset=true
The Strategy Debate
Most of us do not get to have what the graduates call “a war college experience”--those mid-career sabbaticals that let young colonels and commanders survey the spectrum of war and diplomacy from the strategic end of the telescope. Many who do enjoy those “wonder years” emerge with an acute sense of smell for strategic crap. Many of us have been wrinkling our noses for the past three years. The strategic debate goes on in the OpEd columns and the journals of the war colleges and their civilian kin, like Johns Hopkins School of Advanced International Studies, the present haunt of Fukuyama, whose essay follows. On occasion the debates occur in the Pentagon, Foggy Bottom, and the West Wing, but not now. As it becomes more and more apparent that this administration has lost its grip on the big stick and the bully pulpit, the strategy debate has begun to surge. A key part of that loss of grip has been the repeated use of deception and sophistry to sell bogus security policies to reluctant buyers. Fukuyama sheds some light on just how bogus.
August 31, 2005 NYTimes.com
Invasion of the Isolationists
By FRANCIS FUKUYAMA
Washington
AS we mark four years since Sept. 11, 2001, one way to organize a review of what has happened in American foreign policy since that terrible day is with a question: To what extent has that policy flowed from the wellspring of American politics and culture, and to what extent has it flowed from the particularities of this president and this administration?
It is tempting to see continuity with the American character and foreign policy tradition in the Bush administration's response to 9/11, and many have done so. We have tended toward the forcefully unilateral when we have felt ourselves under duress; and we have spoken in highly idealistic cadences in such times, as well. Nevertheless, neither American political culture nor any underlying domestic pressures or constraints have determined the key decisions in American foreign policy since Sept. 11.
In the immediate aftermath of the 9/11 attacks, Americans would have allowed President Bush to lead them in any of several directions, and the nation was prepared to accept substantial risks and sacrifices. The Bush administration asked for no sacrifices from the average American, but after the quick fall of the Taliban it rolled the dice in a big way by moving to solve a longstanding problem only tangentially related to the threat from Al Qaeda - Iraq. In the process, it squandered the overwhelming public mandate it had received after Sept. 11. At the same time, it alienated most of its close allies, many of whom have since engaged in "soft balancing" against American influence, and stirred up anti-Americanism in the Middle East.
The Bush administration could instead have chosen to create a true alliance of democracies to fight the illiberal currents coming out of the Middle East. It could also have tightened economic sanctions and secured the return of arms inspectors to Iraq without going to war. It could have made a go at a new international regime to battle proliferation. All of these paths would have been in keeping with American foreign policy traditions. But Mr. Bush and his administration freely chose to do otherwise.
The administration's policy choices have not been restrained by domestic political concerns any more than by American foreign policy culture. Much has been made of the emergence of "red state" America, which supposedly constitutes the political base for President Bush's unilateralist foreign policy, and of the increased number of conservative Christians who supposedly shape the president's international agenda. But the extent and significance of these phenomena have been much exaggerated.
So much attention has been paid to these false determinants of administration policy that a different political dynamic has been underappreciated. Within the Republican Party, the Bush administration got support for the Iraq war from the neoconservatives (who lack a political base of their own but who provide considerable intellectual firepower) and from what Walter Russell Mead calls "Jacksonian America" - American nationalists whose instincts lead them toward a pugnacious isolationism.
Happenstance then magnified this unlikely alliance. Failure to find weapons of mass destruction in Iraq and the inability to prove relevant connections between Saddam Hussein and Al Qaeda left the president, by the time of his second inaugural address, justifying the war exclusively in neoconservative terms: that is, as part of an idealistic policy of political transformation of the broader Middle East. The president's Jacksonian base, which provides the bulk of the troops serving and dying in Iraq, has no natural affinity for such a policy but would not abandon the commander in chief in the middle of a war, particularly if there is clear hope of success.
This war coalition is fragile, however, and vulnerable to mishap. If Jacksonians begin to perceive the war as unwinnable or a failure, there will be little future support for an expansive foreign policy that focuses on promoting democracy. That in turn could drive the 2008 Republican presidential primaries in ways likely to affect the future of American foreign policy as a whole.
Are we failing in Iraq? That's still unclear. The United States can control the situation militarily as long as it chooses to remain there in force, but our willingness to maintain the personnel levels necessary to stay the course is limited. The all-volunteer Army was never intended to fight a prolonged insurgency, and both the Army and Marine Corps face manpower and morale problems. While public support for staying in Iraq remains stable, powerful operational reasons are likely to drive the administration to lower force levels within the next year.
With the failure to secure Sunni support for the constitution and splits within the Shiite community, it seems increasingly unlikely that a strong and cohesive Iraqi government will be in place anytime soon. Indeed, the problem now will be to prevent Iraq's constituent groups from looking to their own militias rather than to the government for protection. If the United States withdraws prematurely, Iraq will slide into greater chaos. That would set off a chain of unfortunate events that will further damage American credibility around the world and ensure that the United States remains preoccupied with the Middle East to the detriment of other important regions - Asia, for example - for years to come.
We do not know what outcome we will face in Iraq. We do know that four years after 9/11, our whole foreign policy seems destined to rise or fall on the outcome of a war only marginally related to the source of what befell us on that day. There was nothing inevitable about this. There is everything to be regretted about it.
Francis Fukuyama, a professor of international political economy at the Johns Hopkins School of Advanced International Studies, is editorial board chairman of a new magazine, The American Interest.
Tax Fraud: Take it to the bank
Tax Shelter Cases Shed Light on Banks' Role
By Terence O'Hara and Carrie Johnson
Washington Post Staff Writers
Wednesday, August 31, 2005; D01
Berce had good reason to trust the Dallas-based banker. Bank One had been his personal bank for 18 years. Bank One was also a major financier to AmeriCredit Corp., the huge Fort Worth-based auto lender. At the time, Berce was AmeriCredit's chief financial officer -- and the company's good fortunes had made him a millionaire.
The bank offered Berce a way to not pay taxes on some of those millions. It was called Homer and was a tax-sheltering foreign currency transaction (named after the "Simpsons" character) that all but eliminated Berce's stock option gains. The problem is that Homer was a sham, according to government sources, lawyers familiar with the case, and lawsuits by Berce and several other wealthy business people.
The Berce case and others, as described in state and federal court filings, highlight the central role U.S. banks have played in the unfolding tax shelter scandals. While accounting and investment firms devised the shelters, banks helped promote and sell them. Accounting firm KPMG LLP on Monday agreed to pay $456 million and to cooperate with authorities investigating tax shelter deals. Rival Ernst & Young LLP remains under grand jury investigation for its role in selling shelters.
But experts say about a dozen major financial institutions with divisions that cater to the super-wealthy were in most cases the point of entry for tax shelter promoters, and federal investigators are expanding their probe to the role that bankers, financial advisers and lawyers played. Often, lending institutions such as Wachovia Corp. referred their wealthy clients to promoters selling what the Internal Revenue Service says are invalid shelters. In other cases, experts at such institutions as Bank One and Bank of America devised and sold questionable tax avoidance strategies themselves.
The IRS has estimated that tax shelters promoted by those banks and others improperly shielded more than $8 billion in income from federal taxes.
The fees for providing such tax-avoidance strategies were substantial. Berce paid Bank One and the co-promoters of Homer -- Jenkens & Gilchrist PC and Deutsche Bank AG, the German bank that made billions of dollars of "loans" to make the deals work -- $350,000 in fees. And Berce, now AmeriCredit chief executive, was not the only AmeriCredit insider who bought into Homer. AmeriCredit director James H. Greer, owner of a Houston building products company and also a client of Bank One, paid $600,000 in fees for a Homer in an attempt to avoid $5 million in taxes on AmeriCredit stock options.
Both men were told by the IRS in 2004 to amend their tax returns for 2001 and pay interest and penalties, according to their lawsuits against Bank One.
Bank One was acquired last year by J.P. Morgan Chase & Co. Bank spokesman Tom Kelly declined to comment on any of the pending lawsuits against the company because the cases are in litigation. A Deutsche Bank spokesman declined to comment.
The first person indicted in the ongoing federal investigations into the tax shelters was a banker, not an accountant. The plea by former HVB Group official Domenick DeGiorgio to conspiracy, fraud and tax evasion charges was the first time an individual involved in abusive tax shelters characterized them publicly as sham transactions designed to subvert the law.
"Our self-reporting tax system cannot tolerate the fraudulent acts of bankers, accountants and lawyers who, under the guise of 'sophisticated tax planning,' create elaborate structures that have no purpose but to mislead and defraud the IRS," U.S. Attorney David N. Kelley said at the time.
The deals broke the law, DeGiorgio said in court, because they were investments that involved little or no credit risk and because they were intended to produce tax losses. To comply with the tax code, investors must reasonably expect they will make a profit on such deals.
Language in a conspiracy indictment of eight former KPMG officials announced Monday refers to four unnamed, international banks that helped wealthy clients take part in the shelters.
Investigators at the Senate permanent subcommittee on investigations issued a report in April that first chronicled the role of bankers, lawyers and accountants in marketing the shelters. HVB earned $5.45 million for its role in 1999 alone. Deutsche Bank reaped $79 million in fees for BLIPS, another tax shelter, and earlier deals called OPIS, the Senate report said.
Bank of America, the largest U.S. bank, about six years ago began offering a tax shelter under the brand STARS. Texans Charles and Sam Wyly, who made several hundred million dollars as entrepreneurs in the software and retail industries in the past 20 years and who control Michaels Stores Inc., a chain of craft stores, were among their customers.
According to Securities and Exchange Commission filings, the brothers sought to avoid taxes on stock options by transferring the options to an offshore family trust. Bank of America sold the Wylys a deal that allowed the trusts to then convert the options into cash, without paying any taxes.
A Bank of America spokeswoman declined to comment on the Wyly case but said STARS is a form of derivative product commonly marketed by all banks and investment broker dealers to lock in profit on stock options.
The IRS said earlier this year that the shelters of the type employed by the Wylys with Bank of America's assistance helped shield from taxes $900 million in income from hundreds of wealthy business executives.
Lawsuits against Bank One detail the close relationship of law firms, accountants and tax advisers with the bank that sold invalid tax shelters to its clients. The bank's wealth management division in Chicago had an Innovative Strategies Group to come up with novel tax avoidance strategies for wealthy clients. Two of the executives in the group were former national tax group members of KMPG. Both men, along with most of the rest of the Innovative Strategies Group that designed Homer in 2001, have since left the bank, according to a source at the bank who spoke on the condition of anonymity because of the pending litigation.
Lawmakers who examined the tax shelter industry said lending institutions and others require heightened scrutiny to ensure they do not promote illegal tax shelters. Sens. Carl M. Levin (D-Mich.) and Norm Coleman (R-Minn.) introduced a bill last month that would increase penalties for knowingly aiding or abetting taxpayers to minimize their bills. The legislation also would require federal bank regulators to develop ways to detect tax-related violations by banks and to review those strategies at least every two years.
"Our bill provides our government the tools to end the use of abusive tax shelters . . . and to punish the powerful professionals who push them," Levin said.
© 2005 The Washington Post Company
Terror PSYOP at its worst
At Least 600 Killed in Stampede Near Baghdad Shrine
Rumors of a suicide bomber in the midst of a crowd of Shiite Muslim pilgrims set off a stampede Wednesday on a Tigris River bridge, killing hundreds as panicked worshipers trampled others or hurled themselves off the bridge.
(By Ellen Knickmeyer,Naseer Nouri and Bassam Sebti, The Washington Post)
Reportedly, mortar attacks lent credence to the rumors. This massive loss of life provides the insurgent propagandists with even more ammunition for the claim that the Coalition and the Iraqi police and military are incapable of providing order in Iraq. The loss will also tend to coalesce Shi’ia support for Shiite militias and private armies to provide security.
Elect the Flying Spaghetti Monster!
Teaching of Creationism Is Endorsed in New Survey
By LAURIE GOODSTEIN
A poll found that nearly two-thirds of Americans say that creationism should be taught alongside evolution in public
schools. NYTimes.com 31 Aug 2005
Monday, August 29, 2005
Army Critic of Halliburton Demoted
Army Contract Official Critical of Halliburton Pact Is Demoted
Bunnatine Greenhouse, a senior Army contracting official, was demoted for what the Army called poor job performance.
August 29, 2005 NYTimes.com
Army Contract Official Critical of Halliburton Pact Is Demoted
The official, Bunnatine H. Greenhouse, has worked in military procurement for 20 years and for the past several years had been the chief overseer of contracts at the Army Corps of Engineers, the agency that has managed much of the reconstruction work in
The demotion removes her from the elite Senior Executive Service and reassigns her to a lesser job in the corps' civil works division.
Ms. Greenhouse's lawyer, Michael Kohn, called the action an "obvious reprisal" for the strong objections she raised in 2003 to a series of corps decisions involving the Halliburton subsidiary Kellogg Brown & Root, which has garnered more than $10 billion for work in
Dick Cheney led Halliburton, which is based in
"She is being demoted because of her strict adherence to procurement requirements and the Army's preference to sidestep them when it suits their needs," Mr. Kohn said Sunday in an interview. He also said the Army had violated a commitment to delay Ms. Greenhouse's dismissal until the completion of an inquiry by the Pentagon's inspector general.
Carol Sanders, spokeswoman for the Army Corps of Engineers, said Sunday that the personnel action against Ms. Greenhouse had been approved by the Department of the Army. And in a memorandum dated June 3, 2005, as the demotion was being arranged, the commander of the corps, Lt. Gen. Carl A. Strock, said the administrative record "clearly demonstrates that Ms. Greenhouse's removal from the S.E.S. is based on her performance and not in retaliation for any disclosures of alleged improprieties that she may have made."
Known as a stickler for the rules on competition, Ms. Greenhouse initially received stellar performance ratings, Mr. Kohn said. But her reviews became negative at roughly the time she began objecting to decisions she saw as improperly favoring Kellogg Brown & Root, he said. Often she hand-wrote her concerns on the contract documents, a practice that corps leaders called unprofessional and confusing.
In October 2004, General Strock, citing two consecutive performance reviews that called Ms. Greenhouse an uncooperative manager, informed her that she would be demoted.
Ms. Greenhouse fought the demotion through official channels, and publicly described her clashes with Corps of Engineers leaders over a five-year, $7 billion oil-repair contract awarded to Kellogg Brown & Root. She had argued that if urgency required a no-bid contract, its duration should be brief.
Ms. Greenhouse had also fought the granting of a waiver to Kellogg Brown & Root in December 2003, approving the high prices it had paid for fuel imports for Iraq, and had objected to extending its five-year contract for logistical support in the Balkans for 11 months and $165 million without competitive bidding. In late June, ignoring warnings from her superiors, Ms. Greenhouse appeared before a Congressional panel, calling the Kellogg Brown & Root oil contract "the most blatant and improper contract abuse I have witnessed during the course of my professional career." She also said the defense secretary's office had improperly interfered in the awarding of the contract.
Her demotion was delayed when the Army's senior legal officials said they would first seek an independent investigation of her reprisal complaint. "The Army has referred this matter to the Department of Defense inspector general for their review and action, as appropriate," said an Oct. 22, 2004, letter to Ms. Greenhouse's lawyer from Robert M. Fano, the Army's chief of civilian personnel law. The acting secretary of the Army, Mr. Fano wrote, had also directed the Corps of Engineers to "suspend any adverse personnel action so that Ms. Greenhouse remains in her current position until a sufficient record is available to address the specific matters you raised."
But on July 14, the Army secretary approved Ms. Greenhouse's demotion, effective Aug. 27. With his request to proceed, General Strock had provided an unsigned nine-page memorandum, reviewing Ms. Greenhouse's recent performance ratings and responding to her allegations of impropriety.
Mr. Kohn said Sunday that the inspector general had not finished investigating the matter and that the demotion violated the Army secretary's commitment to wait on any action.
Mr. Kohn said that when he telephoned Dan Meyer, director of civilian reprisal investigations in the inspector general's office, on Aug. 24, Mr. Meyer was "shocked" to learn that the corps had proceeded against Ms. Greenhouse. Mr. Meyer said that he was immediately opening a "civilian reprisal" investigation and faxed forms to Mr. Kohn to initiate the process, Mr. Kohn said.
A Pentagon spokesman said Sunday that the inspector general's office could not be reached for comment.
Sunday, August 28, 2005
Intelligent Design: Political Hoax?
August 28, 2005 NYTimes.com
Show Me the Science
By DANIEL C. DENNETT
Blue Hill, Me.
PRESIDENT BUSH, announcing this month that he was in favor of teaching about "intelligent design" in the schools, said, "I think that part of education is to expose people to different schools of thought." A couple of weeks later, Senator Bill Frist of Tennessee, the Republican leader, made the same point. Teaching both intelligent design and evolution "doesn't force any particular theory on anyone," Mr. Frist said. "I think in a pluralistic society that is the fairest way to go about education and training people for the future."
Is "intelligent design" a legitimate school of scientific thought? Is there something to it, or have these people been taken in by one of the most ingenious hoaxes in the history of science? Wouldn't such a hoax be impossible? No. Here's how it has been done.
First, imagine how easy it would be for a determined band of naysayers to shake the world's confidence in quantum physics - how weird it is! - or Einsteinian relativity. In spite of a century of instruction and popularization by physicists, few people ever really get their heads around the concepts involved. Most people eventually cobble together a justification for accepting the assurances of the experts: "Well, they pretty much agree with one another, and they claim that it is their understanding of these strange topics that allows them to harness atomic energy, and to make transistors and lasers, which certainly do work..."
Fortunately for physicists, there is no powerful motivation for such a band of mischief-makers to form. They don't have to spend much time persuading people that quantum physics and Einsteinian relativity really have been established beyond all reasonable doubt.
With evolution, however, it is different. The fundamental scientific idea of evolution by natural selection is not just mind-boggling; natural selection, by executing God's traditional task of designing and creating all creatures great and small, also seems to deny one of the best reasons we have for believing in God. So there is plenty of motivation for resisting the assurances of the biologists. Nobody is immune to wishful thinking. It takes scientific discipline to protect ourselves from our own credulity, but we've also found ingenious ways to fool ourselves and others. Some of the methods used to exploit these urges are easy to analyze; others take a little more unpacking.
A creationist pamphlet sent to me some years ago had an amusing page in it, purporting to be part of a simple questionnaire:
Test Two
Do you know of any building that didn't have a builder? [YES] [NO]
Do you know of any painting that didn't have a painter? [YES] [NO]
Do you know of any car that didn't have a maker? [YES] [NO]
If you answered YES for any of the above, give details:
Take that, you Darwinians! The presumed embarrassment of the test-taker when faced with this task perfectly expresses the incredulity many people feel when they confront Darwin's great idea. It seems obvious, doesn't it, that there couldn't be any designs without designers, any such creations without a creator.
Well, yes - until you look at what contemporary biology has demonstrated beyond all reasonable doubt: that natural selection - the process in which reproducing entities must compete for finite resources and thereby engage in a tournament of blind trial and error from which improvements automatically emerge - has the power to generate breathtakingly ingenious designs.
Take the development of the eye, which has been one of the favorite challenges of creationists. How on earth, they ask, could that engineering marvel be produced by a series of small, unplanned steps? Only an intelligent designer could have created such a brilliant arrangement of a shape-shifting lens, an aperture-adjusting iris, a light-sensitive image surface of exquisite sensitivity, all housed in a sphere that can shift its aim in a hundredth of a second and send megabytes of information to the visual cortex every second for years on end.
But as we learn more and more about the history of the genes involved, and how they work - all the way back to their predecessor genes in the sightless bacteria from which multicelled animals evolved more than a half-billion years ago - we can begin to tell the story of how photosensitive spots gradually turned into light-sensitive craters that could detect the rough direction from which light came, and then gradually acquired their lenses, improving their information-gathering capacities all the while.
We can't yet say what all the details of this process were, but real eyes representative of all the intermediate stages can be found, dotted around the animal kingdom, and we have detailed computer models to demonstrate that the creative process works just as the theory says.
All it takes is a rare accident that gives one lucky animal a mutation that improves its vision over that of its siblings; if this helps it have more offspring than its rivals, this gives evolution an opportunity to raise the bar and ratchet up the design of the eye by one mindless step. And since these lucky improvements accumulate - this was Darwin's insight - eyes can automatically get better and better and better, without any intelligent designer.
Brilliant as the design of the eye is, it betrays its origin with a tell-tale flaw: the retina is inside out. The nerve fibers that carry the signals from the eye's rods and cones (which sense light and color) lie on top of them, and have to plunge through a large hole in the retina to get to the brain, creating the blind spot. No intelligent designer would put such a clumsy arrangement in a camcorder, and this is just one of hundreds of accidents frozen in evolutionary history that confirm the mindlessness of the historical process.
If you still find Test Two compelling, a sort of cognitive illusion that you can feel even as you discount it, you are like just about everybody else in the world; the idea that natural selection has the power to generate such sophisticated designs is deeply counterintuitive. Francis Crick, one of the discoverers of DNA, once jokingly credited his colleague Leslie Orgel with "Orgel's Second Rule": Evolution is cleverer than you are. Evolutionary biologists are often startled by the power of natural selection to "discover" an "ingenious" solution to a design problem posed in the lab.
This observation lets us address a slightly more sophisticated version of the cognitive illusion presented by Test Two. When evolutionists like Crick marvel at the cleverness of the process of natural selection they are not acknowledging intelligent design. The designs found in nature are nothing short of brilliant, but the process of design that generates them is utterly lacking in intelligence of its own.
Intelligent design advocates, however, exploit the ambiguity between process and product that is built into the word "design." For them, the presence of a finished product (a fully evolved eye, for instance) is evidence of an intelligent design process. But this tempting conclusion is just what evolutionary biology has shown to be mistaken.
Yes, eyes are for seeing, but these and all the other purposes in the natural world can be generated by processes that are themselves without purposes and without intelligence. This is hard to understand, but so is the idea that colored objects in the world are composed of atoms that are not themselves colored, and that heat is not made of tiny hot things.
The focus on intelligent design has, paradoxically, obscured something else: genuine scientific controversies about evolution that abound. In just about every field there are challenges to one established theory or another. The legitimate way to stir up such a storm is to come up with an alternative theory that makes a prediction that is crisply denied by the reigning theory - but that turns out to be true, or that explains something that has been baffling defenders of the status quo, or that unifies two distant theories at the cost of some element of the currently accepted view.
To date, the proponents of intelligent design have not produced anything like that. No experiments with results that challenge any mainstream biological understanding. No observations from the fossil record or genomics or biogeography or comparative anatomy that undermine standard evolutionary thinking.
Instead, the proponents of intelligent design use a ploy that works something like this. First you misuse or misdescribe some scientist's work. Then you get an angry rebuttal. Then, instead of dealing forthrightly with the charges leveled, you cite the rebuttal as evidence that there is a "controversy" to teach.
Note that the trick is content-free. You can use it on any topic. "Smith's work in geology supports my argument that the earth is flat," you say, misrepresenting Smith's work. When Smith responds with a denunciation of your misuse of her work, you respond, saying something like: "See what a controversy we have here? Professor Smith and I are locked in a titanic scientific debate. We should teach the controversy in the classrooms." And here is the delicious part: you can often exploit the very technicality of the issues to your own advantage, counting on most of us to miss the point in all the difficult details.
William Dembski, one of the most vocal supporters of intelligent design, notes that he provoked Thomas Schneider, a biologist, into a response that Dr. Dembski characterizes as "some hair-splitting that could only look ridiculous to outsider observers." What looks to scientists - and is - a knockout objection by Dr. Schneider is portrayed to most everyone else as ridiculous hair-splitting.
In short, no science. Indeed, no intelligent design hypothesis has even been ventured as a rival explanation of any biological phenomenon. This might seem surprising to people who think that intelligent design competes directly with the hypothesis of non-intelligent design by natural selection. But saying, as intelligent design proponents do, "You haven't explained everything yet," is not a competing hypothesis. Evolutionary biology certainly hasn't explained everything that perplexes biologists. But intelligent design hasn't yet tried to explain anything.
To formulate a competing hypothesis, you have to get down in the trenches and offer details that have testable implications. So far, intelligent design proponents have conveniently sidestepped that requirement, claiming that they have no specifics in mind about who or what the intelligent designer might be.
To see this shortcoming in relief, consider an imaginary hypothesis of intelligent design that could explain the emergence of human beings on this planet:
About six million years ago, intelligent genetic engineers from another galaxy visited Earth and decided that it would be a more interesting planet if there was a language-using, religion-forming species on it, so they sequestered some primates and genetically re-engineered them to give them the language instinct, and enlarged frontal lobes for planning and reflection. It worked.
If some version of this hypothesis were true, it could explain how and why human beings differ from their nearest relatives, and it would disconfirm the competing evolutionary hypotheses that are being pursued.
We'd still have the problem of how these intelligent genetic engineers came to exist on their home planet, but we can safely ignore that complication for the time being, since there is not the slightest shred of evidence in favor of this hypothesis.
But here is something the intelligent design community is reluctant to discuss: no other intelligent-design hypothesis has anything more going for it. In fact, my farfetched hypothesis has the advantage of being testable in principle: we could compare the human and chimpanzee genomes, looking for unmistakable signs of tampering by these genetic engineers from another galaxy. Finding some sort of user's manual neatly embedded in the apparently functionless "junk DNA" that makes up most of the human genome would be a Nobel Prize-winning coup for the intelligent design gang, but if they are looking at all, they haven't come up with anything to report.
It's worth pointing out that there are plenty of substantive scientific controversies in biology that are not yet in the textbooks or the classrooms. The scientific participants in these arguments vie for acceptance among the relevant expert communities in peer-reviewed journals, and the writers and editors of textbooks grapple with judgments about which findings have risen to the level of acceptance - not yet truth - to make them worth serious consideration by undergraduates and high school students.
SO get in line, intelligent designers. Get in line behind the hypothesis that life started on Mars and was blown here by a cosmic impact. Get in line behind the aquatic ape hypothesis, the gestural origin of language hypothesis and the theory that singing came before language, to mention just a few of the enticing hypotheses that are actively defended but still insufficiently supported by hard facts.
The Discovery Institute, the conservative organization that has helped to put intelligent design on the map, complains that its members face hostility from the established scientific journals. But establishment hostility is not the real hurdle to intelligent design. If intelligent design were a scientific idea whose time had come, young scientists would be dashing around their labs, vying to win the Nobel Prizes that surely are in store for anybody who can overturn any significant proposition of contemporary evolutionary biology.
Remember cold fusion? The establishment was incredibly hostile to that hypothesis, but scientists around the world rushed to their labs in the effort to explore the idea, in hopes of sharing in the glory if it turned out to be true.
Instead of spending more than $1 million a year on publishing books and articles for non-scientists and on other public relations efforts, the Discovery Institute should finance its own peer-reviewed electronic journal. This way, the organization could live up to its self-professed image: the doughty defenders of brave iconoclasts bucking the establishment.
For now, though, the theory they are promoting is exactly what George Gilder, a long-time affiliate of the Discovery Institute, has said it is: "Intelligent design itself does not have any content."
Since there is no content, there is no "controversy" to teach about in biology class. But here is a good topic for a high school course on current events and politics: Is intelligent design a hoax? And if so, how was it perpetrated?
Daniel C. Dennett, a professor of philosophy at Tufts University, is the author of "Freedom Evolves" and "Darwin's Dangerous Idea."
More Proof: You can sell anything on TV
August 28, 2005 NYTimes.com
After Jail and More, Salesman Scores Big With Cure-All Book
When Carol Boruk of La Marque, Tex., saw Kevin Trudeau selling his book on a late-night infomercial last November, she was mesmerized.
Mr. Trudeau was good-looking, energetic and articulate, and talked about nonpharmaceutical remedies that could eradicate virtually any disease - and that he said were being suppressed by the government and the drug industry.
Ms. Boruk, who suffered from allergies and recurring headaches, called the number on the screen and happily forked over $30 for a copy.
So have millions of others. In the last three weeks, the updated and expanded version of "Natural Cures 'They' Don't Want You to Know About," which Mr. Trudeau self-published, has been outsold only by "Harry Potter and the Half-Blood Prince," according to Nielsen Book-Scan.
The book has been on the New York Times list of best-selling how-to and advice books for eight weeks and is currently No. 1. Mr. Trudeau's publishing company says it has sold roughly three million copies since last August.
The book, 570 pages of Mr. Trudeau's musings on how natural therapies, diet and lifestyle can help people free themselves from illness and disease, has quickly become an unusual success story in the publishing business.
"It's a remarkable case," said John Oakes, a vice president at Avalon Publishing Group. "People who don't have the marketing muscle of a big publisher behind them don't usually rocket to the top of the sales list like this."
There are other unusual things about the book's success. Mr. Trudeau, 42, a publishing novice, is not a doctor or scientist, and has had some run-ins with the law.
In the early 90's, he served two years in federal prison for credit-card fraud. He was later sued by the Illinois attorney general over an alleged pyramid marketing scheme, and he has tangled twice with the Federal Trade Commission over claims that he made in infomercials for various alternative remedies.
Last year, the commission barred him from selling products through infomercials. "Natural Cures" was able to skirt that rule because books are protected as free speech under the First Amendment, a lawyer for the agency said.
Some of the book's assertions have prompted some readers to declare it a fraud. "Nothing more than a latter-day snake oil salesman," one reader, D. Bellini of Grand Rapids, Mich., posted on Amazon.com. Another reader called it "the worst rip-off I have gotten sucked into."
Officials at the New York State Consumer Protection Board also did not like the book. In early August the board issued a statement warning that "Natural Cures" is full of "empty promises."
"This book is exploiting and misleading people who are searching for cures to serious illnesses," Teresa A. Santiago, the board's chairwoman, said in the statement. "What they discover is page after page of pure speculation."
The board points out that in the book Mr. Trudeau directs readers to his subscription-based Web site, naturalcures.com, for more information. On the site they are offered subscriptions for $9.95 a month or $499 for life.
Ms. Boruk, the allergy sufferer in Texas, said the book was not entirely what she was expecting, but she found it "eye-opening" and said it had inspired her to stop taking several medications and make significant changes to her diet. "I've lost 30 pounds, never get headaches anymore and hardly notice my allergies," she said.
Mr. Trudeau says those who would call him a fraud misunderstand him. In a telephone interview, he said that he was preaching a holistic gospel he firmly believed in. He said that he eats mostly organic and natural food, never takes drugs, travels with a shower filter to strip the chlorine and fluoride from water and recently completed a seven-day fast to purge toxins.
"I can't remember the last time I was sick," he said, speaking after just returning from what he said was a 14-mile hike.
He noted that lawsuits filed by the trade commission and by Illinois had been settled out of court, and had not involved any findings of wrongdoing. He called the prison time stemming from activities in his mid-20's a "youthful mistake."
"I changed my priority from making money to positively impacting people," said Mr. Trudeau, who lives in Ojai, Calif., a small town popular with Hollywood producers and writers. His main base of operations is Chicago, where he runs half a dozen businesses related to his book and Web site.
Mr. Trudeau has amassed millions from producing infomercials and from direct sales of products. Promotional materials he used in the mid-90's boasted of a net worth of more than $200 million. Today, Mr. Trudeau says he does not know how much money he has, but it is "probably a lot."
He said he owns 10 cars and dozens of houses and condominiums around the world. Sam Catanese, president of Infomercial Monitoring Service, an infomercial research and tracking firm, said Mr. Trudeau, who is unmarried, was usually in the company of beautiful women. Mr. Trudeau said he is now engaged.
Former partners and associates said Mr. Trudeau has been successful because of his sales skills. "There's no doubt in my mind that he could sell anything," said David Bertrand, who worked with Mr. Trudeau from 1995 to 1997 at Nutrition for Life, a seller of vitamin and nutritional supplements. "He's a marketing genius."
Mr. Trudeau has been honing his marketing skills since he was in high school in the former mill town of Lynn, Mass. He started when he was 15 with a mail-order business on how to obtain loans. Mr. Trudeau said the operation had close to $1 million in sales.
After high school, while working at a car dealership, Mr. Trudeau said he met the owner of a company called Memory Masters Institute. He said he loved how the program sharpened his mind. When Memory Masters offered him a job in Chicago, he jumped.
During that period, he falsified credit-card applications, charged a total of $122,000 and landed in prison.
When he was released, Mr. Trudeau struck up a business partnership with his former cellmate, Jules Lieb. He and Mr. Lieb, who had been imprisoned for conspiracy to distribute cocaine, started working for Nutrition for Life. The two, through their company Trudeau Marketing Group, sold nutritional supplements and skin care products and recruited other distributors.
Mr. Bertrand said Mr. Trudeau, then 32, was by far the most successful distributor the company ever had. In the first year of Mr. Trudeau's alliance with Nutrition for Life, sales more than doubled.
Mr. Bertrand said Mr. Trudeau was also gutsy - sometimes too gutsy. "He was always a bit more aggressive than we would have liked," said Mr. Bertrand, now president of a similar nutritional supplements company called Vitamark International. "He started doing things we were not happy with." Mr. Trudeau would, for instance, make overly optimistic promises to new recruits about their future income, Mr. Bertrand said.
Mr. Trudeau says he told recruits what other people had earned in the past but did not offer them any guarantees.
Lawyers in the Illinois attorney general's office were not happy with what they were seeing. In its lawsuit against Trudeau Marketing Group, the office alleged that Mr. Trudeau and Mr. Lieb were operating a pyramid scheme.
Mr. Trudeau maintains that his work for Nutrition for Life, which was not named in the suit, was a legal marketing strategy, no different from Amway. In the settlement, Mr. Trudeau paid $10,000.
Darrell Stoddard, who worked with Mr. Trudeau in 2003, also said Mr. Trudeau's tendency to exaggerate caused trouble. Mr. Stoddard, who created a pain treatment called Biotape, said he hired Mr. Trudeau to create an infomercial for the product, a patented membrane that looks a bit like electrical tape. Mr. Stoddard, trained in Chinese medicine, believes that pain is caused by broken electrical connections between cells, and that Biotape can help with this.
In the infomercial, Mr. Trudeau said Biotape permanently relieved pain, a claim that made Mr. Stoddard cringe. "I knew we were going to get into trouble," said Mr. Stoddard. "You can't know that the pain will be gone forever."
In June 2004, the F.T.C. began court proceedings against Mr. Stoddard and his company, Smart Inventions, on a charge of making false claims. The action is pending. Mr. Trudeau says he did not make that claim about Biotape.
Critics contend Mr. Trudeau's book is also misleading. The New York Consumer Protection Board noted earlier this month that Herbert Ley, who is quoted in a promotional blurb, never read the book - he died in 2001. Mr. Ley, a commissioner for the Food and Drug Administration in the 1960's, made the quoted comment in the 1970's, and his name is misspelled on the book jacket.
Many alternative medicine experts agree with the core principles in "Natural Cures." But they too say Mr. Trudeau stretches the facts.
"There's enough truth in what he's saying that it gives him credibility with people who are looking for answers," said Dr. Dean Ornish, founder of the Preventive Medicine Research Institute in Sausalito, Calif., and a clinical professor of medicine at the University of California at San Francisco. "But a lot of what he says is either nonsense or not proven through credible means."
Dr. Sidney Wolfe, director of health research at Public Citizen, an advocacy group often critical of drug companies, said one problem with the book is that it has no references or index, which would help others to verify its claims. Mr. Trudeau said that inclusion would have made the already lengthy book too long.
Dr. Ornish said the text is peppered with unexplained assertions; for example: "A hospital in Mexico has virtually 100 percent success rate in eliminating cancer in a matter of weeks by giving intravenous ozone and hydrogen peroxide."
"Don't you think," asked Dr. Ornish, "that if there was a hospital that was curing cancer, we would have heard about it?"
Some, though, do not care about clinical trials or the judgment of the medical establishment. "I am so grateful I read this book," said Ms. Boruk, the allergy and headache sufferer. "It's changed my life."
LPMG: $456M Fine, or Indictment?
The moment cries out for the late comedian Jack Benny…
August 27, 2005 NYTimes.com
Settlement Seen on Tax Shelters by Audit Firm
By JONATHAN D. GLATER
KPMG, the accounting firm under investigation for selling questionable tax shelters, will pay $456 million and accept an outside monitor of its operations under terms of an agreement with prosecutors that heads off an indictment of the firm, people briefed on the deal said yesterday.
The agreement means that KPMG has dodged a potentially fatal indictment and avoided the fate of Arthur Andersen, the accounting firm that collapsed after prosecutors charged it with obstruction of justice in their investigation of Enron, an Andersen client.
The KPMG settlement, which is expected to be announced on Monday, moves KPMG closer to finishing a painful chapter in its history, after having grappled with a federal investigation for more than a year and a half.
"That's a big victory for a company," said Jonathan S. Feld, a former federal prosecutor who practices at Katten Muchin Rosenman in Chicago and who is not involved in the case. "Especially in light of the problems that we witnessed with Andersen with a criminal indictment, you've avoided a significant accusation that could potentially undermine an entire accounting firm."
Still, the agreement preserves the possibility of criminal charges for KPMG in the event the firm violates the terms and it includes a strong acknowledgment of wrongdoing, according to people briefed on the deal. But importantly, these people said, the firm will not name any former partners involved in the tax shelter transactions, several of whom may face criminal charges that could be announced as early as Monday.
The settlement is the latest step in the government's investigation of questionable shelters, which were created and sold by accounting firms in the late 1990's, and allowed wealthy investors to evade billions of dollars in taxes. The stock market boom had minted quick riches and clients eager to shield their gains from taxes. Regulators soon caught up to the new tax schemes - typically complex swap transactions to create losses on paper - and several accounting firms settled. KPMG, at first, resisted regulators.
In 2003, a Senate subcommittee report on four KPMG shelters found that the firm sold the shelters to some 350 people from 1996 to 2002, depriving the Treasury of at least $1.4 billion in unpaid taxes. KPMG earned fees of $124 million on those sales, the Senate report said.
Prosecutors have indicated that their investigation is continuing, suggesting that others involved in the transactions - banks, law firms, other accounting firms and possibly individual taxpayers who bought the shelters - may face criminal charges in the future.
Prosecutors have already increased pressure on former KPMG partners with the guilty plea this month by an executive in the New York office of HVB, one of Germany's largest banks. The executive, Domenick DeGiorgio, told a federal judge in Manhattan that he participated in a conspiracy to commit tax fraud that involved some transactions of the type sold by KPMG, and that he committed other tax-related crimes. Mr. DeGiorgio is almost certainly assisting prosecutors in their investigation of former KPMG partners and perhaps others, as well.
Under the terms of the agreement expected to be announced on Monday, a former chairman of the Securities and Exchange Commission, Richard C. Breeden, will serve as an independent monitor of KPMG's operations, according to people briefed on the deal. The agreement would also impose restrictions on the scope of its tax practice.
A spokesman for the United States attorney's office in Manhattan declined to comment, as did a spokesman for KPMG.
KPMG's tax business expanded rapidly in the late 1990's, at a time that all of what were then the Big Five accounting firms were adding to revenue by offering businesses other than audits, including technology consulting and, of course, tax services. (KPMG spun off its consulting arm, now known as Bearingpoint, through a public stock offering in 2001.)
In the wave of corporate scandals that followed the collapse of Enron late in 2001, KPMG had its share of trouble with audit clients. The firm paid $22.5 million to settle S.E.C. charges that it helped executives at the Xerox Corporation - one of its audit clients - manipulate and distort financial statements, and in October, the firm agreed to pay $10 million to settle regulators' charges that it and four of its accountants did not properly audit the financial statements of Gemstar-TV Guide International.
KPMG also audited Fannie Mae, which was forced by regulators to restate earnings dating back to 2001.
The specter of the Andersen prosecution - and the Supreme Court's decision this summer reversing the firm's conviction - has loomed over the tax shelter investigation.
Some lawyers not involved in the case said from the beginning that prosecutors could not risk reducing the number of big accounting firms further, from four to three. In turn, the perception that the government was hamstrung put pressure on prosecutors to prove the contrary and to impose stringent requirements on the accounting firm.
"They've already destroyed one accounting firm, and I didn't think they were going to set about destroying another," said Jerry Bernstein, a former federal prosecutor. "The threat was always there. If KPMG had not been sufficiently conciliatory and cooperative, then there was a realistic chance that they would've been indicted."
The firm's acknowledgment of wrongdoing will complicate defense arguments by individual former KPMG partners who worked on the shelters and who may still face criminal charges. A corporate mea culpa may also be used against the firm if KPMG violates the terms of the agreement and prosecutors decide to bring criminal charges against the firm at a future date. People briefed on the settlement's terms said that the deferred prosecution agreement would run until Dec. 31, 2006, by which time the firm will also have to pay the $456 million penalty.
KPMG early on agreed to limit how much financial assistance with legal fees it would provide to partners who had a role in sales of the shelters, identified by acronyms like Blips and Opis, and who were forced out during the investigation.
KPMG also issued a remarkable statement in June in which the firm said that it took "full responsibility for the unlawful conduct by former KPMG partners during that period, and we deeply regret that it occurred."
That statement, which would appear to support the claims of taxpayers who bought the shelters - some of whom have sued the accounting firm - angered lawyers for former partners. They question how KPMG could describe the conduct by partners as "unlawful," before any court has actually ruled on whether the shelters at issue were improper.
The issue of the propriety of the shelters may first be addressed by a federal judge in California overseeing a lawsuit against the government by companies involved in the shelter transactions; a potentially decisive hearing in that case is scheduled for Nov. 3.
Lynnley Browning contributed reporting for this article.
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