Columbia University's Apple Inc./Applegate Scandal Connection--Part 2

“Apple, the world’s most profitable technology company, doesn’t design iPhones here. It doesn’t run AppleCare customer service from this city. And it doesn’t manufacture MacBooks or iPads anywhere nearby.

“Yet, with a handful of employees in a small office here in Reno, Apple has done something central to its corporate strategy: it has avoided millions of dollars in taxes in California and 20 other states.

“Apple’s headquarters are in Cupertino, Calif. By putting an office in Reno, just 200 miles away, to collect and invest the company’s profits, Apple sidesteps state income taxes on some of those gains. “

--The New York Times on April 28, 2012


“…Campbell serves on several corporate boards, including Apple Inc., and is a consultant to from five to 20 other companies in any given year. He is chairman of the board of trustees at his alma mater, Columbia University…”

--The Pittsburgh Business Times on September 28, 2012


Columbia University’s Apple Inc./Applegate Scandal Connection—Part 2

The Chairman of the board of trustees of “tax-exempt” and “non-profit” Columbia University since 2005—a former Columbia University football coach named William V. Campbell—also has sat on the board of directors of Apple Inc. in recent years; and in 2012, “tax-exempt” and “non-profit” Columbia University’s board of trustees chairman apparently collected $65,000 in fees and $201,000 in stock compensation from Apple Inc. in 2012.

And, coincidentally, Apple Inc.—like “tax-exempt” and “non-profit” Columbia University—has apparently not been eager to pay a fair share of taxes in recent years. As Charles Duhigg and David Kocieniewski noted in an article, titled “How Apple Sidesteps Billions in Taxes,” that appeared in the April 28, 2012 issue of the New York Times noted:

“California’s corporate tax rate is 8.84 percent. Nevada’s? Zero.

“Setting up an office in Reno is just one of many…methods Apple uses to reduce its worldwide tax bill by billions of dollars each year. As it has in Nevada, Apple has created subsidiaries in low-tax places like Ireland, the Netherlands, Luxembourg and the British Virgin Islands — some little more than a letterbox or an anonymous office — that help cut the taxes it pays around the world.

“…For Apple, the savings are especially alluring because the company’s profits are so high. Wall Street analysts predict Apple could earn up to $45.6 billion in its current fiscal year — which would be a record for any American business.

“Apple serves as a window on how technology giants have taken advantage of tax codes… Over the last two years, the 71 technology companies in the Standard & Poor’s 500-stock index — including Apple, Google, Yahoo and Dell — reported paying worldwide cash taxes at a rate that, on average, was a third less than other S.& P. companies’. (Cash taxes may include payments for multiple years.)

“Even among tech companies, Apple’s rates are low….It has…devised corporate strategies that take advantage of gaps in the tax code, according to former executives who helped create those strategies.

“Apple, for instance, was among the first tech companies to designate overseas salespeople in high-tax countries in a manner that allowed them to sell on behalf of low-tax subsidiaries on other continents, sidestepping income taxes, according to former executives. Apple was a pioneer of an accounting technique known as the `Double Irish With a Dutch Sandwich,' which reduces taxes by routing profits through Irish subsidiaries and the Netherlands and then to the Caribbean….

“Without such tactics, Apple’s federal tax bill in the United States most likely would have been $2.4 billion higher last year, according to a recent study by a former Treasury Department economist, Martin A. Sullivan. As it stands, the company paid cash taxes of $3.3 billion around the world on its reported profits of $34.2 billion last year, a tax rate of 9.8 percent. (Apple does not disclose what portion of those payments was in the United States, or what portion is assigned to previous or future years.)

“By comparison, Wal-Mart last year paid worldwide cash taxes of $5.9 billion on its booked profits of $24.4 billion, a tax rate of 24 percent, which is about average for non-tech companies.

“…While Apple contracts out much of the manufacturing and assembly of its products to other companies overseas, the majority of Apple’s executives, product designers, marketers, employees, research and development, and retail stores are in the United States. Tax experts say it is therefore reasonable to expect that most of Apple’s profits would be American as well…However, Apple’s accountants have found…ways to allocate about 70 percent of its profits overseas, where tax rates are often much lower, according to corporate filings….

“In 2006, as Apple’s bank accounts and stock price were rising, company executives came here to Reno and established a subsidiary named Braeburn Capital to manage and invest the company’s cash….Today, Braeburn’s offices are down a narrow hallway inside a bland building that sits across from an abandoned restaurant….When someone in the United States buys an iPhone, iPad or other Apple product, a portion of the profits from that sale is often deposited into accounts controlled by Braeburn, and then invested in stocks, bonds or other financial instruments, say company executives. Then, when those investments turn a profit, some of it is shielded from tax authorities in California by virtue of Braeburn’s Nevada address.

“Since founding Braeburn, Apple has earned more than $2.5 billion in interest and dividend income on its cash reserves and investments around the globe. If Braeburn were located in Cupertino, where Apple’s top executives work, a portion of the domestic income would be taxed at California’s 8.84 percent corporate income tax rate.
"But in Nevada there is no state corporate income tax and no capital gains tax.

“What’s more, Braeburn allows Apple to lower its taxes in other states — including Florida, New Jersey and New Mexico — because many of those jurisdictions use formulas that reduce what is owed when a company’s financial management occurs elsewhere…. But some in California are unhappy that Apple and other California-based companies have moved financial operations to tax-free states — particularly since lawmakers have offered them tax breaks to keep them in the state.

“In 1996, 1999 and 2000, for instance, the California Legislature increased the state’s research and development tax credit, permitting hundreds of companies, including Apple, to avoid billions in state taxes, according to legislative analysts. Apple has reported tax savings of $412 million from research and development credits of all sorts since 1996.

"Then, in 2009, after an intense lobbying campaign led by Apple, Cisco, Oracle, Intel and other companies, the California Legislature reduced taxes for corporations based in California but operating in other states or nations. Legislative analysts say the change will eventually cost the state government about $1.5 billion a year.

“Such lost revenue is one reason California now faces a budget crisis, with a shortfall of more than $9.2 billion in the coming fiscal year alone. The state has cut some health care programs, significantly raised tuition at state universities, cut services to the disabled and proposed a $4.8 billion reduction in spending on kindergarten and other grades.

"Apple declined to comment on its Nevada operations….

“…Apple’s decisions have yielded benefits. After announcing one of the best quarters in its history last week, the company said it had net profits of $24.7 billion on revenues of $85.5 billion in the first half of the fiscal year, and more than $110 billion in the bank, according to company filings….

“While Apple’s Reno office helps the company avoid state taxes, its international subsidiaries — particularly the company’s assignment of sales and patent royalties to other nations — help reduce taxes owed to the American and other governments.

"For instance, one of Apple’s subsidiaries in Luxembourg, named iTunes S.à r.l., has just a few dozen employees…The advantages of Luxembourg are simple, say Apple executives. The country has promised to tax the payments collected by Apple and numerous other tech corporations at low rates if they route transactions through Luxembourg. Taxes that would have otherwise gone to the governments of Britain, France, the United States and dozens of other nations go to Luxembourg instead, at discounted rates.

“`We set up in Luxembourg because of the favorable taxes,’ said Robert Hatta, who helped oversee Apple’s iTunes retail marketing and sales for European markets until 2007….

“An Apple spokesman declined to comment on the Luxembourg operations…. Apple, say former executives, has been particularly talented at identifying…tax loopholes…In the 1980s, for instance, Apple was among the first major corporations to designate overseas distributors as `commissionaires’” rather than retailers, said Michael Rashkin, Apple’s first director of tax policy, who helped set up the system before leaving in 1999….The structure allowed a salesman in high-tax Germany, for example, to sell computers on behalf of a subsidiary in low-tax Singapore. Hence, most of those profits would be taxed at Singaporean, rather than German, rates.

“In the late 1980s, Apple was among the pioneers in creating a tax structure — known as the Double Irish — that allowed the company to move profits into tax havens around the world, said Tim Jenkins, who helped set up the system as an Apple European finance manager until 1994.

“Apple created two Irish subsidiaries — today named Apple Operations International and Apple Sales International — and built a glass-encased factory amid the green fields of Cork. The Irish government offered Apple tax breaks in exchange for jobs, according to former executives with knowledge of the relationship.

“But the bigger advantage was that the arrangement allowed Apple to send royalties on patents developed in California to Ireland….As a result, some profits were taxed at the Irish rate of approximately 12.5 percent, rather than at the American statutory rate of 35 percent…. Moreover, the second Irish subsidiary — the `Double’ — allowed other profits to flow to tax-free companies in the Caribbean. Apple has assigned partial ownership of its Irish subsidiaries to Baldwin Holdings Unlimited in the British Virgin Islands, a tax haven, according to documents filed there and in Ireland. Baldwin Holdings has no listed offices or telephone number, and its only listed director is Peter Oppenheimer, Apple’s chief financial officer, who lives and works in Cupertino….

“Finally, because of Ireland’s treaties with European nations, some of Apple’s profits could travel virtually tax-free through the Netherlands — the Dutch Sandwich — which made them essentially invisible to outside observers and tax authorities….

“…Tax experts say that strategies like the Double Irish help explain how Apple has managed to keep its international taxes to 3.2 percent of foreign profits last year, to 2.2 percent in 2010, and in the single digits for the last half-decade, according to the company’s corporate filings.

“Apple declined to comment on its operations in Ireland, the Netherlands and the British Virgin Islands.

“Apple reported in its last annual disclosures that $24 billion — or 70 percent — of its total $34.2 billion in pretax profits were earned abroad, and 30 percent were earned in the United States…. If profits were evenly divided between the United States and foreign countries, Apple’s federal tax bill would have increased by about $2.4 billion last year…

“…Apple, which holds $74 billion offshore, last year aligned itself with more than four dozen companies and organizations urging Congress for a “repatriation holiday” that would permit American businesses to bring money home without owing large taxes…. The tax break would cost the federal government $79 billion over the next decade, according to a Congressional report….”

Columbia University Faculty House Workers And Students Protest Against Columbia University Exploitation Of Workers

Columbia University's Apple Inc./Applegate Scandal Connection--Part 1

“William V. Campbell…has been on Apple’s board since 1997…He chairs the Columbia board of trustees…Unless you work in the Valley, you’ve probably never head of Campbell—and he does everything he can to keep it that way…Why doesn’t he want his fingerprints on the many ways he’s influencing Silicon Valley, which include…product development at Apple?...

“Campbell has helped build Google’s board (which shares two directors with Apple)…John Sculley, who…left Pepsi to be CEO of Apple and whose brother-in-law was a Campbell buddy, persuaded him to take a job at Apple in 1983…Campbell took over Apple’s software unit Claris…Campbell…is worth at least $200 million, an estimated based in part on his Apple and Intuit stockholdings….

“University President Lee Bollinger invited Campbell to join Columbia’s board in 2003—and 2 years later the board chose him as chairman…focused…on Columbia’s ambitious expansion efforts…:”

(Fortune magazine, 7/21/08)

“In the last decade, Apple has become one of the…richest…companies in the world…However, the workers assembling iPhones, iPads and other devices often labor in harsh conditions…Employees work excessive overtime, in some cases seven days a week, and live in crowded dorms…Under-age workers have helped build Apple’s products…Two years ago, 137 workers at an Apple supplier in eastern China were injured after they were ordered to use a poisonous chemical to clean iPhone screens, Within seven months last year, two explosions at iPad factories, including in Chengdu, killed four people and injured 77. Before those blasts, Apple had been alerted to hazardous conditions inside that Chengdu plant…

“`We’ve known about labor abuses in some factories for four years, and they’re still going on,’ said one former Apple executive who, like others, spoke on the condition of anonymity because of confidentiality agreements. `Why? Because the system works for us. Suppliers would change everything tomorrow if Apple told them they didn’t have another choice.’

“…Apple was provided with extensive summaries of this article, but the company declined to comment… “

(The New York Times, 1/25/12)

Columbia University’s Apple Inc./Applegate Scandal Connection—Part 1

The Chairman of Columbia University’s Board of Trustees, William Campbell, sits on the board of directors of a transnational corporation, Apple Inc., that has been accused by a coalition of human rights and labor rights groups, led by the Students and Scholars Against Corporate Misbehavior, of not providing a living wage for workers in China, using involuntary labor through a student worker intern program and “enormous greed.” As an “Open Letter” to a colleague on the Apple Inc. board of directors of Columbia University Board of Trustees Chair William Campbell—Apple Inc. CEO Tim Cook—stated:

“We, the undersigned non-governmental organizations and labour unions, demand that Apple ensure decent working conditions at all its suppliers.

“When confronted with escalating criticism of Apple’s unethical labour practices, you responded, `We care about every worker in our worldwide supply chain. Any accident is deeply troubling, and any issue with working conditions is cause for concern.’ But promises without action are merely empty rhetoric. In fact, none of the workers whom Students & Scholars Against Corporate Misbehaviour (SACOM) interviewed reported feeling that Apple cares about them. In contrast, they describe their daily routine as work, eat and sleep. They described themselves as machines that repeated the same monotonous motion for thousands times a day….

“In 2010-2011, SACOM issued five research reports that documented labour rights violations at Apple suppliers in China, including Foxconn and Wintek. These violations are systemic problems, not isolated or unrelated incidents. We are frustrated with Apple’s continued failure to implement institutional reforms to protect the rights of workers in its supply chain.

“The size of Apple’s bank account demonstrates the enormous greed and desire for profit of Apple and its executive. On 19 March 2012, Apple announced that it would finally share some of its $100 billion in cash reserves with shareholders. It is regrettable that Apple did not show any intention to share the revenue with its production workers whose labour helped the company become one of the most profitable corporations in the world.

"In early 2012, Bloomberg reported that Apple’s profit margin was as high as 30%, while the profit margin of Foxconn, its main supplier, was a mere 1.5%. Yet, the wages at Apple’s suppliers are so low that the only way for workers to feed their families is through overtime, often well in excess of the legal maximum. In 2011, the monthly basic salary of the workers who produced the iPhones and iPads in China was as low as CNY 850 (USD 134) and CNY 950 (USD 150), respectively. Although Foxconn subsequently implemented a minor wage increase, the company also eliminated subsidies for workers’ food and housing, virtually cancelling any impact of the wage increase….

“In 2011, a typical work shift for Foxconn workers was 10 hours per day, 6-7 days a week in the peak season. Therefore, overtime work could be as high as 100 hours per month, almost 3 times the legal standard. Sometimes, workers must skip their second meal break in order to reach the factory’s production target. Workers reported that overtime work is mandatory and that if they fail to show up for one of the overtime shifts without the permission of the supervisor, it is considered a work stoppage. As punishment, the worker will not be given any overtime work for the following month. The implication of this is that the worker will only be able to earn the base salary, which is not enough for basic survival.

“In the lead-up to the new iPad release in March 2012, some migrant Foxconn workers in Shenzhen complained that they were not able to go back to their hometown for the Chinese New Year holiday – often their only opportunity each year to visit family in their home villages. They were only permitted five days of vacation, barely enough for travel time alone, making it impossible to go home to see their families…

“In 2009, nearly 140 workers at the Wintek factory in China were poisoned by n-hexane, a chemical used for cleaning the touchscreens of iPhones. Some of the victims were hospitalized for more than nine months due to nerve damage…. Besides occupational illness, industrial injuries at Apple suppliers are equally appalling. In May 2011, a deadly explosion occurred in the polishing department at Foxconn’s plant in Chengdu, killing four workers and injuring 18. Seven months later, another blast occurred at another Apple supplier, Riteng Computer Accessory in Shanghai. 59 workers were injured and several suffered facial disfigurement and broken bones as a result. Both explosions were triggered by the excessive build-up of combustible aluminium dust in the air on the shop floor. The explosion at Foxconn could have been prevented, as SACOM had publicly reported on the problem of aluminium dust two weeks before the tragedy. Yet, Apple ignored SACOM’s warning. Tragically, Apple refused to take action following the first explosion, resulting in the accumulation of aluminium dust and subsequent explosion in Riteng…

We strongly demand that Apple:

1. Provide a living wage for all workers so they do not have to work excessive overtime hours in order to support themselves and their families;

2. End the use of involuntary labour that occurs through the student worker intern program;

3. Conduct labour rights training for workers, including training on occupational health and safety;

4. Facilitate the formation of a genuine trade union through democratic election;

5. Compensate victims of non-compliance with the Apple code of conduct….”

Columbia SDS Memories Revisited: Discovering IDA, 1967--Part 7

At Columbia SDS’s general assembly meeting a day or two later, I summarized my IDA research for the rank-and-file members who had shown up for the meeting, and someone nominated me for a Columbia SDS steering committee position. I was elected to the steering committee and was re-elected the following year. Were it not for my discovery of Columbia’s IDA ties, I would not have been elected to the Columbia SDS steering committee.

At this same meeting, Teddy was elected Columbia SDS chairman for the 1967-68 academic year and Ted was elected vice-chairman for the same period. Since Teddy and Ted were the only Columbia College juniors in the New Left faction who were willing to take on these posts, they were elected without any significant opposition within the Columbia SDS chapter. Because Teddy was considered to be both a more charismatic orator and a more popular New Left personality on campus than Ted, nobody suggested that Ted—not Teddy—might be the more appropriate choice for Columbia SDS chairman.

Teddy arranged to have a few hundred copies of the Columbia-IDA expose’ printed up and circulated around campus. Columdia Spectator printed a letter to the editor that I had written them a month earlier because now I suddenly had more intellectual status with them. Viet Report suddenly acknowledged receipt of an excerpt from my anti-war play, The Barrier, which I had mailed them months before, after Klare mentioned my name in an article he wrote for Viet Report about IDA.

I started to work more closely with Teddy who, in his early days as Columbia SDS chairman, was very energetic and enthusiastic about doing campus organizing. Because Nancy continued to always be at Teddy’s side, I bumped into her often and continued to find her quite attractive on an emotional, intellectual, political and physical level, the more I spoke with her and worked closely with her and Teddy. I worked with the Schneiders on writing leaflets which described Columbia-IDA ties and used the IDA complicity issue to raise the political consciousness of the liberal Columbia and Barnard students about the true nature of the U.S. university. I started to get friendlier with more Barnard members of Columbia SDS with whom I worked, attended meetings with or met in libraries, at SDS parties, at SDS cultural events or just walking around campus.

Most Columbia SDS cultural events were set up by Morris, who had entered Columbia the same term I had. Morris was a red diaper baby who, as a freshman, had worked hard setting up benefit film showings and sliding leaflets under dormitory room doors for the Independent Committee on Viet Nam. As a freshman, I had joined him in shoving leaflets under dorm room doors in John Jay Hall one night. Like most other Columbia leftist students, Morris had left the ICV for Columbia SDS in Fall 1966.

Within Columbia SDS, Morris was the guy in whose name rooms for Columbia SDS film showings and cultural events were reserved. Morris was also the guy who took care of placing ads in Spectator for Columbia SDS cultural front events. Films on Viet Nam narrated by Bertrand Russell, Soviet films like Potemkin and Italian films like The Organizer with Marcello Mastroianni were booked by Morris for various evening fundraising or free SDS cultural events on campus.

Columbia SDS Memories Revisited: Discovering IDA, 1967--Part 6

In March 1967, the editorial offices of Columbia Daily Spectator were located on the third floor of Ferris Booth Hall. With Mike Klare, who had previously shared his research on Columbia’s classified Electronics Research Lab [ERL] and Office of Naval research work with Spectator, I walked into the student newspaper office, the expose’ in my hand.

One of the new staff editors of Spectator, Robert, was sitting in his office. Robert was from Great Neck, which was on the other side of the highway from the Little Neck-Douglaston neighborhood in which I had spent most of my childhood. Great Neck was a much wealthier, more upper-middle-class neighborhood than the affluent Jewish working-class ghetto-development I had grown up in. Great Neck was where Little Neck and Douglaston girls from my side of the Long Island Expressway went to receive orthodontic work for their teeth.

Although Robert had apparently picketed Woolworth’s as a high school student as part of a civil rights demonstration, he had not been active in either the Columbia Citizenship Council or in the anti-war movement on campus.

“The Columbia SDS Research Committee has discovered something interesting,” Klare said to Robert. “When I asked Grad School Dean Halford a few weeks ago at a forum whether there existed an institutional connection between the Institute for Defense Analyses and Columbia University, he lied. He said `There is no institutional connection between Columbia University and the Institute for Defense Analyses.’ But the Columbia SDS Research Committee has found that Columbia is institutionally connected to the Institute for Defense Analyses.”

In the Spectator office with Robert at the time was a Spectator reporter named Jerry. Robert handed the expose’ to Jerry, and then told Klare and me to talk with Jerry about our discovery. Then Robert went back to editing newspaper copy. Jerry quickly skimmed through the eight-page research paper and noticed that another IDA Trustee, besides Columbia President Kirk, was a man named William A.M. Burden.

“Hey! This IDA Trustee William A.M. Burden is also a Columbia Trustee!” Jerry exclaimed with glee in his voice. Jerry was a boyish, pre-med major and sophomore from Hewlett, Long Island.

Jerry then went to Spectator’s trustees file and pulled out a glossy photograph of Burden. (Further research on my part revealed that Burden was also a director of Lockheed, American Metal Climax and CBS. Additional research later revealed that Burden was one of the 20th-century heirs to the fortune of robber-baron Cornelius Vanderbilt).

“Can I borrow this copy of your paper to use when I write the Spectator article on the SDS discovery?” Jerry asked.

“Sure,” I answered.

“Come by and pick it up tonight after dinner in my dormitory room,” Jerry added. He then gave me his dorm room number. He lived in the Hartley-Livingston Hall complex. Klare and I then left the Spectator offices and I went to one of my scheduled classes.

That evening, I dropped by Jerry’s dorm room. In the room with Jerry was his roommate, a Columbia College sophomore named Dan. Both Jerry and Dan seemed interested in talking with me about politics. After talking with them both about Columbia and IDA, Dan and I got into a discussion about New Left politics and radical social change. I asked Dan why he didn’t join SDS, since he seemed to be strongly against the war in Viet Nam and against the U.S. military and U.S. foreign policy.

“I’m a Marxist, too. And I seek the same radical change in U.S. society that SDS wants. But I think the best strategy is to infiltrate existing institutions and not let people know you’re a Marxist. Then, once you’re in power within Establishment institutions, you can use your power to really make radical change. That’s what I’m going to try to do with my life. I’m going to secretly work from within to radically change U.S. society,” Dan answered.

“I don’t think you can really change U.S. society by working from within the corrupt U.S. social institutions—even if you are a Marxist who sees working from within as just a political tactic. I think we always have to be open about what we believe in politically, all the time, in order to really change U.S. society. But I wish you luck,” I replied.

[Ironically, in the 1980s Dan became the first “Marxist” chairperson of the New York State Assembly’s Committee on Corrections, in charge of making the state’s prison system work more efficiently; and in 1989 he unsuccessfully ran for the office of Brooklyn District Attorney in the Democratic Party primary and apparently allowed his supporters to wage a homophobic campaign].

Spectator printed a one-column front-page article which noted that Columbia SDS had discovered Columbia’s IDA affiliation, despite Dean Halford’s earlier denial of any such connection. At the Columbia SDS steering committee meeting it was decided to have Evansohn read the paper I had written at an SDS teach-in that was being held around this time.

Just before he read the paper at the McMillan Theatre teach-in, in front of a few hundred people, Evansohn urged me to read it myself. But I was reluctant to stand up before that large a group of people and speak, at that time. I also felt that since Evansohn was more a part of Columbia SDS’s leadership at that time than I was, his reading the Columbia-IDA expose’ would be a more politically effective and impressive act than my reading of it. Evansohn read the expose’ before the teach-in audience and people at the teach-in were angered by the new revelations regarding Columbia’s complicity with the Pentagon.

The following week, Evansohn and I went to Dean Halford’s office in Low Library on behalf of Columbia SDS. We asked him to urge Grayson Kirk to immediately announce that Columbia would resign its institutional membership in the IDA as a protest against the continued U.S. military intervention in Viet Nam. Halford appeared to be in his late 50s, wore glasses, spoke in either a Midwestern or modified Southern accent and was polite. But he was defensive about Columbia’s IDA ties. He tried to minimize the significance of Columbia’s IDA affiliation and to justify his refusal to acknowledge Columbia’s IDA ties at the Low Library forum. Halford also indicated that it was going to be Columbia Administration policy to continue its IDA membership—Viet Nam War or no Viet Nam War.

As we walked down the steps of Low Library, both dissatisfied with Dean Halford’s response to Columbia SDS’s formal demand for institutional disaffiliation from IDA, Evansohn said to me the following:

“That’s all you can ever expect from a liberal bureaucrat.”