Sunday, November 16, 2008

Ditch the smooth transition. The people voted for change

Ditch the smooth transition. The people voted for change

Instead of accepting the corrupted bail-out and reassuring Wall Street, Obama's team must start doing the hard stuff now

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The more details emerge, the clearer it becomes that Washington's handling of the Wall Street bail-out is not merely incompetent: it is borderline criminal.

In a moment of high panic in September, the US treasury pushed through a radical change in how bank mergers are taxed - a change long sought by the industry. Despite the fact that this move will deprive the government of as much as $140bn in tax revenue, legislators found out only after the fact. According to the Washington Post, more than a dozen tax attorneys agree that "[the] treasury had no authority to issue the [tax change] notice".

Of equally dubious legality are the equity deals the treasury has negotiated with many of the banks. According to Congressman Barney Frank, one of the architects of the legislation that enables the deals: "Any use of these funds for any purpose other than lending - for bonuses, for severance pay, for dividends, for acquisitions of other institutions ... is a violation of the act." Yet this is exactly how the funds are being used.

Then there is the nearly $2 trillion that America's central bank, the Federal Reserve, has handed out in emergency loans. Incredibly, the Fed will not reveal which corporations have received these loans or what it has accepted as collateral. Bloomberg news service believes this secrecy violates the law and has filed a federal suit demanding full disclosure.

Yet the Democrats are either openly defending the administration or refusing to intervene. "There is only one president at a time," we hear from Barack Obama. That's true. But every sweetheart deal the Bush administration makes threatens to hobble Obama's ability to make good on his promise of change. To cite just one example, that $140bn in missing revenue is almost the same sum as Obama's renewable energy programme. Obama owes it to the people who elected him to call this what it is: an attempt to undermine the electoral process by stealth.

Yes, there is only one president at a time, but that president needed the support of powerful Democrats - including Obama - to get the bail-out passed. Now that it is clear the Bush administration is violating the terms to which both parties agreed, the Democrats have not just the right, but a grave responsibility, to intervene forcefully.

I suspect the real reason the Democrats are failing to act has less to do with presidential protocol than with fear: fear that the stockmarket, which has the temperament of an over-indulged two-year-old, will throw one of its world-shaking tantrums. Disclosing the truth about who is receiving federal loans, we are told, could cause the market to bet against those banks. Question the legality of equity deals, and the same thing will happen. Challenge the $140bn tax giveaway and mergers could fail.

More than that, the Democrats, including Obama, appear to believe that the need to soothe the market should govern all key economic decisions in the transition period. Which is why, just days after a euphoric victory for "change", the mantra abruptly shifted to "smooth transition" and "continuity".

Take Obama's choice for chief of staff. Rahm Emanuel, the House Democrat who received the most donations from the financial sector, sends an unmistakably reassuring message to Wall Street. When asked if Obama would be moving quickly to increase taxes on the wealthy, as promised, Emanuel pointedly did not answer the question.

This same market-coddling logic should, we are told, guide Obama's selection of treasury secretary. Fox News and MNSBC explained that Larry Summers, who held the post under Clinton, is the man "the Street would like most". Let's be clear why. "The Street" would cheer a Summers appointment for the same reason the rest of us should fear it: because traders will assume that this champion of deregulation will offer a transition from Henry Paulson so smooth that we will barely know it happened. On the other hand, someone like Sheila Bair, the chairman of the banks' insurer of last resort, the Federal Deposit Insurance Corporation, would spark fear on the Street - for all the right reasons.

One thing we know for certain is that the market will react violently to anyone likely to impose serious regulation, invest in people, and cut off the free money. In short, the markets can be relied on to vote in precisely the opposite way that Americans have just voted. (A recent poll found 60% strongly favour "stricter regulations on financial institutions", while just 21% support aid to financial companies.)

There is no way to reconcile the public's vote for change with the market's foot-stomping for more of the same. Any moves to change course will be met with market shocks. The good news is that once it is clear the new rules will be applied across the board, fairly, the market will stabilise and adjust. Furthermore, the timing for this turbulence could not be better. Over the past three months, we've been shocked so often that market stability would come as more of a surprise. That gives Obama a window to disregard the calls for a seamless transition and do the hard stuff first. Few will be able to blame him for a crisis that predates him, or fault him for honouring the clearly expressed wishes of the electorate. The longer he waits, however, the more memories will fade.

When transferring power from a functional, trustworthy regime, everyone favours a smooth transition. When exiting an era marked by criminality and bankrupt ideology, a little rockiness at the start would be a very good sign.

Iraq war veterans charged with ‘DisCon’

Iraq war veterans charged with 'DisCon'

By Dee Knight

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Fourteen members of the Iraq Veterans Against the War attempted to present questions to presidential candidates Barack Obama and John McCain at their final debate in Hempstead, Long Island, N.Y., on Oct. 15. Instead of being ushered into the debate site as they requested, they were assaulted by riot police on horseback.

Iraq veteran Sgt. Nick Morgan, trampled<br>by police horse Oct. 15 in Hempstead, N.Y. One veteran, Nick Morgan, was trampled when a cop provoked his horse to spin, knocking Morgan down and trampling his face. Morgan sustained a crushing blow to his head—a cheek bone was broken in three places, and his eye socket was shattered.

Morgan was dumped in a police wagon with the other vets, until they badgered the cops to rush him to a hospital, then sent to jail. They were arraigned for "disorderly conduct" on Nov. 10 at the Nassau County District Court.

In its coverage of the Hempstead events, the New York City Independent Media Center reported on Oct. 16 that "Speakers included a member of the New York Civil Liberties Union, a local civil rights advocate, a Military Families Speak Out activist and a member of the May 1st Coalition for Immigrant and Worker Rights. As more activists from the NYC area poured in, the march to the campus of Hofstra started, with defiant chants of 'Stop the torture, stop the war, this is what we're fighting for,' and 'They're our brothers, they're our sisters, we support war resisters!' filling the streets of Hempstead. With IVAW members at the front, the crowd swelled to around 400 demonstrators. Members of the local Planned Parenthood joined in along the way."

IVAW members, backed by a crowd of anti-war protesters, were allowed to pass through one line of police before they were met with lines of Nassau County riot police and cops on horses. IVAW members Matthis Chiroux and Kris Goldsmith, who organized the protest, tried to enter the Hofstra University campus and were promptly arrested. At least three other veterans and four civilians followed and were arrested as well.

As the crowd chanted, "Let them in!" the police on horses pushed back against the crowd, which was led by a group of about 15 Iraq veterans in fatigue uniforms. After a tense standoff for several minutes, four people were knocked over by riot police and horses. It was during this fracas that Morgan was injured. After the police assault, a standoff between the cops and demonstrators occurred for more than an hour.

A couple of questions

Chiroux, who last May publicly declared his intent to refuse to deploy to Iraq, had sent a letter to debate moderator Bob Scheiffer demanding that two IVAW members be allowed to ask the candidates one question each.

"My question is, as President of the United States of America, are you prepared to back up your own words [about the illegality of the Iraq War] and the U.S. Constitution by supporting service members refusing to participate in what you describe as an illegal occupation?"

They also wanted to ask McCain a question about his lack of support for veterans. "What promises are you willing to make, as a veteran, as a senator, as a presidential candidate, to the veterans of the United States, to prove that you will ensure the V.A. is fully funded, staffed and capable of preventing troops from suffering as they are now?"

A petition launched the day following the Hempstead incident says in part:

"We, the undersigned, denounce and condemn the violent actions and gross misconduct of the Nassau County Police Department in Hempstead, Long Island. Specifically, we are citing the unprovoked attack unleashed upon a member of Iraq Veterans Against the War, who was acting within the First Amendment right to peacefully assemble on the evening of October 15, 2008 at Hofstra University, the site of the last presidential debate.

"We urge that all charges against the Iraq veterans and the other people arrested be dropped. ... All charges against [Morgan] must be dropped immediately, and a public apology be given by not only the Nassau County Police Department but the Mayor of Hempstead."

To sign the petition, go to www.ipetitions.com.

At the arraignment, Chiroux said, "We were charged with disorderly conduct, to which we all plead not guilty." But, he adds, "Here's the dirty thing. The cops scheduled our court appearances on different days to break us up and make demonstrations that much more complicated." What the cops did not take into account is that more demonstrations help the movement—not them.

No reports were available regarding possible civil action against the police for damages.

GM-Chrysler merger off, but more layoffs on the way

GM-Chrysler merger off, but more layoffs on the way

Between Chrysler and General Motors, it's hard to say where the collective sigh of relief was the loudest. On Nov. 7 GM announced that talks on a possible merger of the two automakers—which would have wiped out thousands of jobs at both companies—was off. At the same time, the headlines announced yet more layoffs at the Big Three and their supplier plants.

In the past week the following cuts have been announced: 2,000 salaried and 3,600 hourly workers at GM; 2,000 salaried workers at Ford; 500 at Chrysler's advertising agency, BBDO North America; and among parts makers, 200 at Meridian Automotive Systems, 2,000 at Dana, 1,250 at ArvinMeritor and 800 at Visteon.

These are on top of all the previously reported cuts, some of which have already gone into effect. Workers at Chrysler's St. Louis minivan assembly plant will receive their final paycheck this month.

By the time this paper goes to press there will probably be more layoff announcements. The industry analysts are busy speculating about a possible bankruptcy of one or more of the Big Three if they don't get federal aid fast. Any funds that become available for "retooling" will be used to modernize the operations so as to eliminate, not protect, existing jobs.

The laid-off and soon-to-be laid-off workers were no doubt a factor in Barack Obama's sweep of the Great Lakes industrial states. Now the task is to take that incredible anti-racist sentiment and unite the workers around a program of jobs before profits and money for worker-community control of the plants.

Dirty Money The fight to control one of the biggest polluters in U.S. history

Dirty Money

The fight to control one of the biggest polluters in U.S. history, and what it means to Texas.

Melissa del Bosque

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For more than a century, the American Smelting and Refining Co. extracted heavy metals from the earth, hauled them to smelters, and refined them into the lead, zinc, and copper products that fueled industry. Under the stewardship of exceedingly rich men, the company earned enormous profits while its industrial processes poisoned poor communities in nearly two dozen states. Now, with the company’s future in doubt, the pollution may outlive the company that produced it.

American Smelting and Refining—better known as Asarco—was formed in 1899 by a group of industrialists that included William Rockefeller. In 1901, the Guggenheim family wrested control of the company from Rockefeller and expanded it. Asarco would become the nation’s third-largest copper mining and smelting company. Asarco owns 38 facilities nationwide, including three in Texas: a metal refinery in Amarillo, a metal waste-treatment facility in Corpus Christi, and most notoriously, a smelter in El Paso that spewed lead and arsenic into surrounding neighborhoods for decades.

A century of pollution has made Asarco one of the dirtiest companies in American history. The company is responsible for 75 contaminated sites in 21 states, including 20 Superfund sites, according to federal court documents. Asarco is the subject of more than 95,000 asbestos-related personal injury claims totaling $750 million. In Texas alone, the state’s environmental commission says it will cost more than $52 million to sweep away decades of lead and arsenic contamination from Asarco’s smelting operations in El Paso. Nationwide, U.S. government officials estimate it will cost $7 billion to clean up Asarco’s pollution—one of the most expensive environmental legacies the United States has ever seen.

In 1999, Asarco was purchased by the Mexican billionaire German Larrea Mota-Velasco. Larrea is the head of a family dynasty that owns Grupo Mexico, a sprawling company that controls gold, copper, and silver mines in Latin America and that owns Mexico’s largest freight railroad. He seemed next in the line of industrialists to profit handsomely from Asarco.

Not long after Larrea bought the company, Asarco’s fortunes began to decline. Copper prices plummeted, and the company began to hemorrhage money. Its finances were in such dire shape that it couldn’t provide gasoline to its mining trucks, according to court records. The smelter in El Paso was shuttered because of depressed copper prices. Asarco’s environmental liabilities continued to mount. The company had net losses of more than $680 million between 1999 and 2002, according to court records.

In 2005, Asarco filed for Chapter 11 bankruptcy protection. The resulting bankruptcy case has been one of the most complex anyone has ever seen. After three years of legal jousting by enough lawyers to populate a small town, the bankruptcy court placed Asarco up for auction. Larrea bid to regain control of his own company. But in May, another major contender entered the bidding. Indian billionaire Anil Agarwal, a man nearly as rich as Larrea, offered to buy Asarco, putting the two in a fight for control of the company. The bankruptcy court seemed to favor Agarwal’s bid. In early October, the Indian mining magnate tried to withdraw his offer.

Neither Larrea or Agarwal—like many in the mining industry—has a stellar environmental record. And neither billionaire has committed to fully cleaning up Asarco’s widespread pollution. Environmentalists and some government regulators worry that Asarco’s bankruptcy eventually will force taxpayers to pay for the cleanup.

No one knows for sure who will own Asarco, how it will operate, or if it will even operate at all. The one certainty is that the company’s arsenic and lead contamination won’t disappear. In El Paso, heavy metals still saturate an entire neighborhood. The question hanging over Asarco’s bankruptcy is who, if anyone, will sweep away the company’s toxic legacy.

On a hot afternoon in June, the 54-year-old Larrea, one of the world’s richest men, took the witness stand at the federal courthouse in Brownsville. It was the first time many of the people inside the courtroom—including attorneys on his payroll—had ever seen the reclusive Mexican billionaire. There are few available photos of Larrea and little public information about his private life. He had fought the federal subpoena compelling him to testify for days. He had finally relented and flown into Brownsville on his private jet from Mexico City earlier that morning. Security guards had banned photographers from the front steps of the courthouse. Shortly before his testimony, Larrea was whisked into the courtroom under the escort of several armed U.S. marshals, who remained on site throughout his five hours on the stand.

Seated in the witness chair, Larrea glowered at the 30 lawyers in the courtroom—representing Asarco, and Grupo Mexico—business reporters, miners, and large, moveable bookcases of evidence that had been wheeled into the room. Larrea had come to defend himself in a lawsuit alleging that he had defrauded Asarco’s creditors.

Th e Asarco smelter in El Paso.

The case in which Larrea was testifying is an outgrowth of the bankruptcy. When Asarco filed for Chapter 11, federal Judge Richard Schmidt removed Asarco from Larrea’s control. Bankruptcy experts say this was a highly unusual move. Larrea’s Grupo Mexico still technically owns the company, but no longer has any say in operations. The judge appointed a three-member independent board to oversee Asarco (the board remolded the company into an entity called Asarco LLC). The board is supposed to ensure that the company isn’t deceiving several hundred creditors with unpaid contracts and asbestos claims.

Controlled by the independent board, Asarco LLC then sued its former bosses at Grupo Mexico. The lawsuit alleges that Larrea had defrauded Asarco’s creditors by swiping Asarco’s most valuable asset—Peru’s largest copper company. The Peruvian mines’ stock was worth $8.25 billion at the time the lawsuit was filed in 2007, according to court records, though Larrea transferred the mines from Asarco to a Grupo Mexico subsidiary at a grossly undervalued price, $756 million, according to the lawsuit. The suit accuses Larrea of bilking creditors out of billions of dollars. “The plaintiff contends that the sale, therefore, was not made to improve Asarco’s financial position, but was solely a means for Grupo to ‘cherry-pick’ Asarco’s most prized asset before it was lost to creditors or by bankruptcy,” the suit alleges. Asarco LLC wants the value of the Peruvian company stocks returned to Asarco LLC creditors.

The lawsuit is a legal sideshow to the larger bankruptcy case. But the outcome of the lawsuit could have a huge impact. Some of the money at stake in the lawsuit over the Peruvian mines could help pay for cleanup of Asarco’s environmental pollution. (The U.S. government considers the Peruvian mines a crucial asset in paying to clean up Asarco’s many toxic sites.)

On this June day in Brownsville, Larrea had come to tell his side of the story. Federal Judge Andrew Hanen had to silence the courtroom before Larrea could begin his testimony. The CEO wore a conservative, well-tailored, dark blue business suit with a red tie. For such a powerful man, Larrea was surprisingly soft-spoken, answering the lawyers and judge in a hushed and barely audible, but fluent, English. Several times, the judge asked him to speak louder so that people in the back of the courtroom could hear.

Larrea repeatedly denied that his motive for purchasing Asarco was to gain control of the valuable Andean copper mines. The CEO said the decision on the mines was solely the opinion of some Asarco and Grupo Mexico officials. (U.S. marshals ensured that no journalists could get within speaking distance of the billionaire.) In a separate statement from his company, he called Asarco LLC’s lawsuit “reprehensible.”

His history with Asarco began in 1999, when Larrea took over as CEO of Grupo Mexico shortly after his father’s death. One of his first purchases was Asarco, for $2.2 billion. At the time, however, the once-powerful Asarco was hemorrhaging cash.

Initially, Larrea testified in Hanen’s courtroom, he believed the company’s growing environmental liabilities could be solved through negotiations. “In those days, we were confident we could reach an agreement with all parties on the remediations,” Larrea said. “But then the company started losing too much money on legal issues.”

By 2002, officials in the U.S. Department of Justice worried that Asarco would sell off its most valuable asset—the Peruvian mines— and would be left with nothing to pay for its numerous environmental cleanups. The department sought an injunction to stop the sale. Negotiations between the Justice Department and Grupo Mexico labored on until the end of 2002. Finally, Grupo agreed to fund a $100 million trust to help pay Asarco’s $1 billion in environmental liabilities at the time.

It was a good deal for Larrea. The Justice Department allowed Larrea to proceed with his sale of the lucrative Peruvian mines in exchange for paying one-tenth of Asarco’s environmental cleanup costs.

At the time, Charles Miller, a Justice Department spokesperson, told the Associated Press that the $100 million was the best the government could do without destroying the company. “This is maybe one-tenth of a loaf, but it’s better than no loaf at all,” Miller said. “We were trying to get whatever we could. Otherwise, this company would be gone, and we could have gotten nothing.”

With Asarco’s loss of the Peruvian mines, creditors like the city of El Paso became increasingly worried that Asarco would file for bankruptcy. Once the company filed, creditors could be left with nothing but an empty shell of debt.

The Environmental Protection Agency had been testing and cleaning up lead, arsenic, and other contaminants on residential properties in El Paso for more than six years (see “Clean Up or Cover Up?” October 8, 2004). Many homes were still waiting for a cleanup. For almost a century, the Asarco smelter near downtown El Paso belched lead, arsenic, and other contaminants over schools, businesses, and family homes. The EPA lists lead and arsenic among the most dangerous pollutants that can cause numerous human health problems. Closed in 1999 because of dwindling copper prices, the 828-foot high smokestack looms like a slumbering giant over the city. The Texas Commission on Environmental Quality estimates it will cost $52 million to demolish the smelter, remove the contaminated soil, and monitor and treat polluted groundwater surrounding the plant, according to agency records.

Two months after Larrea’s testimony, on August 30, Judge Hanen issued his ruling in the lawsuit over the Peruvian mines. In a 190-page opinion, he agreed with the plaintiffs on three of their charges. He wrote that Grupo Mexico had fraudulently transferred Asarco’s majority share in the Southern Peru Copper Corp. to another Grupo Mexico subsidiary. Hanen also ruled that the mining corporation had conspired to transfer the stock at an artificially low price that had robbed Asarco’s long line of creditors. Hanen described the transfer of the stock as designed “to leave a cash-starved Asarco with less cash.”

Houston lawyer Irv Terrell, the lead attorney for the plaintiffs, said negotiations over damages would start October 30. “I feel great about the judge’s ruling,” Terrell said. “We’ve won in three different ways. We’ve got the belt, suspenders and another pair of suspenders holding up our case.”

Terrell said that the plaintiffs would ask for $5 billion to $6 billion compensation for the Peru mines’ stock. It’s not yet clear how much of that money Larrea and Grupo Mexico will have to pay, or how much of it will go toward environmental cleanups.

Larrea and Grupo Mexico have said they will appeal the damages and possibly take their case to the U.S. Supreme Court. The company also has said it will fight to regain control of Asarco.

“We will not stop until we get back what is ours,” Jorge Lazalde, the vice president for Grupo Mexico’s Asarco Inc. told the International Herald Tribune in June. “We are going to do absolutely everything necessary.

Larrea has more motivation now to win back control of Asarco. As copper prices have risen recently, the company is turning profitable once again. Last year, the company generated $1.9 billion in revenues because of international demand for copper. But Larrea has competition.

Earlier this year, the independent board that controls Asarco LLC put the company up for bid in a private auction. Some of the world’s largest finance and mining conglomerates bid for Asarco’s assets in June. The winning bidder was billionaire Agarwal, India’s “Metal King.”

Unlike Larrea, Anil Agarwal, 54, did not inherit his wealth. He began his rise 30 years ago as a scrap metal trader in Mumbai, India, working his way up through the trade, eventually acquiring valuable copper mines in India, Zambia, and Australia. If Agarwal buys Asarco, he will own holdings on four continents. In 2008, Forbes magazine designated Agarwal as the 164th richest man in the world, up from No. 245 in 2007. (Forbes lists Larrea and his family at No. 127.)

Agarwal’s $2.6-billion offer for Asarco provides no money for environmental cleanup or asbestos claims. To placate the U.S. government, Agarwal would create a $1.5 billion environmental trust to help settle Asarco’s considerable environmental debts, which total more than $7 billion.

Larrea didn’t give up his pursuit of Asarco. In July, Grupo Mexico submitted a competing bid, this time offering $2.7 billion. Grupo’s plan would place the El Paso smelter and 31 other sites across the United States in an environmental custodial trust. The trust would be funded with an initial $10 million to clean up the contaminated sites.

Larrea’s offer has a catch. Grupo Mexico’s plan would continue to litigate environmental claims. Bankruptcy experts say this could draw out the claims process for decades. “If Grupo Mexico fights it out on all of these claims, it could take years,” says Jay Westbrook, a University of Texas law professor and expert in bankruptcy law. “And there is no guarantee that they will still have the money to pay in the future.”

While Asarco LLC and the U.S. government applauded the Agarwal bid, environmentalists aren’t yet sold on the Indian billionaire. They’re unsure he would address the contamination wrought on dozens of communities across the country.

Another thing both Larrea and Agarwal have in common, besides being on the Forbes billionaire list, is a history of allegations that their companies are responsible for environmental pollution and human rights violations.

In May, the U.S.’s largest grassroots environmental group, the Sierra Club, and several other environmental organizations sent a letter to U.S. Attorney General Michael Mukasey asking that he review the environmental record of Agarwal’s company, Vedanta. (The Justice Department must approve a deal before Vedanta could take possession of Asarco.)

In a press release, the environmental groups described Vedanta Resources as a widely recognized environmental “bad actor.” They noted that its stock had been dropped by the Norwegian government’s pension fund over concerns about environmental and human rights abuses. The groups alleged that Vedanta caused major water contamination in Zambia and India, provided subpar working conditions for its employees and falsified documents to obtain environmental clearances in an ecologically sensitive region of eastern India.

The Texas chapter of Sierra Club wants to ensure whoever buys Asarco doesn’t back out of its commitment to clean up the company’s toxic legacy. “We feel the compliance history and the stewardship of Vedanta are extremely relevant,” says Oliver Bernstein, a Sierra Club spokesperson. “We don’t want to see another instance of a company using whatever the profitable pieces are of these entities and then trying to unload the environmental cleanup burden on taxpayers.”

The Indian company apparently has soured on buying Asarco. In mid-October—just before the Observer went to press—Agarwal announced that he was having second thoughts. With the global credit crunch and China’s economic engine slowing down, copper prices are once again declining. At the moment, the federal government is holding Agarwal to his promise, but he said that he will consider buying the company only at a reduced price. The parties will participate in a negotiation on October 30 in Houston to see whether a deal can be salvaged to bail Asarco out of bankruptcy.

El Paso Mayor John Cook said it would be a devastating blow for his city if Agarwal backs out. Cook said the city doesn’t favor Grupo Mexico’s plan because there is no guarantee the smelter will finally be demolished and cleaned up. “We’ll have no choice but to start negotiating long term with Grupo Mexico,” Cook said. “I’ve been working on this for the 10 years I’ve been in public office, and I’d really like to see it finally resolved.”

Social workers at Detroit “poverty summit” describe impact of layoffs, foreclosures, utility shutoffs

Social workers at Detroit “poverty summit” describe impact of layoffs, foreclosures, utility shutoffs

By Tom Eley

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A "poverty summit" was held at Detroit's Cobo Center on November 13. The "Voices for Action 2008 Poverty Summit" attracted thousands of social workers and representatives of charities from throughout the state of Michigan. It was hosted by the Michigan Department of Human Services, the non-profit Michigan Community Action Agency Association and the Governor's Commission on Community Action and Economic Opportunity.

Michigan has suffered decades of deindustrialization and the attendant devastation of cities and towns. Now, in the midst of the current economic crisis, the working class in Michigan is facing a rapidly deteriorating situation, with job losses in the state's auto industry mounting and home foreclosures and evictions increasing. Social services and private charities have been swamped by the growing demand for relief.

According to official figures released late last month, Michigan, at 8.7 percent, had the second highest unemployment rate in the US in September. The figure for October will undoubtedly be higher. Detroit, Michigan's largest city, is ranked as the poorest city in the country. There are 2 million people in the state living below the official poverty line, including 500,000 children.

Thursday's event demonstrated the lack of any serious policy on the part of the political establishment to address this social catastrophe. The "poverty summit" was little more than a public relations event designed to give the appearance that Michigan's Democratic Party politicians, including Governor Jennifer Granholm, are moving to address the problems confronting unemployed and low-wage workers. Granholm addressed the meeting after returning from a national media tour in which she sought to drum up support within the ruling elite for a bailout of the Big Three American automakers—General Motors, Ford and Chrysler—which will entail tens of thousands more layoffs and unprecedented attacks on auto workers' wages, health benefits and pensions.

Over the past three decades, the auto companies have extracted massive tax concessions from the state and from local governments, threatening to shut plants and move production to lower-wage regions if their demands were denied. The auto giants got their tax windfalls, and shut plants and slashed jobs anyway. The billions in tax cuts went to increase the wealth of big shareholders and Big Three executives, while basic services for the population, such as education, healthcare and housing, deteriorated.

Granholm and other speakers at the forum said nothing about this history or the corporations, banks and social interests that are responsible for the social decay. Not a single substantive measure was proposed to halt the epidemic of home foreclosures, utility shutoffs and layoffs. Instead, there was talk of token measures, such as mentoring for impoverished children.

The event did attract thousands of people from all over the state who want to address the worsening social crisis. Among the attendees were many social workers and technical experts on questions related to poverty, housing and education. The World Socialist Web Site spoke with some of these participants.

Donald Moore, a clinical therapist, said that the Detroit homeless shelter where he works is already witnessing the impact of the economic crisis. "We are seeing daily more people looking for shelter, and more and more cases of mental illness are being discovered," he said.

Bob Houston and Justin Williams are college students. Houston works as a social worker and Williams works at a homeless shelter. Williams said that the shelter where he works is seeing more and more people coming from the cold—not because they don't have a home, but because the utility companies have cut off their heat and electricity. Williams complained that the conference had not provided "any specific proposals, nothing concrete." Houston said that many of his college friends' fathers are losing their jobs at the auto companies, and that his graduating classmates are not finding work.

Alphonzo and John are two young workers in Detroit who are getting job training as construction workers with an organization called the Young Builders Association. They said that one of the biggest problems in Detroit is a lack of affordable housing. John has seen three neighbors foreclosed on in the past year.

Elizabeth, an employee of the Michigan State Housing Development agency, told the WSWS that there are 79,000 homeless persons in the state of Michigan. What's new, she said, is that 7 percent are homeless as a result of having their homes foreclosed.

Many of those in attendance were social service workers from small towns across the state. Bob Bodig, a Michigan Department of Human Services worker from Huron County, explained that in his area there has been an increase in poverty and unemployment. "The small farms are gone, the manufacturing is gone," he said. He told the WSWS that there are not enough resources to meet the needs of those confronted with utility shutoffs. "The elderly are hit very hard" by cutoffs, he said.

Lisa, a social worker from a small town near Flint, explained some of the difficulties small towns confront. "Many families are losing their jobs," she said. "There's a real need for assistance. People are losing their homes and are not able to provide for their families." She said many people in her area were without utilities due to shutoffs. When asked what these families do in the winter, she replied, "They go without heat."

Mark, a social worker from Houghton, on Michigan's Upper Peninsula, said that even before the current economic crisis began, the area was very poor. Many people don't have enough money for the bare necessities of life, he said. "People have to decide how they're going to spend their money," he explained. "Some hold back on food to pay the utilities."

He also expressed concern about nutrition. "Usually, we worry about the kids who go to bed with nothing in their belly, but there are also many children who go to bed with their bellies full of junk food because that's all their parents can afford."

In general, the social workers and volunteers with whom the WSWS spoke said that the single biggest problem is the lack of good-paying jobs. In terms of their own work, they spoke of the need for more resources. Many expressed anger over the fact that hundreds of billions of dollars are being handed over to the biggest banks, but nothing is being done to address the crisis confronting working and poor people.

US retail sales plunge as layoffs mount

US retail sales plunge as layoffs mount

By Kate Randall

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Retail sales in the US fell 2.8 percent in October, the fourth straight monthly decline, the Commerce Department reported Friday. The decline was much worse than the 2.1 percent drop forecast by economists in a Bloomberg News survey.

Sales declined across virtually all sectors of the retail economy, with auto sales worst hit. Car dealerships and parts stores saw sales plunge 5.5 percent in October, following a 4.8 percent drop in September.

Retailers have now registered the longest string of monthly declines since the Commerce Department began compiling comparable data. Sales fell at furniture, electronics, clothing, sporting goods and department stores. Macy's Inc., Target Corp. and Gap Inc. all reported drops in sales. Only discount chain Wal-Mart reported an increase.

According to research company RetailMetrics, the retail industry is expected to see an overall earnings drop of 14 percent for the third calendar quarter. Excluding Wal-Mart, that figure is estimated to be sharply down, by 22 percent.

Richard Hastings, a consumer strategist at Global Hunter Securities, predicted a huge 6 to 8 percent drop in holiday retail sales this year, far bleaker than the modest 2.2 percent increase projected by the National Retail Federation.

More than half a million workers have been cut from payrolls in the past two months. Analysts predict that consumer spending will continue to falter as the job-cutting continues and US households run out of credit as home values fall and banks tighten access to mortgages, auto loans and credit cards.

Ellen Zentner, economist at Bank of Tokyo-Mitsubishi in New York, told Bloomberg, "The September-October credit jolt in the economy is showing up in all of the numbers now. We're expecting the worst recession, possibly, post-World War II."

Layoff announcements affecting tens of thousands of workers continued on Friday. Citigroup is cutting at least 10,000 jobs in its investment banking and other divisions globally. A Reuters report Friday afternoon said the figure could rise to as many as 35,000 jobs, or about 10 percent of the bank's global workforce.

In a company memo, CEO Vikram Pandit said he will host a "town hall" meeting for Citigroup employees at 8 a.m. Monday morning, New York time, at which he plans to discuss the bank's plans, including "the money we spend." According to the Wall Street Journal, Pandit has instructed managers to slash their budgets for employee compensation by at least 25 percent.

The new layoffs at Citigroup come on top of the 11,000 announced by the bank in the third quarter. The New York City-based bank employed approximately 352,000 workers at the end of the third quarter.

The Wall Street Journal also reported that Citigroup is notifying some credit card customers that their interest rates are being hiked by an average of 3 percent.

Sun Microsystems Inc. announced Friday it was cutting up to 6,000 jobs, citing falling demand for its high-end computer servers. Sun said it was cutting 15 to 18 percent of its global workforce to "align its cost model with the global economic climate."

The layoffs come two weeks after the Santa Clara, California-based company reported a quarterly net loss of $1.66 billion, compared to a net profit of $89 million a year earlier.

OfficeMax Inc. announced Thursday it is eliminating about 245 North American corporate staff and field management positions in an effort to save $20 million in operating costs. The job cuts at the Naperville, Illinois-based office supply store chain are in addition to 2,700 store management jobs cut in June.

Susquehanna Financial Group, the investment bank division of Susquehanna International Group (SIG), has shut down its Manhattan office and fired about 30 people, mostly bankers and research analysts. The Pennsylvania-based firm has more than 1,500 employees worldwide.

Eric Noll, SIG's global head of strategic relationships, pointed to the slump in biotech and healthcare stocks as the reason for the closure. "Earlier this week we changed the focus in our institutional business, he said. "We were trying to provide banking and research to a sector of the market that's been demolished."

Mutual fund seller American Century Investments will cut its workforce by 17 percent, or about 270 jobs. Most of the cuts will come at the company's Kansas City, Missouri headquarters.

American Century laid off 90 workers in May, mostly among those involved in direct selling to customers. CEO Jonathan Thomas had warned last month that more layoffs were coming due to the fall in the value of mutual funds in the equity markets.

Bush cheers “free enterprise” as US capitalism goes bust

Bush cheers “free enterprise” as US capitalism goes bust

By Bill Van Auken

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US President George W. Bush came to Wall Street Thursday to deliver a speech extolling the virtues of the "free enterprise" system even as multiple economic indicators made it clear that the so-called "magic of the market" is spelling misery for millions more working people in the US and around the globe.

Bush delivered his paean to American capitalism at Federal Hall, just a stone's throw from the New York Stock Exchange. The historic building was the site of the inauguration of George Washington and the first sessions of the US Congress. The august setting stood in stark contrast to the character of the select audience, which, in the gap between its ideological proclivities and socioeconomic reality, resembled a meeting of the flat earth society.

A total of 175 people turned out for the session, organized by the Manhattan Institute, a right-wing think tank that specializes in demonizing the poor while promoting tax cuts, financial deregulation, the dismantling of social programs and the decimation of public education.

The lame-duck president timed his speech for the eve of this weekend's G20 summit in Washington, which will bring together heads of state from the world's major economies for the ostensible purpose of working out a common agenda for confronting the global financial meltdown.

Behind the banalities and boosterism, Bush's message to those assembling in Washington was clear: Nothing will be accepted that interferes with the unfettered accumulation of wealth by America's financial elite and the defense of their interests, regardless the cost to the world's population.

Bush effectively acknowledged at the outset that the gathering of presidents and prime ministers this weekend will accomplish nothing—and that his administration will block any attempt to reach binding agreements. "The undertaking is too large to be accomplished in a single session," he said. "The issues are too complex, the problem is too significant to try to solve, or to come up with reasonable recommendations in just one meeting."

Rather, he insisted, the summit should be dedicated to "developing principles," above all, the reaffirmation that "free market principles offer the surest path to lasting prosperity."

Given the state of the economy, confronting its most profound crisis since the 1930s, Bush's remarks appeared delusional. He spoke in the wake of official figures showing that more than half a million American workers filed for unemployment benefits the week before, and over 85,000 homes had been foreclosed in October. The Treasury Department announced a record budget deficit of $237.2 billion for the month of October, and just a day before, its secretary, former Goldman Sachs CEO Henry Paulson, was forced to make an emergency announcement that the $700 billion approved by Congress to buy up "toxic" mortgage-backed assets must now be redirected to prop up not only the major banks, but also the failing consumer credit industry.

Bush felt compelled to acknowledge that "in the wake of the financial crisis, voices from the left and the right are equating the free enterprise system with greed and exploitation and failure."

While admitting some isolated failings, Bush rejected any indictment of the capitalist system. "The crisis was not a failure of the free market system," he proclaimed. "And the answer is not to try to reinvent that system. It is to fix the problems we face, make the reforms we need, and move forward with the free-market principles that have delivered prosperity and hope to people all across the globe."

The "fixes" that Bush proposed were so vague as to be meaningless: "improving accounting rules," ensuring that "financial products are properly regulated" and taking a "fresh look at the rules governing market manipulation and fraud."

His faith in the "free market," however, remained rock solid: "Like any other system designed by man, capitalism is not perfect [presumably, only the eternal free market created by God in the hereafter can attain such a state]. It can be subject to excesses and abuse. But it is by far the most efficient and just way of structuring an economy. At its most basic level, it offers people the freedom to choose where they work and what they do."

He continued: "Free market capitalism is more than an economic theory. It is the engine of social mobility—the highway to the American Dream."

"Freedom to choose where they work?" Whom does he think he's kidding?

According to official figures, 10 million American workers are now out of work and cannot find jobs. Their ranks have been swollen by 1 million in the last year alone. If one counts those who are underemployed—involuntarily relegated to part-time jobs—and so-called "discouraged" workers, who have been dropped from the jobless rolls, fully one of eight not only can't choose where he or she works, but cannot get full-time work at all. And this is only the beginning, with mass layoffs being announced daily, threatening to create an army of unemployed larger than any seen since the Great Depression.

As for free-market capitalism serving as an "engine of social mobility," this movement has increasingly been in opposite directions, with those at the top of the social ladder increasing their share of total wealth to unprecedented levels, while the vast majority, the working people, have seen their incomes stagnate and decline. The gap between wealth and poverty in the US is now greater than at any time since the 1920s.

It is this amassing of wealth by those at the top that Bush is determined to defend. As the Washington Post pointed out Friday, among the proposals being put forward by other heads of state attending the Washington summit that "Bush and his aides do not favor" is the call for "restrictions on executive pay."

Bush was forced to admit that even his commitment to the free market has limits. "We are faced with the prospect of a global meltdown," he said. "And so we've responded with bold measures. I'm a market-oriented guy, but not when I'm faced with the prospect of a global meltdown."

These "bold measures"—backed not only by Bush but also by President-elect Barack Obama—have amounted to the looting of trillions of dollars in social wealth in order to bail out the country's biggest banks and Wall Street finance houses. Hundreds of billions of dollars of this money is flowing directly into bonuses for financial executives and dividends for wealthy shareholders, while facilitating the consolidation of banks and the further concentration of wealth.

"Free-market principles" continue to apply in full force, however, to workers who have lost their jobs and to families facing foreclosure on their homes. For them there is no bailout, only the prospect of being forced to pay for the trillions lavished on Wall Street through further attacks on living standards, jobs and social programs.

Earlier in his presidency, Bush restricted his public appearances largely to military audiences, bound by command discipline to treat him with respect. Now, in the waning days of his presidency, he apparently feels comfortable only in addressing small groups of right-wing ideologues like those assembled by the Manhattan Institute.

For good reason. Outside of this rarified atmosphere, the popularity of capitalism and the "free market" is sinking to that of the outgoing president himself, whose poll numbers have plumbed depths never reached by any previous occupant of the White House.

Millions are indeed beginning to identify the "free enterprise system" with "greed and corruption and failure." As the Obama administration takes office and seeks to defend this same system, popular anger over the social conditions created by capitalism must inevitably take the form of mass struggles against his government.

G-20 summit: More like London 1933 than Bretton Woods 1944

G-20 summit: More like London 1933 than Bretton Woods 1944

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The G-20 summit being held in Washington today takes place amid the worst economic and financial breakdown since the Great Depression of the 1930s. But notwithstanding the rhetoric about the need for a new Bretton Woods Agreement and calls for the remaking of the international financial system, the summit will provide no solutions to the rapidly deepening crisis. On the contrary, in the absence of any coherent program, it may well see the divisions among the major capitalist powers widen.

The summit, which was called by outgoing US president George W. Bush last month, comprises leaders of the G-8 plus so-called emerging economies India, China, Brazil, Mexico, Argentina, Turkey, Indonesia, Saudi Arabia, South Africa, as well as Australia and the European Union. Together they comprise 90 percent of the world's gross domestic product.

In the lead-up to the summit, British prime minister Gordon Brown said it had to become a "decisive moment" for the world economy and provided the opportunity for a "new Bretton Woods"—that is, the equivalent of the conference held in July 1944 which laid the foundations for the post-war economic order following the economic devastation of the 1930s.

French president Nicolas Sarkozy, currently the president of the EU, has insisted on the need to "change the rules of the game in the financial world" and for another conference to be held in the spring to flesh out the details of the agreements reached in Washington.

However, the real prospects for the summit were more accurately summed up in a comment published in the British newspaper, the Independent: "What we have is a summit without an agenda, on a crisis without an agreed cause, in a country without a functioning government."

The differences are clearly apparent. The Bush administration is opposed to any system of international regulation—in a speech on Thursday Bush declare that history had shown the greatest danger was not too little government interference in the market but too much—while some of the European powers, especially France, favour greater intervention. Speaking after a meeting of G-20 finance ministers in Brazil on Sunday, French finance minister Christine Lagarde said: "We see friction between Anglo-Saxon capitalism on the one hand and European-style capitalism on the other."

In the lead-up to the conference, the managing director of the International Monetary Fund, Dominique Strauss-Kahn, has poured cold water on references to a new Bretton Woods. "Expectations should not be oversold," he said an interview with the Financial Times. "A lot of people are talking about Bretton Woods II. The words sound nice but we are not going to create a new international treaty."

Strauss-Kahn even raised doubts about the proposal backed by Brown among others for an IMF-administered early warning system to prevent a future global crisis. "I don't think you can have a mechanical system with red lights and green lights and, sometimes country by country, the light goes from green to red," he said.

Any misconception that the G-20 might be able to provide a solution to the global economic crisis is soon dispelled by recalling the history of this organisation. It was established in September 1999 as a result of the Asian financial crisis of 1997-98. In the wake of that disaster, which resulted in the loss of as much as 10 percent of GDP for a number of Southeast Asian economies and led to the Russian default of August 1998, there was much talk of the need to establish a "new financial architecture."

Nothing resulted. Far from action to resolve the growing instability of the international financial system, the US Federal Reserve expanded the flow of credit into the US financial system by slashing interest rates from 2001 to 2004, thereby helping to create the conditions for a housing bubble and the ensuing financial crisis. As for the G-20, it has had so little impact since its founding nine years ago, that, in a telephone conversation with Australian Prime Minister Kevin Rudd last month, Bush reportedly had to ask what it was.

Taking the longer historical view—back to the Bretton Woods conference of 1944 and beyond—further underscores the incapacity of the G-20 summit or any other grouping to establish a stable global financial regime.

The fundamental difference between the present situation and that of July 1944 is the position of the United States. At that time, with victory in World War II in sight, the US was at the height of its global power. With industry now running at full capacity, it was able to use its economic supremacy to push through the changes to the world economic order needed to overcome the devastation of the previous decade. Chief among these was the establishment of a system of stable currency exchanges—based on fixing the US dollar to gold at the rate of $35 per ounce—to prevent the type of competitive devaluations and protectionism that had helped deepen the Great Depression.

Currency stabilisation went hand-in-hand with a system of regulation in which governments were able to insulate their economies from the impact of large international capital flows. In the words of US Treasury Secretary Henry Morgenthau in his closing address, one of the aims of the new measures was to limit the power of private bankers and to drive "the usurious money lenders from the temple of international finance." Or as the chief British negotiator John Maynard Keynes, one of the two principal architects of the agreement, put it: "Not merely as a feature of the transition but as a permanent arrangement, the plan accords every member government the explicit right to control all capital movements. What used to be heresy is now endorsed as orthodoxy."

The Bretton Woods system laid the foundations for the post-war economic expansion. But it did not overcome the contradictions of world capitalism and they began to reassert themselves from the beginning of the 1970s. In August 1971, US president Nixon removed the gold backing from the US dollar and by 1973 the regime of fixed currency relationships established at Bretton Woods had been replaced by a system of floating currency values.

The past 35 years has seen the growth of a global financial system, in which trillions of dollars course through markets every day beyond the control of any government, group of governments or financial authorities.

The most significant change of all is the decline in the economic power of the United States of which today's global crisis in an expression. At the time of Bretton Woods, the names General Motors and Ford were by-words for American economic supremacy. Today, they are seeking a financial lifeline from the government.

The Bretton Woods conference was aimed at bringing to an end the economic conflicts of the 1930s which had led directly to the eruption of war. Today's meeting takes place in conditions of growing economic tensions among the major powers.

One of the reasons for the non-attendance of president-elect Barack Obama is not because "American can only have only one president at a time" but because the incoming administration wants to have its hands free to advance the US position in ever-worsening economic conditions.

Today's conference does not recall Bretton Woods so much as the World Economic Conference held in London in June 1933. Convened to discuss a unified response to the Great Depression, it foundered on the rivalries of the major powers and adjourned without agreement. Little more than six years later war had broken out.

Rare Treatment Is Reported to Cure AIDS Patient

Rare Treatment Is Reported to Cure AIDS Patient

By DONALD G. McNEIL Jr.

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Doctors in Berlin are reporting that they cured a man of AIDS by giving him transplanted blood stem cells from a person naturally resistant to the virus.

But while the case has novel medical implications, experts say it will be of little immediate use in treating AIDS. Top American researchers called the treatment unthinkable for the millions infected in Africa and impractical even for insured patients in top research hospitals.

“It’s very nice, and it’s not even surprising,” said Dr. Anthony S. Fauci, director of the National Institute of Allergy and Infectious Diseases. “But it’s just off the table of practicality.”

The patient, a 42-year-old American resident in Germany, also has leukemia, which justified the high risk of a stem-cell transplant. Such transplants require wiping out a patient’s immune system, including bone marrow, with radiation and drugs; 10 to 30 percent of those getting them die.

“Frankly, I’d rather take the medicine,” said Dr. Robert C. Gallo, director of the Institute of Human Virology at the University of Maryland School of Medicine, referring to antiretroviral drugs.

Moreover, the chances of finding a donor who is a good tissue match for the patient and also has the rare genetic mutation that confers resistance to H.I.V., the virus that causes AIDS, are extremely small. Nonetheless, the man has been free of the virus for 20 months even though he is not using antiretroviral drugs, and the success in his case is evidence that a long-dreamed-of therapy for AIDS — injecting stem cells that have been genetically re-engineered with the mutation — might work.

The cure was announced Wednesday by Dr. Gero Hütter and Dr. Eckhard Thiel, blood-cancer specialists at Charité Hospital in Berlin. The case was described last week in The Wall Street Journal.

Attempts to use bone-marrow transplants in AIDS treatment have been made since the 1980s. In one case, a patient with both AIDS and lymphoma died of the cancer two months later, but was found to harbor no H.I.V.; it was not known if something in the transplant had protected him.

And in a famous 1995 case, Jeff Getty, a prominent San Francisco advocate for AIDS patients, received bone marrow from a baboon, which is resistant to the human virus. He survived 11 years, but died of AIDS and cancer; the transplant had not protected him but antiretroviral triple therapy had been invented in time to help.

Dr. Hütter said one of the 80 potential donors who matched his patient closely enough for leukemia treatment also happened to have the mutation.

That mutation, discovered in a few gay men in the 1990s and known as Delta 32, must be inherited from both parents. With it, the white blood cells produced in the marrow lack the surface receptors that allow H.I.V. to invade the immune system.

Even if it is prevented from replicating by drugs, the H.I.V. can lie dormant in lymph and nerve cells for years. But without the necessary receptors, any virus coming out of dormancy has no way to infect them.

Doctors say the case gives hope for therapies that artificially induce the Delta 32 mutation.

For example, Dr. Irvin S. Y. Chen, director of the AIDS Institute at U.C.L.A. , is working on using RNA “hairpin scissors” to cut out the bits of genetic material in blood stem cells that code for the receptors. The concept is working in monkeys, he said. Eventually, he hopes, it will be possible to inject them into humans after wiping out only part of the immune system with drugs. “I think that would carry no risk of death,” he said.

Hard labor at a tender age

Hard labor at a tender age

Raid at poultry plant reveals problem beyond illegal immigration. Workers as young as 15 were found on the line.

By Franco Ordoñez and Ames Alexander

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POULTRYGIRL_03

Lucero Gayton, 16, says she was hired at age 15 at the House of Raeford Farms chicken processing plant in Greenville, S.C. It's not legal for workers under 18 to work in dangerous jobs like the one Lucero held.

Four months after turning 15, Lucero Gayton began work on the night shift at a House of Raeford Farms chicken plant.

Starting at 11 each night, when most girls her age were asleep, the shy teenager with brown eyes was working 10-hour shifts, wielding a sharp knife, cutting muscles from thousands of freshly killed chickens.

“I was scared that I'd cut my finger off,” she told the Observer. “I did cut myself a few times.”

Lucero lost her job last month in the largest immigration raid ever conducted in the Carolinas. She was one of six underage workers, ages 15 and 16, found among the 331 arrested workers at the Greenville plant.

Underage workers are a familiar sight on House of Raeford production lines, and not only in Greenville.

More than 20 former and current workers at three House of Raeford plants – in Greenville, West Columbia, S.C., and Raeford, N.C. – told the Observer that the poultry company frequently hired underage workers.

Six of them, all supervisors, said that top managers allowed the hiring to secure cheap, compliant labor.

Because of the hazards, federal and state labor laws prohibit anyone under 18 from working on a poultry processing line.

Former supervisor Eric Lawson started work at the company's West Columbia plant last year. He said a plant official told him: “Most of (the workers) are illegal or underage. So they won't question anything.”

Lawson said he was forced out of his job in April after arguments with his supervisors.

In a February series on working conditions in the poultry industry, the Observer reported that House of Raeford had been cited for 130 workplace safety violations since 2000 – among the most of any U.S. poultry company. The Raeford-based company is one of the nation's top chicken and turkey producers, with about 6,000 employees and eight processing plants in the Carolinas and Louisiana.

Following last month's raid, the U.S. Department of Labor launched an investigation into possible child labor violations. Miguel Pascal, who got a job at House of Raeford's West Columbia plant when he was 15, described it as a perilous environment, but an easy place to find work.

“Nobody asked me how old I was,” he said.

In a written response Friday, House of Raeford said it follows the law. Every applicant, the company said, must present identification showing he or she is 18 or older. The company said it's required to accept documents that appear to be legitimate and can't request additional documentation.

“Unfortunately, the documentation the employees present is not always genuine, or accurate, even if it appears to be,” the company said. “Also, as we all know, not everyone tells the truth all the time.”

Coming to America

Lucero's father never wanted her to come to the United States - at least not until she was 18.

When Lucero called him from her mother's home in Oaxaca, Mexico, before making the trip across the desert, Tranquilino Gayton told her not to come. He already lived in Greenville and sent money home.

“You're too young,” he said he told Lucero. “The trip is dangerous. Stay in school. You need to study.”

But Lucero was determined to accompany her older sister, who had their father's permission. She knew her family had financial problems. Her mother would sometimes cry when there wasn't enough money for food or medicine. She wanted to help.

Lucero and her father argued for three weeks. She threatened to move to another city if her father didn't welcome her in Greenville.

“I thought… at least she will be with me,” Gayton said.

“OK,” he remembers saying. “You can come.”

In early 2007, with the help of a human smuggler, Lucero traveled from Mexico to Greenville.

Hundreds of immigrants have taken a similar path to find work at House of Raeford plants. The company, many workers have told the Observer, has had a reputation as an easy place for the undocumented to get jobs.

When Lucero visited the Greenville plant, however, a woman behind the desk told her she was too young.

The staffer paused, Lucero said, and then made a proposition. “If you pay $300,” Lucero recalled the woman saying, “I can change your birth date.”

In a statement, House of Raeford said that it's illegal and against company policy to ask or require an applicant to pay to be hired. The company said it has fired human resources employees whom it discovered selling jobs.

“If she (Lucero) submitted false documentation then she has broken the law, as well as company policy,” the company said. “We have audited our I-9 records (employment eligibility forms) and are not aware that any employee who presented documentation showing that he or she was less than 18 years old at the time of hiring was given a job with the company.”

Teen on the line

Lucero barely looks her age sitting on her living room couch. With her legs propped up, she twiddles her ponytail while talking about her friends from back home.

While most of her former classmates were playing sports, flirting with boys and attending dances, Lucero was pulling overnight shifts in a cold concrete factory, helping to turn thousands of birds into convenient cuts for restaurants, stores and cafeterias.

“I don't dance much here,” she said.

Lucero, now 16, worked at the plant, known locally as Columbia Farms, for about 18 months, first cutting muscles and then moving down the line to cut wings.

Working in a chicken factory is hard, dirty work. Workers stand shoulder-to-shoulder, making as many as 20,000 cuts a shift.

With a knife in her right hand, Lucero said, she cut at the chickens as fast as she could. The meat seemed to fly by.

The older women on the processing line at the House of Raeford Farms plant didn't have as much trouble, but Lucero was hampered by her adolescent muscles.

“The others kept up because they were big,” she said. “It was harder for me. I'm small.”

Colleagues who looked out for Lucero said her age was no secret.

Anita Bautista worked across from Lucero. She and Lucero would sometimes switch places when the teenager fell behind.

“She's just a kid,” Bautista said. “A ‘chamaca' – a little girl.”

After her shift, Lucero would pick bits of chicken fat from her clothes. Her skin seemed to absorb the smell of the meat. Her throbbing hands would burn for hours.

Weeks after losing her job, she says some fingers still hurt.

She stands up and grabs a bottle of a hot analgesic lotion from a shelf near the kitchen.

“My father,” she said, “rubbed this cream on my hands at night.”

Others underage

Current and former workers say Greenville wasn't the only place where House of Raeford hired underage workers. Dozens of minors, they say, also got jobs in West Columbia and Raeford.

Fernando Arevalo, who supervised about 80 workers in West Columbia until he was fired in October, said he knew of five or six underage workers. They looked and acted young, often talking the way teenagers do, he said. Arevalo sometimes asked their ages.

“They'd tell me straight out ‘I'm 15,'” he said.

Another supervisor still employed at the plant said the company is aware of underage workers, but overlooks that because of a need to keep production lines running.

“When I've said someone looked too young, they've told me not to ask any questions,” said the supervisor, who asked not to be named. “They said ‘you have to assume the papers are real.'”

Lizzie Mae Harris, who worked as a supervisor at the Raeford plant for many years before leaving in 2003, estimated that about two dozen workers in her department were underage.

The boys were still not shaving, she said, and lacked the strength to do jobs designed for grown men, such as pulling skin off turkeys.

“You could look at them,” she said, “and tell they were babies.”

Miguel Pascal said no one asked about his age when he started working at the West Columbia plant. He was 15 when handed a deboning knife and put to work last year on the production line. His father says he often dreams that his oldest son stayed in school and later became a doctor or lawyer. But, he says, when you're a poor family from the mountains of Guatemala, that is rarely an option.

“When you're poor,” his father said, “there are choices you have to make that you'd rather not.”

He noted it's very common in Guatemala for a 15-year-old to be working.

Miguel, now 17, and his father said many Americans don't understand the daily struggles of many Guatemalan families. Before they came to the United States, the family not only struggled to buy food, they struggled to pay for fertilizer so he could grow simple food staples, such as corn.

But Marcille Chavis is troubled when she sees children doing this kind of work. Chavis, who worked as a production clerk at House of Raeford's Rose Hill plant for about 20 years before leaving in 2003, said she can recall seeing about 50 plant workers who she suspected were underage. When she pressed one youth who worked on the processing line about his age, he admitted he was 15, she said.

It troubled her. “A lot of the time they're not mature enough to know what to do in an emergency,” she said.

In a statement, House of Raeford said supervisors should report underage employees to the human resources department because it is a violation of company policy and federal law.

“Any company manager who condones the employment of underage or illegal workers would likewise be in violation of company policy and would be subject to termination of employment,” the company said. “And, in fact, we have terminated employees for just such reasons.”

‘La migra'

Lucero said the Oct. 7 raid at Columbia Farms was one of the scariest moments of her young life.

Federal agents came pouring into the Greenville factory just before 9a.m.

“La migra,” workers screamed.

Lucero said she and others tried to escape through an emergency door. It wouldn't budge.

She said she called her sister on her cell phone, weeping, to say goodbye.

Authorities took her to an empty factory about 10 minutes from the plant. She was fingerprinted and questioned.

Lucero said she pleaded with the agents. She told them about her father and sister in Greenville.

Lucero was released to her sister's custody. She was told she'd be contacted by federal authorities.

She may still be deported.

“I don't want to go,” she said. “I want to help my mother. I've only done a little. I want to do more.”