Sudan refugees reach U.S. to escape corporate oil war - Bill Gates Connected to Oil Profits
/By Charles Piller from the Los Angeles Times [HERE]
May 3, 2007
OMAHA, Neb. — The janjaweed militia charged into Hayffa Ahmed's village in Darfur on horseback -- rifles raised, swords glinting.
First they killed Ahmed's grandfather, the village chief.
Janjaweed warriors, allies of the Sudanese government, "continued to kill everyone," Ahmed, 30, said softly in Arabic.
"They used guns, clubs, swords -- anything to be able to kill or hurt human beings. For some people, they tied them behind their horses and pulled them until they died in the road."
In Darfur, where more than 200,000 people have perished in what the United States calls "a genocide," the killing has been supported by profits from companies helping the government of Sudan tap its reservoirs of oil.
The companies include China's Sinopec Corp., Malaysia's Petronas, and Schlumberger, based in the Netherlands Antilles -- all of whose investors include the Bill & Melinda Gates Foundation.
The Gates Foundation's most significant connection to the Sudanese oil industry is through Berkshire Hathaway Inc. Bill Gates is a Berkshire director, and Berkshire's chairman, Warren E. Buffett, is a trustee of the Gates Foundation.
Berkshire holds a $3.3 billion stake in PetroChina Co., a subsidiary of the China National Petroleum Corp., or CNPC, the biggest player in Sudanese oil.
Buffett has pledged $31 billion worth of Berkshire stock to the Gates Foundation in annual installments, beginning last year with $1.6 billion.
In 2009 and afterward, the foundation expects Berkshire's wealth to fund about half of its charitable awards -- which have included more than $34 million for emergency refugee and health services in Sudan, plus a share of $167 million more in regional health grants.
But some of Berkshire's wealth comes from PetroChina, whose parent company supplies the money that underwrites Sudan's military and the janjaweed, according to the United States and the United Nations.
The infusion of Berkshire stock places the Gates Foundation in conflict with its own efforts to help victims of the Sudanese civil war. Those victims include refugees of the massacre at Hayffa Ahmed's village.
Sudan denies that it supports the janjaweed and accuses Darfur rebels of instigating the violence.
But Sudan acknowledges that some militia commanders and government officials might have committed human-rights abuses and vow to prosecute such cases. Amid concerns over a possible boycott of the 2008 Beijing Olympics, China recently has begun to pressure the Sudanese government to resolve the crisis.
In April 2004, the janjaweed, who had gang-raped girls in neighboring villages, torched houses on the north side of Ahmed's hamlet, near Tawila, looting as they moved south.
"We had a chance in that time to run," Ahmed said.
She, her husband, Abdel Hamid Mohamed, and their three children fled with only the clothes they were wearing.
They found temporary sanctuary in El Fasher, in northern Darfur, at a refugee camp filled with desperate people.
That same month, the Gates Foundation began an infusion of funds to CARE, Save the Children, the International Rescue Committee and other groups in the El Fasher camp.
The family moved to Khartoum, the capital of Sudan, and then bribed their way to Cairo, where the five obtained official refugee status. Last year, they arrived in Omaha, home to about 9,000 Sudanese refugees, more than anywhere else in America.
The hub of Sudanese life here is modest. A small restaurant, a mom-and-pop grocery, a few storefronts and the Sudanese Center, a social club, are packed into a depressed area of downtown. Nine blocks away stands Berkshire Hathaway's headquarters.
Gabriel Ngong, a refugee and tax accountant, recently voiced a Sudanese axiom: "The Chinese take oil out for the government, then the government kills the people."
When he was told about Berkshire's investment in PetroChina, Ngong was surprised and sad: "Our people always trust Americans."
In response to questions about the Gates Foundation's investments in key economic supporters of the Sudanese government, Monica Harrington, a senior policy officer at the foundation, said: "Bill and Melinda have initiated a process to assess the asset trust investments in Sudan."
These investments, totaling $29 million, included $1.5 million in Petronas, $9.8 million in Sinopec and $2.4 million in Schlumberger, all in 2005, the most recent totals available.
Harrington did not address the conflict with the foundation's mission caused by Berkshire's holdings in PetroChina. She did say, however, that Buffett served as a trustee for the foundation's grant programs and had no involvement in the foundation's investment decisions, "including decisions that might be made about the disposition of Berkshire Hathaway stock."
One week ago, an assistant to Buffett said that the Berkshire Hathaway chairman did not have time to respond to written questions. But in a rare open letter to his shareholders in February, Buffett said that Berkshire would retain its financial holdings in PetroChina. It was PetroChina's parent company, CNPC, he said, that had oil operations in Sudan.
The subsidiary, he said, bore no responsibility for the actions of its parent.
Nonetheless, Buffett has allowed a shareholder resolution challenging the PetroChina holdings to be placed on the agenda for Berkshire's annual meeting Saturday in Omaha.
Critics have said Buffett was ignoring his ability, as PetroChina's largest outside shareholder, to pressure CNPC and China into ending the support it provides the genocide by its oil dealings with Sudan and by providing arms to the Sudanese government and blocking U.N. efforts to stop the killing in Darfur.
By investing in PetroChina, Buffett signaled that the status quo in Sudan was acceptable, said Timothy Smith, president of the Social Investment Forum, an association of more than 600 financial institutions, research companies and foundations.
"There is no morally neutral ground," Smith said. "If Mr. Buffett doesn't want to divest his shares from PetroChina, he should use his considerable prestige and leverage as an investor to demand that the genocide be stopped."
Though the critics agree that PetroChina operates only outside Sudan, they say the company's intimate ties to CNPC raise serious questions about separation between the two.
In 1999, when CNPC proposed a public stock offering to raise cash to expand its operations, concerns about the company's business in Sudan, which is subject to U.S. sanctions as a sponsor of terrorism, caused CNPC to cancel the sale.
Instead, it sold stock in PetroChina, a newly created subsidiary that CNPC promised would not operate in Sudan and would be separated from its parent by a legal and financial firewall.
But critics say the firewall is paper-thin:
-- Ten of PetroChina's 13 directors or officers serve in similar jobs for CNPC, according to the companies' Web sites, and CNPC owns nearly 90 percent of PetroChina, according to the U.S. Securities and Exchange Commission -- giving it unilateral control of PetroChina's "policies, management and affairs."
-- PetroChina inherited $15 billion in CNPC debt, some derived from its Sudan oil operations, and gave 10 percent of the proceeds from the initial public stock offering to CNPC, partly to increase operations in Sudan. Much of PetroChina's net profit goes to CNPC -- PetroChina's second-largest customer and largest supplier.
PetroChina -- the fifth-largest public oil company in the world measured by market capitalization -- is CNPC's largest subsidiary. It took over much of the parent company's domestic operations and many of its foreign holdings.
The ties between CNPC and PetroChina were well-known when Buffett disclosed his first stake in PetroChina in September 2002, near the height of the public concern over government atrocities in southern Sudan. He built up his holdings by April 2003, with war in southern Sudan raging and the Darfur genocide under way.
Since then, PetroChina's share price has risen nearly sixfold, making it one of Berkshire's more lucrative investments.
Since 1965, according to company records, Berkshire shares rose an average of 21.4 percent annually, beating the Standard & Poor's 500 stock index 36 out of the last 42 years, often by wide margins.
Albertina Issa recalled bombs raining on her hometown of Juba, in the south of Sudan. Juba was 250 miles from the oil fields, but on the frontline line of the Sudanese war.
As Catholics, Issa and her husband, Emmanuel Lugang, left Juba to escape both the war and forced conversions to Islam by government forces. After years of exile in Egypt, they moved to Omaha last year. In a recent telephone call from Sudan, Lugang's brother described Juba today. Despite a 2005 cease-fire, a tenuous alliance between the central Sudanese government and southern rebels was unraveling. There were few signs, Lugang's brother said, that oil wealth from the north was trickling down.
"We lack medicine, we lack doctors. No school for the kids," he reported.
According to the Harvard Corp., which manages Harvard University's endowment funds, oil production has become "essential to the government's capacity to fund military operations" -- a view shared by the U.S. Department of Energy.
For this reason, Harvard has divested from companies with ties to Sudan.
Indeed, 95 U.S. universities, colleges and high schools, along with 31 states and 14 cities, are considering or have enacted similar divestment policies, according to the Sudan Divestment Task Force, an advocacy group.
Human Rights Watch concluded in 2003:
"CNPC and Petronas operations ... have been complicit in human rights violations. Their activities are inextricably intertwined with the (Sudanese) government's abuses; the abuses are gross; the corporate presence fuels, facilitates or benefits from violations."
Similar complaints have been lodged against Petrodar Operating Co., according to a 2006 report by the European Coalition on Oil in Sudan, a group of more than 80 religious and peace groups.
CNPC owns 41 percent of Petrodar.
A report in 2000 by a Canadian government commission said an airstrip at Heglig, operated by Sudan's Greater Nile Petroleum Operating Co., was a staging area for military attacks on civilians.
CNPC owns 40 percent of Greater Nile.
Oil provides over half of Sudan's budget, and CNPC buys about two-thirds of that oil.
To Lugang, these reports, together with his brother's words from Juba, have made it clear: "Sudan is getting money from the Chinese oil companies in order to buy guns and tanks," first to terrorize the south, now Darfur.
Oil money, Lugang said, is "prolonging the war."
Because Berkshire Hathaway's stock will become the largest single part of the Gates Foundation's portfolio and will fund half of its future grants, the Los Angeles Times examined holdings in Berkshire's investment portfolio in addition to PetroChina.
About $56.4 billion, or 87 percent of Berkshire's stock holdings, is invested in companies criticized by social-performance research groups for profiting from environmental irresponsibility, human-rights violations and other activities that undermine the foundation's good works or its goals of improving the lot of humankind.
That contrasted to $8.7 billion, or 41 percent, of the foundation's holdings with similar conflicts, according to the most recently available data.
The foundation declined to respond to most questions.
However, Patty Stonesifer, the foundation's chief executive, said in a letter to the editor of the Times that it was naive to think that a shift in investment strategy would reduce the human misery blamed on the companies in which it had invested.
Buffett's aide said he did not have time to respond to written questions about the apparent conflicts between his investments and the foundation's goals.
Warren Buffett's authority is part financial, part moral.
"St. Warren," said Michael Useem, a professor of management at the University of Pennsylvania's Wharton School, "has built additional credibility as a wise and informed observer of what's good for companies, what's good for governance and where the country should be going."
Buffett made his reputation in corporate governance in 1991, when he saved Salomon Inc., investment bank from collapse after one of its traders tried to evade securities laws. Buffett, a Salomon director, restored the bank's ethical culture.
But in his investments, Buffett's good-governance ethos does not extend to social or environmental concerns, according to reports by independent investment analysts.
The holdings of Berkshire Hathaway, totaling more than $4.6 billion in eight companies, came in dead last by a wide margin in a ranking of oil and gas holdings among the 100 largest investors in the United States. The ranking was based on social, environmental and governance performance ratings developed by the investment bank Goldman Sachs Group Inc. and a related ownership analysis by Cary Krosinsky of CapitalBridge, a capital markets intelligence firm.
It was 33 percent below average.
More than any other large investor, Berkshire bought into oil companies whose records on greenhouse gas emissions, safety, business ethics, human rights and other issues significantly lagged behind their peers.
As Berkshire stock is transferred to the Gates Foundation, the lag measured by Goldman Sachs and others contravenes the foundation's efforts to improve human health and welfare and its philosophy that "all lives -- no matter where they are being led -- have equal value."
Berkshire holds about $64 million in pharmaceutical companies whose pricing policies have kept antiretroviral drugs out of reach for HIV/AIDS patients in developing nations -- one of the foundation's most important constituencies.
Berkshire also owns shares worth $28.5 billion in companies accused of human-rights abuses, including $921 million in Wal-Mart Stores Inc.
On its Web site, Wal-Mart says it has long supported human rights in the workplace and that it cancels orders from factories overseas that violate its policies supporting fair compensation and bans on child labor. But Wal-Mart has paid fines or lost rulings in regulatory and court cases accusing it of violating laws banning child labor and governing union organizing and adult working conditions.
Berkshire holdings worth more than $21 billion also fared poorly on overall corporate governance, including accounting procedures; transparency on environmental and social policies; and lawsuits or regulatory problems concerning harm to investors, employees, customers or local communities.
Buffett enjoys a rare authority, investment experts said, that could shift the debate on these issues, including the genocide in Darfur.
"Buffett has tremendous power and influence," said Smith of the Social Investment Forum. "He has the platform of the Gates Foundation and its incredibly important mission to speak from. His voice would be heeded."
Times staff writers Doug Smith and Edmund Sanders and researchers Maloy Moore and Scott Wilson contributed to this report.
