TOON

Blackwater Founder Implicated in Murder

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Jeremy Scahill
August 4, 2009 - The Nation

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A former Blackwater employee and an ex-US Marine who has worked as a security operative for the company have made a series of explosive allegations in sworn statements filed on August 3 in federal court in Virginia. The two men claim that the company's owner, Erik Prince, may have murdered or facilitated the murder of individuals who were cooperating with federal authorities investigating the company. The former employee also alleges that Prince "views himself as a Christian crusader tasked with eliminating Muslims and the Islamic faith from the globe," and that Prince's companies "encouraged and rewarded the destruction of Iraqi life."

In their testimony, both men also allege that Blackwater was smuggling weapons into Iraq. One of the men alleges that Prince turned a profit by transporting "illegal" or "unlawful" weapons into the country on Prince's private planes. They also charge that Prince and other Blackwater executives destroyed incriminating videos, emails and other documents and have intentionally deceived the US State Department and other federal agencies. The identities of the two individuals were sealed out of concerns for their safety.

These allegations, and a series of other charges, are contained in sworn affidavits, given under penalty of perjury, filed late at night on August 3 in the Eastern District of Virginia as part of a seventy-page motion by lawyers for Iraqi civilians suing Blackwater for alleged war crimes and other misconduct. Susan Burke, a private attorney working in conjunction with the Center for Constitutional Rights, is suing Blackwater in five separate civil cases filed in the Washington, DC, area. They were recently consolidated before Judge T.S. Ellis III of the Eastern District of Virginia for pretrial motions. Burke filed the August 3 motion in response to Blackwater's motion to dismiss the case. Blackwater asserts that Prince and the company are innocent of any wrongdoing and that they were professionally performing their duties on behalf of their employer, the US State Department.

The former employee, identified in the court documents as "John Doe #2," is a former member of Blackwater's management team, according to a source close to the case. Doe #2 alleges in a sworn declaration that, based on information provided to him by former colleagues, "it appears that Mr. Prince and his employees murdered, or had murdered, one or more persons who have provided information, or who were planning to provide information, to the federal authorities about the ongoing criminal conduct." John Doe #2 says he worked at Blackwater for four years; his identity is concealed in the sworn declaration because he "fear[s] violence against me in retaliation for submitting this Declaration." He also alleges, "On several occasions after my departure from Mr. Prince's employ, Mr. Prince's management has personally threatened me with death and violence."

In a separate sworn statement, the former US marine who worked for Blackwater in Iraq alleges that he has "learned from my Blackwater colleagues and former colleagues that one or more persons who have provided information, or who were planning to provide information about Erik Prince and Blackwater have been killed in suspicious circumstances." Identified as "John Doe #1," he says he "joined Blackwater and deployed to Iraq to guard State Department and other American government personnel." It is not clear if Doe #1 is still working with the company as he states he is "scheduled to deploy in the immediate future to Iraq." Like Doe #2, he states that he fears "violence" against him for "submitting this Declaration." No further details on the alleged murder(s) are provided.

"Mr. Prince feared, and continues to fear, that the federal authorities will detect and prosecute his various criminal deeds," states Doe #2. "On more than one occasion, Mr. Prince and his top managers gave orders to destroy emails and other documents. Many incriminating videotapes, documents and emails have been shredded and destroyed."

The Nation cannot independently verify the identities of the two individuals, their roles at Blackwater or what motivated them to provide sworn testimony in these civil cases. Both individuals state that they have previously cooperated with federal prosecutors conducting a criminal inquiry into Blackwater.

"It's a pending investigation, so we cannot comment on any matters in front of a Grand Jury or if a Grand Jury even exists on these matters," John Roth, the spokesperson for the US Attorney's office in the District of Columbia, told The Nation. "It would be a crime if we did that." Asked specifically about whether there is a criminal investigation into Prince regarding the murder allegations and other charges, Roth said: "We would not be able to comment on what we are or are not doing in regards to any possible investigation involving an uncharged individual."

The Nation repeatedly attempted to contact spokespeople for Prince or his companies at numerous email addresses and telephone numbers. When a company representative was reached by phone and asked to comment, she said, "Unfortunately no one can help you in that area." The representative then said that she would pass along The Nation's request. As this article goes to press, no company representative has responded further to The Nation.

Doe #2 states in the declaration that he has also provided the information contained in his statement "in grand jury proceedings convened by the United States Department of Justice." Federal prosecutors convened a grand jury in the aftermath of the September 16, 2007, Nisour Square shootings in Baghdad, which left seventeen Iraqis dead. Five Blackwater employees are awaiting trial on several manslaughter charges and a sixth, Jeremy Ridgeway, has already pleaded guilty to manslaughter and attempting to commit manslaughter and is cooperating with prosecutors. It is not clear whether Doe #2 testified in front of the Nisour Square grand jury or in front of a separate grand jury.

The two declarations are each five pages long and contain a series of devastating allegations concerning Erik Prince and his network of companies, which now operate under the banner of Xe Services LLC. Among those leveled by Doe #2 is that Prince "views himself as a Christian crusader tasked with eliminating Muslims and the Islamic faith from the globe":

To that end, Mr. Prince intentionally deployed to Iraq certain men who shared his vision of Christian supremacy, knowing and wanting these men to take every available opportunity to murder Iraqis. Many of these men used call signs based on the Knights of the Templar, the warriors who fought the Crusades.

Mr. Prince operated his companies in a manner that encouraged and rewarded the destruction of Iraqi life. For example, Mr. Prince's executives would openly speak about going over to Iraq to "lay Hajiis out on cardboard." Going to Iraq to shoot and kill Iraqis was viewed as a sport or game. Mr. Prince's employees openly and consistently used racist and derogatory terms for Iraqis and other Arabs, such as "ragheads" or "hajiis."

Among the additional allegations made by Doe #1 is that "Blackwater was smuggling weapons into Iraq." He states that he personally witnessed weapons being "pulled out" from dog food bags. Doe #2 alleges that "Prince and his employees arranged for the weapons to be polywrapped and smuggled into Iraq on Mr. Prince's private planes, which operated under the name Presidential Airlines," adding that Prince "generated substantial revenues from participating in the illegal arms trade."

Doe #2 states: "Using his various companies, [Prince] procured and distributed various weapons, including unlawful weapons such as sawed off semi-automatic machine guns with silencers, through unlawful channels of distribution." Blackwater "was not abiding by the terms of the contract with the State Department and was deceiving the State Department," according to Doe #1.

This is not the first time an allegation has surfaced that Blackwater used dog food bags to smuggle weapons into Iraq. ABC News's Brian Ross reported in November 2008 that a "federal grand jury in North Carolina is investigating allegations the controversial private security firm Blackwater illegally shipped assault weapons and silencers to Iraq, hidden in large sacks of dog food." Another former Blackwater employee has also confirmed this information to The Nation.

Both individuals allege that Prince and Blackwater deployed individuals to Iraq who, in the words of Doe #1, "were not properly vetted and cleared by the State Department." Doe #2 adds that "Prince ignored the advice and pleas from certain employees, who sought to stop the unnecessary killing of innocent Iraqis." Doe #2 further states that some Blackwater officials overseas refused to deploy "unfit men" and sent them back to the US. Among the reasons cited by Doe #2 were "the men making statements about wanting to deploy to Iraq to 'kill ragheads' or achieve 'kills' or 'body counts,'" as well as "excessive drinking" and "steroid use." However, when the men returned to the US, according to Doe #2, "Prince and his executives would send them back to be deployed in Iraq with an express instruction to the concerned employees located overseas that they needed to 'stop costing the company money.'"

Doe #2 also says Prince "repeatedly ignored the assessments done by mental health professionals, and instead terminated those mental health professionals who were not willing to endorse deployments of unfit men." He says Prince and then-company president Gary Jackson "hid from Department of State the fact that they were deploying men to Iraq over the objections of mental health professionals and security professionals in the field," saying they "knew the men being deployed were not suitable candidates for carrying lethal weaponry, but did not care because deployments meant more money."

Doe #1 states that "Blackwater knew that certain of its personnel intentionally used excessive and unjustified deadly force, and in some instances used unauthorized weapons, to kill or seriously injure innocent Iraqi civilians." He concludes, "Blackwater did nothing to stop this misconduct." Doe #1 states that he "personally observed multiple incidents of Blackwater personnel intentionally using unnecessary, excessive and unjustified deadly force." He then cites several specific examples of Blackwater personnel firing at civilians, killing or "seriously" wounding them, and then failing to report the incidents to the State Department.

Doe #1 also alleges that "all of these incidents of excessive force were initially videotaped and voice recorded," but that "Immediately after the day concluded, we would watch the video in a session called a 'hot wash.' Immediately after the hotwashing, the video was erased to prevent anyone other than Blackwater personnel seeing what had actually occurred." Blackwater, he says, "did not provide the video to the State Department."

Doe #2 expands on the issue of unconventional weapons, alleging Prince "made available to his employees in Iraq various weapons not authorized by the United States contracting authorities, such as hand grenades and hand grenade launchers. Mr. Prince's employees repeatedly used this illegal weaponry in Iraq, unnecessarily killing scores of innocent Iraqis." Specifically, he alleges that Prince "obtained illegal ammunition from an American company called LeMas. This company sold ammunition designed to explode after penetrating within the human body. Mr. Prince's employees repeatedly used this illegal ammunition in Iraq to inflict maximum damage on Iraqis."

Blackwater has gone through an intricate rebranding process in the twelve years it has been in business, changing its name and logo several times. Prince also has created more than a dozen affiliate companies, some of which are registered offshore and whose operations are shrouded in secrecy. According to Doe #2, "Prince created and operated this web of companies in order to obscure wrongdoing, fraud and other crimes."

"For example, Mr. Prince transferred funds from one company (Blackwater) to another (Greystone) whenever necessary to avoid detection of his money laundering and tax evasion schemes." He added: "Mr. Prince contributed his personal wealth to fund the operations of the Prince companies whenever he deemed such funding necessary. Likewise, Mr. Prince took funds out of the Prince companies and placed the funds in his personal accounts at will."

Briefed on the substance of these allegations by The Nation, Congressman Dennis Kucinich replied, "If these allegations are true, Blackwater has been a criminal enterprise defrauding taxpayers and murdering innocent civilians." Kucinich is on the House Committee on Oversight and Government Reform and has been investigating Prince and Blackwater since 2004.

"Blackwater is a law unto itself, both internationally and domestically. The question is why they operated with impunity. In addition to Blackwater, we should be questioning their patrons in the previous administration who funded and employed this organization. Blackwater wouldn't exist without federal patronage; these allegations should be thoroughly investigated," Kucinich said.

A hearing before Judge Ellis in the civil cases against Blackwater is scheduled for August 7.

Wall Street profits from trades with Fed

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Henny Sender 
August 2 2009 - Financial Times/UK

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Wall Street banks are reaping outsized profits by trading with the Federal Reserve, raising questions about whether the central bank is driving hard enough bargains in its dealings with private sector counterparties, officials and industry executives say.

The Fed has emerged as one of Wall Street's biggest customers during the financial crisis, buying massive amounts of securities to help stabilise the markets. In some cases, such as the market for mortgage-backed securities, the Fed buys more bonds than any other party.

However, the Fed is not a typical market player. In the interests of transparency, it often announces its intention to buy particular securities in advance. A former Fed official said this strategy enables banks to sell these securities to the Fed at an inflated price.

The resulting profits represent a relatively hidden form of support for banks, and Wall Street has geared up to take advantage. Barclays, for example, e-mails clients with news on the Fed's balance sheet, detailing the share of the market in particular securities held by the Fed.

"You can make big money trading with the government," said an executive at one leading investment management firm. "The government is a huge buyer and seller and Wall Street has all the pricing power."

A former official of the US Treasury and the Fed said the situation had reached the point that "everyone games them. Their transparency hurts them. Everyone picks their pocket."

The central bank's approach to securities purchases was defended by William Dudley, president of the New York Fed, which is responsible for market operations. "We believe that opting for transparency is a greater good," he said. "If we didn't have transparency, we'd be criticised on other grounds."

However, another official familiar with the matter said the central bank "has heard that dealers load up on securities to sell to the Fed. There is concern, but policy goals override other considerations."

Barney Frank, chairman of the House financial services committee, said the potential profiteering may be part of the price for stabilising the financial system.

"You can't rescue the credit system without benefiting some of the people in it." Still, Mr Frank said Congress would be watching. "We don't want the Fed to drive the hardest possible bargain, but we don't want them to get ripped off."

The growing Fed activity has coincided with a general widening of market spreads – the difference between bid and offer prices – as the number of market participants declines. Wider spreads enable banks, in their capacity as market-makers, to make more profit.

Larry Fink, chief executive of money manager BlackRock, has described Wall Street's trading profits as "luxurious", reflecting the banks' ability to take advantage of diminished competition.

"Bid-offer spreads have remained unusually wide, notwithstanding the normalisation of financial markets," said Mohamed El-Erian, chief executive of fund manager Pimco in Newport Beach, California.

Spreads narrowed dramatically during the years of the credit bubble.

Brad Hintz, an analyst at AllianceBernstein, said he doubted that spreads would ever return to those levels, a development that could be pleasing to the Fed.

"They want to help Wall Street make money," he said.

Oil Supplies Are Running Out Fast

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Catastrophic shortfalls threaten economic recovery, says world's top energy economist

Steve Connor
August 3, 2009 - The Independent/UK

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The world is heading for a catastrophic energy crunch that could cripple a global economic recovery because most of the major oil fields in the world have passed their peak production, a leading energy economist has warned.

Higher oil prices brought on by a rapid increase in demand and a stagnation, or even decline, in supply could blow any recovery off course, said Dr Fatih Birol, the chief economist at the respected International Energy Agency (IEA) in Paris, which is charged with the task of assessing future energy supplies by OECD countries.

In an interview with The Independent, Dr Birol said that the public and many governments appeared to be oblivious to the fact that the oil on which modern civilisation depends is running out far faster than previously predicted and that global production is likely to peak in about 10 years - at least a decade earlier than most governments had estimated.

But the first detailed assessment of more than 800 oil fields in the world, covering three quarters of global reserves, has found that most of the biggest fields have already peaked and that the rate of decline in oil production is now running at nearly twice the pace as calculated just two years ago. On top of this, there is a problem of chronic under-investment by oil-producing countries, a feature that is set to result in an "oil crunch" within the next five years which will jeopardise any hope of a recovery from the present global economic recession, he said.

In a stark warning to Britain and the other Western powers, Dr Birol said that the market power of the very few oil-producing countries that hold substantial reserves of oil - mostly in the Middle East - would increase rapidly as the oil crisis begins to grip after 2010.

"One day we will run out of oil, it is not today or tomorrow, but one day we will run out of oil and we have to leave oil before oil leaves us, and we have to prepare ourselves for that day," Dr Birol said. "The earlier we start, the better, because all of our economic and social system is based on oil, so to change from that will take a lot of time and a lot of money and we should take this issue very seriously," he said.

"The market power of the very few oil-producing countries, mainly in the Middle East, will increase very quickly. They already have about 40 per cent share of the oil market and this will increase much more strongly in the future," he said.

There is now a real risk of a crunch in the oil supply after next year when demand picks up because not enough is being done to build up new supplies of oil to compensate for the rapid decline in existing fields.

The IEA estimates that the decline in oil production in existing fields is now running at 6.7 per cent a year compared to the 3.7 per cent decline it had estimated in 2007, which it now acknowledges to be wrong.

"If we see a tightness of the markets, people in the street will see it in terms of higher prices, much higher than we see now. It will have an impact on the economy, definitely, especially if we see this tightness in the markets in the next few years," Dr Birol said.

"It will be especially important because the global economy will still be very fragile, very vulnerable. Many people think there will be a recovery in a few years' time but it will be a slow recovery and a fragile recovery and we will have the risk that the recovery will be strangled with higher oil prices," he told The Independent.

In its first-ever assessment of the world's major oil fields, the IEA concluded that the global energy system was at a crossroads and that consumption of oil was "patently unsustainable", with expected demand far outstripping supply.

Oil production has already peaked in non-Opec countries and the era of cheap oil has come to an end, it warned.

In most fields, oil production has now peaked, which means that other sources of supply have to be found to meet existing demand.

Even if demand remained steady, the world would have to find the equivalent of four Saudi Arabias to maintain production, and six Saudi Arabias if it is to keep up with the expected increase in demand between now and 2030, Dr Birol said.

"It's a big challenge in terms of the geology, in terms of the investment and in terms of the geopolitics. So this is a big risk and it's mainly because of the rates of the declining oil fields," he said.

"Many governments now are more and more aware that at least the day of cheap and easy oil is over... [however] I'm not very optimistic about governments being aware of the difficulties we may face in the oil supply," he said.

Environmentalists fear that as supplies of conventional oil run out, governments will be forced to exploit even dirtier alternatives, such as the massive reserves of tar sands in Alberta, Canada, which would be immensely damaging to the environment because of the amount of energy needed to recover a barrel of tar-sand oil compared to the energy needed to collect the same amount of crude oil.

"Just because oil is running out faster than we have collectively assumed, does not mean the pressure is off on climate change," said Jeremy Leggett, a former oil-industry consultant and now a green entrepreneur with Solar Century.

"Shell and others want to turn to tar, and extract oil from coal. But these are very carbon-intensive processes, and will deepen the climate problem," Dr Leggett said.

"What we need to do is accelerate the mobilisation of renewables, energy efficiency and alternative transport.

"We have to do this for global warming reasons anyway, but the imminent energy crisis redoubles the imperative," he said.

Oil: An unclear future

*Why is oil so important as an energy source?

Crude oil has been critical for economic development and the smooth functioning of almost every aspect of society. Agriculture and food production is heavily dependent on oil for fuel and fertilisers. In the US, for instance, it takes the direct and indirect use of about six barrels of oil to raise one beef steer. It is the basis of most transport systems. Oil is also crucial to the drugs and chemicals industries and is a strategic asset for the military.

*How are oil reserves estimated?

The amount of oil recoverable is always going to be an assessment subject to the vagaries of economics - which determines the price of the oil and whether it is worth the costs of pumping it out -and technology, which determines how easy it is to discover and recover. Probable reserves have a better than 50 per cent chance of getting oil out. Possible reserves have less than 50 per cent chance.

*Why is there such disagreement over oil reserves?

All numbers tend to be informed estimates. Different experts make different assumptions so it is under- standable that they can come to different conclusions. Some countries see the size of their oilfields as a national security issue and do not want to provide accurate information. Another problem concerns how fast oil production is declining in fields that are past their peak production. The rate of decline can vary from field to field and this affects calculations on the size of the reserves. A further factor is the expected size of future demand for oil.

*What is "peak oil" and when will it be reached?

This is the point when the maximum rate at which oil is extracted reaches a peak because of technical and geological constraints, with global production going into decline from then on. The UK Government, along with many other governments, has believed that peak oil will not occur until well into the 21st Century, at least not until after 2030. The International Energy Agency believes peak oil will come perhaps by 2020. But it also believes that we are heading for an even earlier "oil crunch" because demand after 2010 is likely to exceed dwindling supplies.

*With global warming, why should we be worried about peak oil?

There are large reserves of non-conventional oil, such as the tar sands of Canada. But this oil is dirty and will produce vast amounts of carbon dioxide which will make a nonsense of any climate change agreement. Another problem concerns how fast oil production is declining in fields that are past their peak production. The rate of decline can vary from field to field and this affects calculations on the size of the reserves. If we are not adequately prepared for peak oil, global warming could become far worse than expected.

Pentagon eyes accelerated "bunker buster" bomb

The Pentagon is seeking to speed deployment of an ultra-large "bunker-buster" bomb on the most advanced U.S. bomber as soon as July 2010, the Air Force said on Sunday, amid concerns over perceived nuclear threats from North Korea and Iran.

The non-nuclear, 30,000-pound Massive Ordnance Penetrator, or MOP, which is still being tested, is designed to destroy deeply buried bunkers beyond the reach of existing bombs.

If Congress agrees to shift enough funds to the program, Northrop Grumman Corp's radar-evading B-2 bomber "would be capable of carrying the bomb by July 2010," said Andy Bourland, an Air Force spokesman.

"The Air Force and Department of Defense are looking at the possibility of accelerating the program," he said. "There have been discussions with the four congressional committees with oversight responsibilities. No final decision has been made."

The precision-guided weapon, built by Boeing Co, could become the biggest conventional bomb the United States has ever used.

Carrying more than 5,300 pounds of explosives. it would deliver more than 10 times the explosive power of its predecessor, the 2,000-pound BLU-109, according to the Pentagon's Defense Threat Reduction Agency, which has funded and managed the seed program.

Chicago-based Boeing, the Pentagon's No. 2 supplier by sales, could be put on contract within 72 hours to build the first MOP production models if Congress signs off, Bourland said.

The threat reduction agency is working with the Air Force to transition the program from "technology demonstration" to acquisition, said Betsy Freeman, an agency spokeswoman.

Both the U.S. Pacific Command, which takes the lead in U.S. military planning for North Korea, and the Central Command, which prepares for contingencies with Iran, appeared to be backing the acceleration request, said Kenneth Katzman, an expert on Iran at the Congressional Research Service, the research arm of Congress.

"It's very possible that the Pentagon wants to send a signal to various countries, particularly Iran and North Korea, that the United States is developing a viable military option against their nuclear programs," Katzman said.

But he cautioned against concluding there was any specific mission in mind at this time.

BIGGEST BOMB

The MOP would be about one-third heavier than the 21,000-pound (9.5 million kg) GBU-43/B Massive Ordnance Air Blast bomb -- dubbed the "mother of all bombs" -- that was dropped twice in tests at a Florida range in 2003.

The 20-foot-long (6-meter) MOP is built to be dropped from either the B-52 or the B-2 "stealth" bomber. It is designed to penetrate up to 200 feet underground before exploding, according to the U.S. Air Force.

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Jim Wolf
Aug 2, 2009 - Reuters

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The suspected nuclear facilities of Iran and North Korea are believed to be largely buried underground to escape detection and boost their chances of surviving attack.

During a visit to Jerusalem last week, U.S. Defense Secretary Robert Gates sought to reassure Israel that a drive by President Barack Obama to talk Iran into giving up its nuclear work was not "open-ended."

Iran says its uranium enrichment -- a process with bomb-making potential -- is for energy only and has rejected U.S.-led demands to curb the program.

For its part, North Korea responded to new United Nations sanctions, imposed after it detonated a second nuclear device, by vowing in June to press the production of nuclear weapons and act against international efforts to isolate it.

Alcoa Razes Rain Forest in Court Case Led by Brazil Prosecutors

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Michael Smith and Adriana Brasileiro
July 31, 2009 - Bloomberg

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For four decades, Edimar Bentes and his family have survived by farming tiny clearings in the jungle near their dirt-floor shack in the state of Para in the Brazilian Amazon.

On this April afternoon, Bentes, 56, squats in the driving rain and dips a glass into what just four years ago was a crystal-clear stream that provided drinking and bathing water. He frowns as the glass fills with brown silt. A thin man with short-cropped dark hair and a tanned, deeply wrinkled forehead, Bentes gazes around his land.

There are no signs of the deer, armadillos and pacas he used to hunt to feed his wife and 10 children.

For Bentes and thousands of others in the Juruti region of Para whose livelihood depends on wildlife and plants, everything changed in 2006. That's when New York-based Alcoa Inc., the world's second-largest primary aluminum producer, started to bulldoze a 56-kilometer (35-mile) swath of the rain forest across hundreds of families' properties to build a railway.

This cleared corridor, 100 meters (109 yards) wide, will lead to a mine that will chew up 10,500 hectares (25,900 acres) of virgin jungle over three decades.

More than half of the mine will lie inside a forest that by Brazilian federal law is supposed to be preserved unharmed forever for local residents. By year's end, Alcoa says, the railway will transport 7,000 tons a day of bauxite, the dark red ore that's used to make aluminum, from the mine to a port on the Amazon River.

'Want to Cry'

"It makes you want to cry when you see this stream," says Bentes, his bare feet sinking into the mud. He views a wasteland of uprooted trees and brown rivulets seeping into the water. "It reminds me of everything bad that Alcoa did to our land."

A growing array of evidence in court documents puts Alcoa among the multinational corporations that prosecutors accuse of destroying or causing destruction of the world's largest rain forest.

Brazilian federal and Para state prosecutors sued Alcoa's Brazilian mining subsidiary in 2005 in an effort to block the Juruti mine, saying the company had circumvented the law by not applying for a federal permit and instead seeking a license from the state of Para.

After four years of legal haggling, the suit is still pending. Alcoa, which denies any wrongdoing, has already completed construction of the railway, port and processing plants. It's now ready to start mining.

"The state agency has no power to give anyone full rights to exploit land, especially in the case of a reserve," state prosecutor Raimundo Moraes says. "Alcoa invaded the area, undeterred. Alcoa has no shame."

'All Necessary Licenses'

In written responses to questions from Bloomberg News, Alcoa says it "has all necessary government licenses to implement the Juruti mining project."

The Amazon, which spans nine countries and is roughly the size of Australia, has for centuries been the lungs of the Earth, its plants and trees absorbing pollution from the air. But that strength is fading. The world's largest inhaler of carbon dioxide is shrinking -- thus aggravating, instead of slowing, global warming.

Every week, federal prosecutors say, people acting outside the law use bulldozers, chain saws or fire to wipe out parts of the jungle to make way for crops, cattle and mines.

The fires men set to clear land for ranches and farms create 6 percent of the carbon dioxide spewed into the air worldwide, according to the Cambridge, Massachusetts-based Union of Concerned Scientists. That equates to half of all the emissions from cars, trucks, planes, trains and ships in the world.

'Amazon is the Key'

Brazil has become the planet's fourth-biggest polluter.

The fires that rage across the Amazon could help increase Earth's average surface temperature by as much as 11.5 degrees this century, says the Intergovernmental Panel on Climate Change, a group of scientists from 194 countries.

Global warming threatens to melt glaciers, raise sea levels and lead to drinking water shortages, the United Nations-sanctioned panel says.

"We are not going to reduce global warming if we don't do something about deforestation in the Amazon," says Doug Boucher, director of the Tropical Forest and Climate Initiative at Concerned Scientists. "It's that simple, and very alarming. The Amazon is a big part -- if not the key part -- of a solution to deal with global warming."

Wal-Mart, McDonald's

To date, companies and individuals have destroyed more than 857,000 square kilometers (331,000 square miles) of the Amazon, an area almost the size of France and England combined, according to the UN Environment Programme. Cattle ranchers have caused 80 percent of the illegal deforestation, according to Brazil's environment ministry.

They sell steers to Brazil's three biggest beef producers. One of them, Sao Paulo-based JBS SA, is the world's largest; the others are Santo Andre-based Marfrig Alimentos SA and Bertin SA of Lins.

Wal-Mart Stores Inc., the world's biggest retailer; French supermarket chain Carrefour SA; and McDonald's Corp. have purchased beef from those companies, according to Brazilian internal revenue service sales and export records.

Ford Motor Co., General Motors Co. and Daimler AG's Mercedes-Benz have bought leather for car and truck seats from Auburn Hills, Michigan-based Eagle Ottawa LLC, a leather company supplied with materials from illegally deforested ranches, the records show.

These multinationals say they're working to avoid buying products originating in deforested land.

Cargill's Port

Alcoa is the latest company in a decade-long legacy of global corporations that have thwarted Brazil's environmental regulations, federal prosecutors say.

Minneapolis-based Cargill Inc., the largest privately held company in the U.S., spent $20 million to build a grain port on the Amazon River in 2003 that led to farmers illegally destroying thousands of hectares of rain forest to grow soybeans, says Felicio Pontes, a federal prosecutor who sued to block the project.

In early February, soybeans were piled high in a storage area at Cargill's Amazon port, waiting to be loaded onto a ship bound for Europe. The company ships about 60,000 tons of soybeans a year grown near the town of Santarem. Before Cargill built the port, there was no large-scale soybean production in the area.

'Completely Obvious'

Cargill hired The Nature Conservancy, an Arlington, Virginia-based nonprofit group, to confirm that soybean farmers aren't clearing the Amazon around Santarem. The group says it has certified this year that 155 of 383 farms weren't deforesting.

"It's completely obvious that Cargill's port gave an incentive that led to deforestation," Pontes says.

Both Alcoa and Cargill, prosecutors say, have persuaded local officials to sign off on their plans, flouting federal law. Brazil's constitution says minerals are national resources that should be overseen by tougher federal agencies, says Daniel Azeredo, a federal prosecutor in the Amazon port of Belem, who specializes in environmental lawsuits.

"The problem is that in Brazil we have weak institutions and laws, and companies take advantage of that," he says. "We have laws, but they are impossible to enforce, which gives companies complete impunity to do whatever they want to profit."

Alcoa says it has abided by the law.

'Any and All'

"In Brazil, public attorneys tend to challenge in court any and all major industrial and infrastructure projects," Alcoa wrote in responses to questions from Bloomberg News. Alcoa says it doesn't need federal approval for its mine in Juruti.

Cargill also says it has done the right thing in Brazil. The company won proper state approval to build its river transport center, says Afonso Champi Jr., Cargill's external affairs director in Brazil. He says the company strives to guarantee the soybeans it buys don't come from deforested land.

Alcoa, which mines and produces aluminum in 31 countries, champions itself as a responsible steward of global resources.

"Operating in a manner that protects and promotes the health and well-being of the environment is a core value to Alcoa," the company says on its Web site.

Cargill, whose products worldwide include animal feed, salt, steel and financial services, says, "Being socially responsible as a corporation means that we care about the environment."

EPA Settlement

Alcoa has clashed with regulators and environmentalists in other countries. The University of Massachusetts's Political Economy Research Institute ranks Alcoa as the 15th-most-toxic company in the U.S.

In 2003, Alcoa agreed with the U.S. Environmental Protection Agency and the Justice Department to pay about $330 million to clean up air pollution at a power plant within an aluminum factory in Rockdale, Texas -- a plant it has since shut down.

Alcoa has received mixed notices in Australia. In 1990, the UN Environment Programme gave the company an award for replanting forests it had destroyed to build a bauxite mine there. Alcoa, which generates electricity to process aluminum, obtained the lowest score in a 2008 review of utilities by the World Wildlife Fund.

The WWF said Alcoa had failed to adopt targets to cut greenhouse gas emissions by its coal-fired power plant in Victoria state.

Slashed Emissions

Alcoa says it gets rapped by environmentalists because its electrical power plants emit carbon. The company says it should get credit for all of the pollution it's preventing by supplying the lightweight aluminum that makes cars and trucks more energy-efficient. Alcoa says it has slashed its greenhouse gas emissions by 36 percent since 1990.

In Brazil, Alcoa is doing business in a political climate that regulators say is favorable to polluters. Luciano Evaristo, a director at Ibama, the federal environmental agency, says forces in the government -- starting at the very top -- promote and finance industries that feed on illegal destruction of the rain forest.

President Luiz Inacio Lula da Silva calls himself an environmentalist. In 2003, he introduced a plan to protect the Amazon, creating task forces to raid areas being deforested.

Copenhagen Conference

In December, Lula will join leaders from almost 200 other countries in Copenhagen at a UN-sponsored conference to discuss a successor to the 1997 Kyoto Protocol, the first major international pact on global warming.

"At Copenhagen, we will have to reach a global agreement that will be both just and ambitious if we want to bequeath a viable planet to future generations," Lula said in a July 7 speech. Lula set a goal of reducing deforestation by 80 percent by 2020.

At the same time, Lula has authorized the building of new roads and power plants in the Amazon and has increased funding for ranches and factories in deforested areas. In June, he congratulated people for tearing down trees to create farms spurring economic growth.

"No one can say that someone is a criminal because he deforested," Lula told a crowd of cheering ranchers in the Amazon city of Alta Floresta as he announced plans to legalize almost 300,000 ranches and farms built on illegally cleared land that once was rain forest.

'Schizophrenic Government'

"It's a completely schizophrenic government," says Paulo Adario, who directs the Amazon campaign for nonprofit environmental group Greenpeace. "On one hand, they are combating deforestation. On the other, they are financing it."

Foreigners have been cutting down Latin America's rain forests since the 1600s, when Spanish and Portuguese conquerors cleared jungles from Mexico to Brazil to build ships, farms and cities. In the 1960s and 1970s, Texaco Inc. drilled dozens of oil wells in Ecuador's Amazon, destroying rain forest and polluting the region with poisonous wastes.

Alcoa, which produced the first commercially available aluminum in 1888, has 63,000 employees around the world. The company produces enough sheeting to make 100 billion cans of beer and soda a year.

America's largest aluminum producer sells ingots, sheets, wheels, fasteners and building materials to customers in the aerospace, packaging and automotive industries.

Stock Recovery

The company reported $26.9 billion in revenue last year. Its share price, which peaked at $47.35 in July 2007, slid as low as $5.22 on March 6 during the global economic meltdown. The stock value has since increased to $11.46, as of July 30, up 1.8 percent in the year-to-date.

Brazil has the world's third-largest reserves of bauxite. In 1979, a group led by Rio de Janeiro-based Vale SA built a bauxite mine in Porto Trombetas, 60 kilometers from Juruti. In 1994, Alcoa joined Vale in the venture, whose other members today include Melbourne-based BHP Billiton Ltd. and Rio Tinto Plc of London.

The scarred land and fouled water around Porto Trombetas bears witness to the impact of the mine. Nearby, a lake called Lago Batata still turns bright red from bauxite wastes workers dumped for a decade.

The venture says it stopped polluting the lake in 1989 and now uses sealed holding ponds to contain overflow. The consortium replanted trees on the banks of the lake, but they're low to the ground and brittle. Ademar Cavalcanti, the mine's environmental director, says the cleanup will go on indefinitely.

Revived Project

Alcoa inherited its Juruti mining rights from Reynolds Inc., which it bought in 2000. Alcoa revived the project in 2003, as global economic growth increased demand.

Simao Jatene, the governor of Para, supported the Alcoa project. BNDES, Brazil's national development bank, provided the company with 1.9 billion reais ($1 billion) of financing for construction.

In January 2005, Alcoa requested state permits to build the $1.7 billion mine. Gabriel Guerreiro, who was then Para's environment secretary, says the company submitted an impact study done by an independent firm, Sao Paulo-based CNEC Engenharia SA.

Guerreiro says his agency analyzed Alcoa's proposal and concluded the mine would be modern and efficient. Guerreiro says Para's mineral riches must be explored for the good of the state's 7.1 million residents, 50 percent of whom live in poverty.

'Rich Civilization'

"Nobody is going to build a rich civilization without using the natural resources of the tropics," he says.

Guerreiro gave Alcoa a preliminary license in June 2005 and asked for 35 improvements to the impact study. After Alcoa made adjustments, he recommended the project be accepted by the state environmental council, called Coema, which approved it in August 2005.

A month later, federal and state prosecutors sued Omnia Minerios Ltda., the Santarem-based Alcoa subsidiary running the mine; Para's state government; and Ibama, the federal regulator. The government's civil suit, filed in federal court in Santarem, says Omnia Minerios was required to seek and obtain a federal environmental permit.

Prosecutors say Ibama failed by not taking control of the licensing process. In court filings, Alcoa and the two regulators each say they followed proper procedures.

Court to Court

The case against Alcoa has languished for four years as the participants argue over which level of the Brazilian judicial system -- federal or state -- should have jurisdiction.

Franklin Feder, Alcoa's Sao Paulo-based president for Latin America and the Caribbean, says Ibama advised Alcoa to get state approval for the mine.

Marcus Luiz Barroso Barros, Ibama's president from 2003 to 2007, says no one told him about such a decision. He says he didn't know about Alcoa's project until after the company had applied for licensing with Para. At that point, he decided it would be too complicated for Ibama to get involved -- a position he now regrets.

"Now that I know more about Alcoa's mine, looking at the significant impact it's having in the area, I'd say it's a major project that should have been handled by the federal agency," says Barros, 61, a physician who's now in private practice in the Amazon city of Manaus.

Licensing Guidelines

A government advisory panel called Conama lays out guidelines for when Ibama should get involved in reviewing a project.

"Ibama shall be responsible for the environmental licensing for projects and activities with a significant environmental impact of a national or regional scope," Conama Resolution 237 says.

State regulators aren't as reliable as the federal government, Barros says.

"The main problem with licensing by state agencies is that they are often too close to projects and fall victim more easily to political and economic pressures than Ibama," he says. "They may be more easily manipulated."

The state licensing of the Juruti mine was riddled with irregularities, the prosecutors' suit says. Alcoa's consultants limited their environmental research to two separate one-month periods during the dry season, in a jungle with some of the highest rainfall levels in the world, prosecutors say.

'Comprehensive'

The researchers didn't analyze how the mine, which will consume 505 cubic meters (133,407 gallons) of water per hour from an Amazon River inlet, will affect fishing. They also didn't study how heavy ship traffic would affect fish populations near the port, prosecutors say.

"All environmental studies, conducted by qualified specialists, were comprehensive, as demonstrated by the fact that all necessary licenses were duly granted," Alcoa said in its responses to questions from Bloomberg News.

Fatima de Sousa Paiva, a nun and community organizer who's spent almost a decade near the Juruti mine area, says Alcoa approached the rain forest community like Portuguese explorers who grabbed Brazil in the 16th century.

"Alcoa offered gifts like plastic sandals, thermoses and bicycles," says Paiva, 48, who teaches at a local elementary school. "To them, we were just some ignorant Indians in the way of their plans to make billions."

In its written response, Alcoa said, "This is a groundless allegation."

'Provide for the People'

In granting Alcoa permission to mine in the Juruti preserve, Para officials clashed with Incra, the federal government's land reform institute. By law, the reserve can be used only by residents to hunt, fish and gather nuts to sustain their families.

"The reserve allows a way to make sure the land is able to provide for the people," the law says. All decisions about land use must be made by residents of the community, according to the law.

"Maybe the state wanted to play Alcoa's game by approving an environmental licensing process that was full of holes, but we didn't," says Luciano Brunet, who runs Incra's office in Santarem.

Brunet says Alcoa told residents that they didn't have a right to stop the mine because they didn't have title to the land.

Public Land

Most of the ground in the Amazon is owned by the government, according to Imazon, a Belem-based nonprofit group. Incra gave descendants of Mundurucu and Muirapinima Indians the right to use the land in 1981 without granting titles to the families. Incra certified the land as a federal reserve in November 2005.

Brazil's laws regarding property deeds in the Amazon have always been lax, Brunet says, because until recently no one has challenged them.

"Those people don't own the land," says Alcoa's Tiniti Matsumoto Jr., who has run the mine since 2005 and has worked at Alcoa for 40 years. "That land issue is Incra's problem, not Alcoa's."

Alcoa doesn't own the property either, prosecutor Moraes says.

"Alcoa simply assumed it was authorized to mine an area that is protected, where people live off the land," Moraes says.

Soon after Alcoa received approval from the state to build the mine, Bricio Lima, the company's community affairs director, went from house to house, asking families to cede part of their land. In the end, Alcoa secured the right of way through land where 81 families live.

No Choice

Bentes, the farmer whose stream is now filled with brown silt, says Lima told his family and their neighbors that residents had no choice but to cooperate because Alcoa had approval from the state.

Lima said Alcoa offered the family 23,000 reais, which equals about 17 months of the median income in Brazil, to use 2.5 hectares of their land, Bentes says. He says he agreed to the deal because he had no choice.

"He told us the railroad would go through our land whether we accepted the offer or not," Bentes says, as he prepares to roast half a deer he hunted for two days with a friend.

Alcoa wanted to pay them something, even though it wasn't required by law, Lima says.

"There was nothing forcing us to pay any compensation," says Lima, who confirms Bentes's account of their discussions.

'The Right Thing'

Brunet says his agency plans to grant land titles to local residents, allowing them to request royalty payments from Alcoa's mine production.

Matsumoto, 59, a Brazilian of Japanese descent, says the company is willing to pay people who live in the reserve part of its royalty payments to the government -- 1.5 percent of the mine's revenue -- if that's what officials want.

"We want to be here for at least 70 years, so of course we want to do the right thing," he says.

Alcoa is paying Conservation International, an Arlington- based nonprofit group, $100,000 a year to create a trust fund to finance the preservation of 10 million hectares of parks and preserves around Juruti.

Since 2005, the company has spent 10 million reais to improve roads and build schools, water treatment units, a health-care center and a government building in Juruti, Alcoa says.

Replanting Trees

In 2008, the company commissioned a poll of 600 people in the region, finding that 61 percent said the mine project had improved their lives. Two-thirds of those questioned didn't live close to the mine, Alcoa says.

Matsumoto says Alcoa will replant every tree it destroys. It will send forestry engineers and biologists ahead of the excavators to catalog plants and animals in all of the jungle Alcoa cuts down.

"When we start planting trees at the mine, we want to make it richer than the original forest," Matsumoto says.

Patricia Elias, a forestry expert for the Union of Concerned Scientists, says Matsumoto's goal is impossible to achieve.

"It would take centuries for trees to grow to their original density and height -- and it would never be better than virgin forest," she says. "It's of greater value in combating climate change to avoid deforestation in the first place."

'Just Doesn't Work'

Andre Clewell, a botanist in Ellenton, Florida, who is a consultant on restoration of mines, says it's difficult to quickly restore tropical trees.

"You can try to grow 200-year-old trees in 50 years, but it just doesn't work," Clewell, 75, says. "And some of it never comes back."

About 160 kilometers from the Juruti mine, green fields of soybeans stretch to the horizon near Santarem, flanked by narrow stands of the rain forest that once covered all of the area. Scorched trees lie on the ground at the far end of Edno Cortezia's farm, where workers set fire to the forest to make way for crops.

Cortezia says he's growing soybeans where the jungle once stood because Cargill built a port 30 kilometers away at the confluence of the Amazon and Tapajos rivers.

"We came here because of the port," Cortezia says. Cargill's Champi says the company will remove Cortezia as a supplier if it can confirm the deforestation.

Pot-Holed Highways

Before Cargill built its port, there were no soybean farms near Santarem, says Marcus Bistene, chief of enforcement at Ibama's Santarem office. Pontes, the federal prosecutor, says Cargill bypassed federal environmental law to build a port without properly studying how it would affect the Amazon.

In the mid-1990s, Cargill, the world's largest agricultural company by revenue, was looking for an alternative to trucking grains down pot-holed highways from the fields of Mato Grosso state in western Brazil to the ports of Santos and Paranagua, 2,000 kilometers south.

They set their sights on a highway through the heart of the soybean belt from the Amazon to Santarem, Champi says. At the time, Cortezia farmed land in the state of Mato Grosso, near the southern border of the Amazon. He says Cargill officials came to town, urging farmers to move to Santarem, where it would be less expensive to grow soybeans.

This season, he's harvesting soybeans on his farm near Santarem that he plans to sell to Cargill.

EPA Brushes

Cargill has 160,000 employees in 67 countries and reported $120 billion in revenue in 2008. Founded in 1855 by William Cargill, it's still primarily family owned. It has been in Brazil since 1965, when it started producing and selling hybrid corn seeds. Within two decades, Cargill grew into Brazil's top trader and exporter of soybeans and oilseed.

Like Alcoa, Cargill has had brushes with environmental regulators.

In the U.S., the EPA has cited the company for polluting rivers and killing fish populations. In 2005, Cargill signed an agreement with the EPA and the Justice Department settling charges that the company had underestimated air pollution at corn and soybean processing plants in 13 states.

Cargill agreed to spend $130 million to reduce pollution at 27 plants, pay a fine of $1.6 million and finance $3.5 million in environmental programs.

'Long History'

Cargill standards for protecting the environment are stricter than the EPA's in some cases, spokeswoman Lori Johnson says.

"Cargill has a long history of voluntarily reducing its emissions and other environmental impacts," Johnson says.

In 2000, Pontes filed suit in federal court to halt construction of Cargill's port, arguing that the company hadn't done a proper environmental study. Cargill contested the suit, saying it had approval from Para's environmental agency.

As the case was pending, Cargill finished the port in 2003. In March 2007, a Brazilian federal judge shut down the port until the company did a comprehensive environmental study. Cargill won a reversal of that decision on appeal.

In 2006, Greenpeace reported it had traced soybeans from the port to illegally deforested land. Since then, Cargill has refused to buy soybeans grown on newly deforested land, Champi says. Three days ago, Cargill and other grain exporter in Brazil extended until July 2010 a commitment not to buy soybeans from farms that were cleared from the Amazon since 2006.

74 Million Cows

Ranchers, more than anyone else, have illegally flattened thousands of square kilometers of publicly owned rain forest to create pastures for cattle, Pontes says. More than 74 million cows graze in the Amazon today, covering a combined area larger than Spain.

Ranchers are proud of what they have done to improve the local economy. Ataides Gomes de Oliveira, a foreman on the Itacaiunas ranch near Xinguara, walks among a wasteland of scorched logs and splintered stumps. He stops as cattle appear amid the ragged ferns and saplings.

"There are 6,000 cows here, where there used to be unproductive jungle," he says. Sao Paulo-based Agropecuaria Santa Barbara Xinguara SA, which owns Itacaiunas, says it's not responsible for managing the ranch and has never illegally cleared jungle.

McDonald's gets some of the beef for its Big Macs from a meatpacker supplied by ranches cleared from the Amazon, cattle sales permits show.

Deforesting Fines

McDonald's supplier of hamburger patties in Brazil, Braslo Produtos de Carne Ltda. in Sao Paulo, has bought beef from its parent, Marfrig Alimentos. Four ranchers that supply Marfrig have been fined a total of 13.5 million reais for illegally clearing the rain forest, public records show.

Marfrig has never bought "regularly" from ranches that don't follow Brazil's environmental law, says Ricardo Florence, director of planning and investor relations. The company demands its suppliers follow all laws. It won't buy from suppliers that Ibama has placed on a list of "embargoed" ranches cited for illegal deforestation, Florence says.

The ranchers who were fined aren't on that list, so Marfrig has no way of knowing their background on deforestation, he says.

"The Marfrig Group does not buy from suppliers that contribute to deforestation of the Amazon," Florence says.

McDonald's Policy

Oak Brook, Illinois-based McDonald's, which has had a policy of not buying beef from deforested land since 1989, says it relies on its suppliers to follow the law.

"Every McDonald's beef supplier has signed and affirmed its compliance with this policy," says Bob Langert, McDonald's vice president of corporate social responsibility. "They are aware that McDonald's will immediately cease accepting raw materials from any facility that is found to source cattle for McDonald's from within the Amazon."

Marfrig complies with McDonald's policy, Florence says.

JBS, the world's biggest meat company, has purchased cattle from fined ranchers. JBS owns Swift & Co. and part of Smithfield Foods Inc. in the U.S. and has nine plants in the Amazon. Kraft Foods Inc.'s division in Italy and a unit of H.J. Heinz Co. have bought beef from JBS, according to sales and export records.

The number of slaughterhouses in the Amazon has tripled to 87 since 2004, as international meat exporters expanded into the rain forest, prosecutors say.

'It's the Meatpackers'

"If you want to know who is financing the deforestation, it's the meatpackers," Ibama director Evaristo says.

Angela Garcia, director of environmental affairs at JBS, says the company counts on government enforcement records to ensure cattle come from land that wasn't illegally deforested.

"We're not in enforcement," she says. "We don't have the resources. I hope the ranches are complying with the law, but I cannot say whether they are."

Evaristo says virtually all Amazon ranchers built pastures on land that was illegally deforested.

"These are people who operate with 100 percent illegality," he says. "They steal public land, destroy the rain forest, plant grass and let the cows graze until they're fat enough to sell."

In Sao Felix do Xingu, the municipality in the Amazon with the most cattle, only one ranch out of hundreds has a license. On June 1, Ibama and federal prosecutors filed suit against 21 cattle ranches, accusing them of illegally deforesting 150,000 hectares of rain forest.

Stopped Buying Beef

Prosecutors say that meatpacker Bertin sold beef from cattle that had been raised on illegal ranches to 41 of its customers --including Carrefour and Wal-Mart. Prosecutors sent a letter to all Bertin customers recommending they stop buying meat that comes from deforested land.

By June 19, Carrefour, Wal-Mart and 33 other buyers had told Azeredo that they had stopped buying from Bertin and other meatpackers named in the lawsuit.

Bertin says it stopped buying from 14 ranches named in the suit and signed an agreement with prosecutors to develop tighter controls to ensure cattle suppliers follow the law.

"We've suspended cattle purchases from deforested ranches and will help ranchers stop deforesting the Amazon and replant areas that have been devastated," Bertin spokeswoman Simone Soares says.

'A Matter of Cost'

Bentonville, Arkansas-based Wal-Mart says it wants to buy only beef raised on ranches that follow the law. The company had suspected that ranchers were destroying the Amazon, says Daniela De Fiori, Wal-Mart's vice president for sustainability in Brazil.

"The truth is, Brazil's retail sectors rely on these companies," De Fiori says. "And it's a matter of cost."

On July 17, Wal-Mart launched a global initiative to urge all of its suppliers to assess and label the environmental impact of all their products, going back to the source of raw materials.

Spokespeople for Carrefour, Heinz, Kraft and car companies Ford, GM and Mercedes say they have policies against buying products from deforested land and requiring suppliers to assure them they follow the law.

Leather producer Eagle Ottawa, which is a unit of Whitehall, Michigan-based Everett Smith Group Ltd., says it's satisfied with Bertin's agreement with prosecutors to stop buying from illegally deforested ranches.

Shrinking Amazon

In Juruti, where Alcoa has its bauxite mine, the jungle is dotted with mahogany, Brazil nut trees and marble-textured angelin-pedra trees. These hardwoods can grow to almost 50 meters.

Under the thick canopy of that timber are giant ferns and palms. This Amazonian vegetation, which has long absorbed the world's carbon dioxide, is now shrinking at a rate of 163 square kilometers a week, exacerbating the global warming that threatens to wreak havoc worldwide.

Lima, Alcoa's community relations manager, a heavyset man with thinning hair, drives a pickup truck on the freshly cleared land for the mine. The rain forest gives way to a 700- meter-wide muddy pit that steams in the sun after a cloudburst.

Jungle topsoil and clay have been stripped away, exposing bauxite 15 meters down. Dump trucks are lined up, waiting for work to begin.

Lima points to the pit, saying that beginning in late August, excavators will fill trucks with 90-ton hauls of bauxite once mining starts. Bulldozers will move ahead, clearing the rain forest to make way for heavy machinery to advance in a mining trench 50 meters wide.

Train Sits Empty

In a clearing a few kilometers away, conveyor belts lead to a tower where clay and other waste material will be washed from the ore. Not far from the pit, a train sits empty, ready to be loaded with bauxite.

Alcoa has already torn down 900 hectares of rain forest, Lima says. Within 30 years, the mine will consume more than 10 times that much jungle, according to the company.

Bentes and his family show where Alcoa workers strip the rain forest.

"We don't know many things, and we are very simple people," Bentes says, adding that he does understand the value of economic development in Brazil. "But they should find a way to do that without destroying the rain forest," he says. "That is not right."

'High Risk, High Reward' - the Sarah Palin Gamble

.....

John McCain Was Looking for a Way to Shake Up His Campaign. He Took a Surprising Gamble on a Relative Unknown.

 
Dan Balz and Haynes Johnson
August 3, 2009 - Washington Post

Adapted from the book "The Battle for America 2008: The Story of an Extraordinary Election"

.....

A black car pulled up next to the stairs of a Learjet parked at the executive terminal at Ted Stevens Anchorage International Airport. Inside was Alaska Gov. Sarah Palin, driven by her husband, Todd. It was shortly before 1 p.m. on Wednesday, Aug. 27, 2008, and Palin had just finished an appearance in town. She told Todd goodbye and, along with aide Kris Perry, boarded the plane quickly, lest anyone notice her leaving. In minutes she was airborne. All arrangements had been handled in strict confidence.

Twenty minutes into the flight, she was handed a phone-book-sized packet of materials by Davis White, John McCain's director of advance, who had slipped into Alaska late Monday night to oversee the secret journey. The packet contained her reading for the long flight south: McCain's speeches, a schedule and other background on the campaign. White explained two possible outcomes. They would fly to Boeing Field in Seattle to refuel, and then on to Flagstaff, Ariz. She would meet with McCain on Thursday morning. If all went well, she would become his vice presidential running mate and not see Alaska for many days. If not, she faced a quick trip home and a return to relative obscurity.

What happened next is the extraordinary tale of how a campaign desperate to shake up the race took a huge gamble that would dog McCain until Election Day.

In conservative circles, Palin had begun to develop a following, but she still remained a dark-horse candidate whose inexperience made her a risky choice for the Republican ticket. She had been in office less than 20 months and though popular at home had remained out of the national debates. But as her plane headed to Arizona, she now had the inside track to win the job of McCain's running mate.

McCain believed he needed someone dramatic to transform the presidential race. Though he had knocked Barack Obama back in early August with ads featuring Britney Spears and Paris Hilton that belittled his celebrity appeal, everyone around McCain knew that was merely a summertime diversion, a tactical exercise that quickly would be overwhelmed by Obama's convention. The McCain team may have mocked Obama's Greek temple setting in Denver, but it needed a real strategy, propelled by a bold choice for vice president, to preserve any hope of winning in November.

As McCain approached his convention, his advisers saw the challenges as overwhelming -- and contradictory. First, he needed to distance himself decisively from the president. Second, he needed to cut into Obama's advantage among female voters. Despite the bitterness of the primaries and some of the mutinous talk among Hillary Rodham Clinton's most vocal holdouts, the polls showed Obama consolidating most of the Clinton vote. By midsummer, this had become an acute problem for McCain. Third, he needed to energize the lethargic Republican base. While polling showed McCain now winning roughly the same level of support among Republicans as Obama was receiving among Democrats, McCain enjoyed little enthusiasm among conservatives. They might turn out to vote for him -- might -- but would they staff local offices, make phone calls, knock on doors, contribute money, and rally friends and neighbors as they had done for President Bush four years earlier? Fourth,
and perhaps most important, McCain had to regain the one advantage he had always counted on: his identity as a reformer. As senior adviser Steve Schmidt put it, "We had to get that reform mojo back."

Obama had gone the safe route in his selection of Joe Biden, a do-no-harm pick that followed the classic vice presidential manual. McCain did not have such a luxury -- or so argued some of his closest advisers. Schmidt and campaign manager Rick Davis believed McCain's only hope of winning was to make an out-of-the-box choice. If we pick a traditional candidate and run a really good race, Schmidt told top adviser Mark Salter late one night, we still lose.

Palin arrived in Flagstaff after dark. Christian Ferry, McCain's deputy campaign manager, met the plane and drove the group to the home of Robert Delgado, the CEO of Hensley & Co., the large beer distributorship started by Cindy McCain's father. Though it was late, Palin still had a long night ahead of her. Waiting there to see her were Schmidt and Salter. Waiting back in Washington to talk to her by telephone was A.B. Culvahouse, a White House counsel under Ronald Reagan who was in charge of the vetting process and needed to conduct the all-important personal interview. Waiting in Sedona to receive her the next morning was McCain. McCain's team now had barely 12 hours to complete the vetting process, take a face-to-face measure of their leading candidate, decide whether McCain and Palin had the chemistry to coexist as a ticket, and make a judgment about whether she was ready for the rigors of a national campaign.

* * *

McCain's search for a running mate had started in the spring with about two dozen names. Palin was not a serious candidate. One person said she wasn't even on the initial list; others said she was -- barely. It was only later in the summer, when the campaign team became alarmed at the size of Obama's lead among women, that she was added to the list of genuine contenders. "Toward the end of the process, in July, we started taking a look at, like okay, who are we missing? Let's take a sharper look at women candidates and try that one more time," Davis said. "That's when Palin came on." Palin, he added, "stood out significantly from the rest of that list."

Eventually, McCain narrowed his choices to six finalists. In addition to Palin, they were independent-Democratic Senator Joseph Lieberman, McCain's former rival Mitt Romney, Minnesota Gov. Tim Pawlenty, New York Mayor Michael Bloomberg and Florida Gov. Charlie Crist. Louisiana Gov. Bobby Jindal might have been a finalist had he not taken himself out of contention.

Until days before McCain's deadline, Lieberman appeared to be in the lead, although one top official later said it was never as clear-cut as that. "If you characterize this as yes or no on Lieberman and then someone else [became the top contender], that's not it at all," he said. "Was he the romantic pick? Yes."

Certainly none of the others had the kind of relationship with McCain that Lieberman did. The Connecticut senator ran for vice president with Al Gore in 2000, but broke with his party over the war in Iraq. In August 2006, he lost his primary election to antiwar businessman Ned Lamont, who attracted enthusiastic support from liberal bloggers furious about Lieberman's support of Bush's war policies. Defeated, Lieberman ran as an independent and was reelected. McCain and Lieberman shared almost identical views on the war. If anything, McCain was a more vocal critic of Bush's policies, but both strongly opposed withdrawal timetables and believed victory could be achieved. They were steadfast in their views when public opinion about the war was running strongly in the other direction.

Lieberman traveled regularly with McCain, who loved him. He admired Lieberman's probity, enjoyed his corny Borscht Belt humor and most of all trusted his judgment. They differed on many aspects of domestic policy, but they saw a dangerous world through the same prism.

Advisers thought picking Lieberman would alter the race, particularly if coupled with the move McCain was seriously considering: a pledge to serve just one term. Virtually all his top advisers favored the idea. Such a pledge had long been talked about inside the campaign. At the time of McCain's announcement in April 2007, the draft of his speech included a statement that he would serve only four years. But Davis strongly opposed the idea, and McCain was dubious, believing that it would unnecessarily limit his power. The pledge was removed less than 24 hours before the speech, according to two advisers, but resurfaced as part of plans for a possible McCain-Lieberman ticket.

The appeal of picking Lieberman was that it would send a powerful signal that a McCain administration would represent an attempt to break out of partisan politics in Washington, that as president he would actively seek to build a governing consensus at the center of the electorate. The one-term pledge would add an exclamation point to this message, allowing McCain to argue that his administration would have but one goal: to clean up a toxic political system in Washington and take on the most intractable issues that had resisted solution without having to worry about how it might affect his reelection. By now, even Davis had softened in his opposition.

"My opposition to it in the primary was that it really was a cheap way to try to win the primary," he later said. "It wasn't worth making that sacrifice for a primary win. . . . That being said, I understood the need for a device like that if you were going to sell Lieberman, because Lieberman was going to be a hard sell."

Both Davis and Culvahouse raised the one-term pledge directly with Lieberman. "My answer to both of them was, 'Hey, guys, I didn't expect to be considered for vice president at all,' " Lieberman told us. "I still think it's a long shot, so you're asking if it happens would I agree to do it for only four years, that's an easy question. Of course I would." Even McCain had come around, according to his most senior advisers. "There would have to be a one-term pledge," one said. "McCain knew that."

McCain's team also knew there would be conservative opposition to Lieberman because of his views in support of abortion rights and gay rights. It developed a plan to reach out to delegates before the convention, with Charlie Black dispatched to St. Paul, Minn., early for that purpose. As late as the third week of August, the vetting operation was still working hard to finish Lieberman's background checks, questionnaire and personal interview with Culvahouse. Lieberman joked to Culvahouse that the questionnaire was so personally intrusive that the only thing he had not been asked was "whether I had had sexual relations with an animal." (Culvahouse's team found one potentially serious problem with picking Lieberman. Laws in some states prohibited a candidate from running for office from one party or another unless he had been registered with that party for a specified period of time. No one really wanted another Bush v. Gore to sully the 2008 election.)

Ironically, Sen. Lindsey Graham, one of Lieberman's main advocates, hurt Lieberman's chances by talking openly about his possible selection, allowing conservative opposition to intensify. "Lindsey was out talking to people before he should have and the story got ahead of us," one McCain adviser said.

McCain's team had circled the three days between the Democratic and Republican conventions as the time to announce its vice presidential choice and scheduled big rallies on all three days to give McCain flexibility to make his decision. But they preferred Friday, Aug. 29, the day after the Democratic convention, as the best way to stop Obama's momentum.

On Sunday morning, Aug. 24, McCain's senior staff members met at the Ritz-Carlton in Phoenix to review their options. The group included Rick Davis, Schmidt, Charlie Black, pollster Bill McInturff, media adviser Fred Davis, and senior adviser Greg Strimple, although only Rick Davis, Schmidt and Black had been privy to the details of the selection process. During the meeting, McInturff went through the results of his latest polling and analysis. He argued that McCain's position had improved since early July, particularly in battleground states. But much work remained.

McCain needed to reinforce his maverick label; a Republican would have trouble winning in November but a maverick McCain might be able to. Given the political climate, McCain would need an unconventional and unorthodox campaign and message.

But McInturff raised serious questions about picking Lieberman, or anyone who favored abortion rights, as a vice presidential running mate. That included Mayor Bloomberg and former Pennsylvania governor Tom Ridge. Days earlier, McInturff tested abortion-rights attitudes in a poll. Forty percent of McCain's core supporters said they would be less likely to support him if he selected a running mate who backed abortion rights.

McInturff sketched out a possible doomsday scenario. First, he said, there was no way anyone could predict or control how the selection of a running mate who supported abortion rights would be covered by the media. Would the story line be "McCain the maverick" -- as everyone hoped -- or would it be "McCain shatters the Republican coalition"? Second, he asked, had anyone read the rules of the convention? Majorities of just four state delegations could force a roll call on the vice presidential nomination. Picking a running mate like Lieberman virtually guaranteed a divisive floor fight over abortion. While McCain might be able to impose his choice in St. Paul, the damage would be too costly. The story in September would be about a divided Republican Party, not about McCain's position on the economy or the war or his criticisms of Obama. Others in the campaign later said McInturff's analysis ended any realistic chance of Lieberman becoming vice president,
although one senior official said McCain had not totally ruled out Lieberman even at that point.

The group briefed McCain that afternoon. McInturff shared his findings and repeated his assessment of what could happen in St. Paul. McCain listened, but "John was very inscrutable," one person who attended the meeting recalled. "He was in his quiet, subdued, shoulder-hunched listening mode. . . . We said to each other after the meeting, 'From that conversation, we have no clue.' "

At that point, there seemed to be only two realistic finalists: Pawlenty and Palin, although media speculation focused mostly on Pawlenty and Romney. Romney's star had risen over the summer. He was not a Washington insider and could talk about the economy in ways McCain could not. Furthermore, his relationship with McCain had warmed considerably since the primaries. McCain was impressed by how hard Romney was willing to work to get him elected. Romney's prospects may have ended after a McCain gaffe the previous week. In an interview with Politico, the candidate said he couldn't remember how many homes he and Cindy owned, making him sound badly out of touch with the lives of ordinary Americans. Romney owned four homes. Amid such economic hardship, Republicans could not present voters with nominees who between them owned nearly a dozen homes.

Pawlenty was young and vigorous, a conservative who had grown up in a blue-collar family -- his father was a truck driver -- and he was anti-abortion. He had won reelection in the Democratic year of 2006 and was seen as a future leader of the GOP, an advocate of modernizing the party without abandoning its conservative principles. Though not particularly flashy, he was seen as a more than credible choice, a running mate who might keep the Upper Midwest competitive. He was the safe choice if Palin faltered.

That Sunday night, Rick Davis and Schmidt went alone to see McCain at his apartment in Phoenix. They urged him to take a hard look at Palin. Davis had been talking with her regularly all through August as part of a confidential plan designed to keep secret the fact that she was even under serious consideration. That weekend, Davis checked with Culvahouse to ask if he could complete a thorough vetting of Palin in the short time remaining. Culvahouse said he could. With that reassurance, McCain called Palin, who was at the Alaska State Fair, and invited her to come to Arizona to meet with him.

* * *

By the time Palin arrived at Delgado's house on Wednesday night, Culvahouse's team members already knew much about her. They had scoured the public record. They had looked closely at an investigation that came to be known as "Troopergate." The investigation centered on whether Palin had pressured and then fired the state public safety commissioner, Walter Monegan, after he refused to fire her former brother-in-law, who was in a divorce and child-custody fight with her younger sister. Culvahouse's team examined Palin's tax returns and other financial records. Nothing appeared amiss. A small blemish did turn up: Palin had once been fined for fishing without a valid license.

Culvahouse did not send Palin the lengthy questionnaire that all finalists were asked to complete until McCain invited her to Arizona. The survey ran to 70 questions. Some were highly intrusive, the kind once saved for a personal interview: Did you ever fail to pay taxes for household help? Have you ever filed for bankruptcy? Have you undergone treatment for drug or alcohol abuse? Have you ever downloaded porn from the Internet? Have you ever paid for sex? Have you ever been unfaithful?

Palin's questionnaire turned up one new piece of information: Her husband had once been arrested for driving while intoxicated. The survey also asked if there was anything particularly sensitive that a prospective candidate preferred to discuss verbally. Palin indicated there was.

At the Delgado house, Palin spoke with Culvahouse. It was now well after 10 p.m. Phoenix time, and their interview lasted between 90 minutes and three hours. She was direct and cooperative, according to officials privy to the conversation, and revealed that her unmarried teenage daughter Bristol was pregnant. When Culvahouse finished, he gave Rick Davis a readout of the conversation.

In the days after her selection, Palin's vetting became a major question, with top officials insisting that nothing of significance had surfaced after her selection. Although they didn't learn of her daughter's pregnancy until she was about to meet McCain, they agreed that it should not be disqualifying. The appearance of haste in choosing her fueled speculation that McCain had acted impulsively. But if there was a breakdown, it appears not to have been in the review but rather in a decision made without a deeper understanding of whether Palin would be judged ready to sit a heartbeat away from the presidency. As one person close to the campaign put it, Palin may have received a thorough legal vetting, but what she didn't receive was a thorough political vetting. Those closest to the decision said that in the weeks before the choice they discussed with McCain the pros and cons of picking Palin as much as they talked about other finalists. They believed
the potential reward outweighed the risk.

While Palin talked with Culvahouse, Schmidt and Salter waited impatiently. They approached the decision from different perspectives. Schmidt was more committed. Like Davis, he believed she was the best remaining chance to change the dynamic of the campaign. One of his business partners worked in Alaska; through those contacts, he had become aware of Palin. He checked her with people he knew, and the reviews were positive. She represented a risk, but one Schmidt believed worth taking. Salter was more skeptical, but he was open to the possibility. And he was utterly loyal to McCain.

The two advisers spent an hour or more with Palin, impressing on her the degree to which her life would be turned upside down. Nothing she had ever experienced would prepare her for the scrutiny, the intensity and the outright brutality of a presidential campaign. Schmidt did most of the talking. You're going to be very far from home, he told her. You will have executive and constitutional duties in Alaska, but short of an emergency in the state, you're not likely to be going back. This is incredibly demanding and rigorous. Your advisers and people with opinions back in Alaska will not have a seat at the table. Your job in this race, should this project go forward, is to perform at your highest level of ability every day.

Palin, unruffled and self-confident, said she got it. Salter asked her about her statements in support of creationism. Did she disbelieve the theory of evolution? "No," she told them. "My father's a science teacher." Salter later told journalist and author Robert Draper how "tough-minded and self-assured" Palin was that night.

Early Thursday morning, the group set off for Sedona. The campaign had taken every precaution to preserve secrecy about Palin. The next challenge was getting her to Sedona without being recognized. Christian Ferry bought sun shields to cover the windows of the SUV. The advance team asked the Secret Service to withdraw to an outer perimeter around McCain's compound. The group arrived without incident about 8:30 a.m. McCain greeted Palin, offered her coffee, and then took her down to a bend in the creek where he often liked to sit and watch a hawk's nest in the tree above.

While Palin was being driven to Sedona, McCain spoke to Culvahouse by telephone about the previous night's interview. Culvahouse gave a positive report. She had knocked some of the broader questions out of the park, he told McCain. She would not necessarily be ready on Jan. 20, 2009, to be vice president, but in his estimation few candidates ever are. Culvahouse believed she had a lot of capacity. "What's your bottom line?" McCain asked. Culvahouse later told an audience that he responded, "John, high risk, high reward."

He said McCain then replied, "You shouldn't have told me that. I've been a risk-taker all of my life."

* * *

The previous February, McCain had met Palin in Washington when he hosted several governors attending a National Governors Association meeting. She had impressed him during a discussion of energy policy. Palin also was at a reception McCain hosted for all Republican governors and they spent a few more minutes talking that night.

Now they talked for about an hour down by the creek and were joined toward the end by Cindy McCain. That was the extent of McCain's personal interview with the woman he was about to thrust into the national spotlight. When they finished their conversation, McCain took a short walk with Cindy. He then huddled with Schmidt and Salter, who by prior arrangement argued the case for and against her. Schmidt restated his case: McCain needed to scramble the race; Palin's profile would reestablish his reform image; Pawlenty was credible and acceptable, but once the convention was over he would disappear. Salter argued that Palin was untested nationally and a high risk. He also said that, for all the talk about "country first" in his campaign, McCain could be accused of making a political choice designed only to help him win the election, not enhance his ability to govern. Pawlenty, he argued, was solid, had an attractive biography, and could talk to both the
Republican base and swing voters.

Their conversation over, McCain returned to the deck of his cabin and offered Palin the job. After pictures were taken, McCain and Cindy left. He would see his running mate again the next morning in Dayton, Ohio.

Advisers later said that the decision was McCain's, that he was in no way forced to take Palin against his better judgment. What persuaded him? In part he believed that, in Palin, he had found a fellow reformer who would help him transform the special interest-dominated culture of Washington. But there was more to it than that, as Rick Davis later explained. "I think he realized that everything that was an indicator of success in the campaign was pointing down for us," he said. That included the economy, the country's pessimistic mood, the president's unpopularity, and McCain's belief that the media were in Obama's corner. "When you looked at everyone else, they all were good, solid selections in their own right, but who was really going to help us try and push back all these signals that said we were going to lose? Sixty days wasn't enough time to crawl our way back into the election."

Nor did McCain's advisers worry about seeming to give away the experience argument he had been using all summer against Obama; they did not believe that alone could win it for McCain, any more than it had for Clinton. "We couldn't win with experience," Davis said. "McInturff, when he came back on payroll, said experience will get you to 47 [percent]. Well, good luck."

If that were true, however, they had wasted weeks making the case. It was an example of the campaign's inability to settle on a message, emblematic of larger disorganization.

After the McCains departed, Palin and the others waited until they were certain that no reporters remained in the area, then she was driven back to Flagstaff for the flight to Ohio. En route, her plane touched down in Amarillo, Tex., to refuel -- and to refile the flight plan to make tracking the aircraft more difficult for reporters trying to learn the name of McCain's running mate.

McCain's team was determined not to let the choice leak that night, partly out of deference to Obama, who was to give his acceptance speech in Denver. McCain did not want to be accused of sabotaging that event. But his team also wanted the element of surprise to dramatize the choice. The goal was to keep Palin under wraps until the moment she stepped onto the stage in Dayton.

Earlier in the week, the campaign had put in motion a stealthy plan designed to get Palin and her family to Ohio without anyone knowing. Davis White had called Tom Yeilding, a close friend in Alabama who had once done advance work for Vice President Dick Cheney. "I need you to get on a flight to Cincinnati today," White told him. Yeilding, who worked for a company called CraneWorks, protested, saying he was on a construction site. "You're the only one who can do this," White implored him. Yeilding walked off the site and headed for Ohio. His role, as White later put it, was to "catch the package" there on Thursday night. The plan called for Palin and the others to stay at the Manchester Inn in Middletown, 30 miles south of Dayton. Yeilding made reservations for them under the name of the Uptons (Yeilding's bosses). The cover story for airport workers, who might wonder why jets were arriving from Arizona and Anchorage, was that they were part of a family
fishing trip in Alaska. Meanwhile, Schmidt had sent his colleague Jonathan Berrier to Alaska to assist in getting Palin's family to Ohio.

Palin arrived early in the evening and was taken to her hotel. Next to arrive were Nicolle Wallace, a former White House communications director who served as spokeswoman for McCain, and Matthew Scully, a former Bush White House speechwriter who would be writing Palin's speech. Schmidt led them to room 508. "I'm about to introduce you to our nominee," he said. No BlackBerry communications, no calls to family.

When they walked in and saw Palin, they were astonished. Wallace remembers Palin that night as "super mellow . . . really calm."

Davis White drove to Dayton at midnight to check out the event site. He found one problem: The lectern was set up for a tall person -- the assumption among the advance team was that Romney was the choice. "When I told them to lower it for someone who was 5-7, they thought it was Bloomberg," White said.

The secret held until morning and then exploded across the country, provoking a sense of disbelief. McCain called Lieberman, who was vacationing on Long Island, to give him the news before it was confirmed publicly. Lieberman was stunned. "I said, 'No kidding!' " he told us. "I was surprised. I said, 'Gee, I don't know much about her.' "

Palin's selection created a frenzy. Reporters scrambled to confirm the choice, then to explain who she was and why she was picked. Few people knew anything about her background or record, including those in the McCain campaign now charged with helping to introduce her to the country. Scully -- who thought McCain had made a bold choice -- had spent part of the night on the Internet gathering information about Palin to include in her speech.

At McCain headquarters in Virginia, the communications team was caught off guard. No one had given members the advance word that they needed to prepare background material. Inundated by media calls trying to confirm the choice, they were helpless, some of them not sure how to pronounce her name. One staffer was frantically trying to download information about Palin when the overloaded Alaska state government Web site crashed. Unable to get answers to basic questions, the campaign gave out inaccurate information, telling one news organization she had been to Iraq when she had only been near the border on a visit to Kuwait. "It was horrific," one campaign official said. "It was a disaster. It was a huge disaster."

Conventional wisdom gyrated wildly in those opening days. Republicans in St. Paul were ecstatic about their new vice presidential candidate, but each day brought new questions or rumors about her. Not all of them were accurate, but enough were to keep alive questions about McCain's judgment.

"Sarah who?" had been replaced by "Who is Sarah?"

"What was John McCain thinking?" had been replaced by "What did John McCain know?"