Corporate Corruption News Stories

Excerpts of Key Corporate Corruption News Stories in Major Media

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Executives and employees at the major credit ratings agencies were often aware of problems in the AAA grades awarded to thousands of mortgage-related securities whose downgrades helped plunge the nation into a financial meltdown. The companies — Standard & Poor, Moody’s and Fitch, Inc. — made enormous profits as they evaluated a ballooning number of mortgage-backed bonds, many of which were given top marks as long as housing prices went up. “The story of the credit rating agencies is a story of colossal failure,” said Rep. Henry Waxman, chairman of the House Oversight and Government Reform Committee. The California Democrat said, “Millions of investors rely on them for independent, objective assessments. The rating agencies broke this bond of trust, and federal regulators ignored the warning signs and did nothing to protect the public. The result is that our entire financial system is now at risk.” The companies are important because their high assessments assured investors that their money should be safe. The inflated ratings awarded to securities backed up by subprime loans led investors to buy them in enormous numbers. But now, most of these securities have been downgraded and the market for them has largely evaporated, contributing to the current crisis. The panel also heard former ratings agency executives say there’s an inherent conflict of interest in the industry because they’re paid by bond issuers instead of investors who trust their ratings to make smart investments.

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Sorry to pop your bubble folks, but it no longer matters who's president. Why? The real "game changer" already happened. Democracy has been replaced by Wall Street's new "disaster capitalism." That's the big game-changer historians will remember about 2008, masterminded by Wall Street's ultimate "Trojan Horse," Hank Paulson. Congress simply handed over voting power and the keys to trillions in the Treasury to Wall Street's new "Disaster Capitalists" who now control "democracy." We let it happen. In one generation America has been transformed from a democracy into a strange new form of government, "Disaster Capitalism." Three decades of influence peddling in Washington ... accelerated under Reaganomics and went into hyperspeed under Bushonomics, both totally committed to a new disaster capitalism run privately by Wall Street and Corporate America. No-bid contracts in wars and hurricanes. A housing-credit bubble -- while secretly planning for a meltdown. Finally, the coup de grace: Along came the housing-credit crisis, as planned. Press and public saw a negative, a crisis. Disaster capitalists saw a huge opportunity. Yes, opportunity for big bucks and control of America. This end game was planned for years in secret war rooms on Wall Street, in Corporate America, in Washington and the Forbes 400. Naomi Klein summarizes the game in Shock Doctrine: the Rise of Disaster Capitalism. This "new economy" generates enormous profits feeding off other peoples' misery: Wars, terror attacks, natural catastrophes, poverty, trade sanctions, subprime housing meltdowns and all kinds of economic, financial and political disasters.

Note: The author of this highly critical commentary, Paul B. Farrell, is a well-known writer on finance and investment and a long-time columnist at The Wall Street Journal's sister-site MarketWatch.

Battered by outrage over the $440,000 it spent on a luxury retreat less than a week after the federal government loaned it $85 billion dollars, the giant AIG Insurance Company says it has called off plans to hold a second retreat next week at the exclusive Ritz-Carlton Resort in Half Moon Bay, California. The Ritz-Carlton outing, like the earlier one, was to reward top independent insurance agents, which the company called a "standard industry practice." "I am somewhat relieved to hear that AIG has canceled their Ritz-Carlton conference, which was nothing less than a slap in the face of the American people," said Rep. Elijah Cummings (D-MD). "I cannot fathom how in the same day -- the very same day -- that AIG asked the government for another $37.8 billion loan, the company would even consider moving forward with plans to host another large conference at another luxury resort." Critics ... have denounced AIG for holding an expensive retreat at a time of economic crisis. The criticism has been "demoralizing" within AIG said Nicholas Ashooh, a spokesperson for AIG, "but we have to recognize that we're in a different environment and we have to adjust to that." AIG says it has instructed its worldwide managers to re-scrutinize how money is being spent. "We're certainly reviewing all our expenditures in light of financial circumstances and the fact that taxpayer dollars are helping to support AIG as we get through this difficult credit crisis," said Ashooh.

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An outraged sheriff in Illinois who refuses to evict ... renters from foreclosed homes criticized mortgage companies ... and said the law should protect victims of the mortgage meltdown. Sheriff Thomas J. Dart said earlier he is suspending foreclosure evictions in Cook County, which includes the city of Chicago. The county had been on track to reach a record number of evictions, many because of mortgage foreclosures. "Many good tenants are suffering because building owners have fallen behind on their mortgage payments," he said Thursday on CNN's "American Morning." "These poor people are seeing everything they own put out on the street. ... They've paid their bills, paid them on time. Here we are with a battering ram at the front door going to throw them out. It's gotten insane," he said. Mortgage companies are supposed to identify a building's occupants before asking for an eviction, but sheriff's deputies routinely find that the mortgage companies have not done so, Dart said. "This is an example where the banking industry has not done any of the work they should do. It's a piece of paper to them," Dart said. "These mortgage companies ... don't care who's in the building," Dart said. "They simply want their money and don't care who gets hurt along the way. "On top of it all, they want taxpayers to fund their investigative work for them. We're not going to do their jobs for them anymore. We're just not going to evict innocent tenants. It stops today. When you're blindly sending me out to houses where I'm coming across innocent tenant after innocent tenant, I can't keep doing this and have a good conscience about it."

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Michael Cantrell, an engineer at the Army Space and Missile Defense Command headquarters in Huntsville, Ala., along with his deputy, Doug Ennis, had lined up millions of dollars from Congress for defense companies. Mr. Cantrell decided it was time to take a cut. Within months, [he] began getting personal checks from contractors and later [picked] up a briefcase stuffed with $75,000. The two men eventually collected more than $1.6 million in kickbacks, through 2007, [causing] them to plead guilty this year to corruption charges. But what has drawn little scrutiny are [Cantrell's] activities leading up to it. Thanks to important allies in Congress, he extracted nearly $350 million for projects the Pentagon did not want, wasting taxpayer money on what would become dead-end ventures. He often bypassed his bosses and broke department rules to make his case on Capitol Hill. He enlisted contractors to pitch projects that would keep the dollars flowing and paid lobbyists to ease them through. He cultivated lawmakers, who were eager to send money back home or to favored contractors and did not ask many questions. And when he ran into trouble, he could count on his powerful friends for protection from Pentagon officials who provided little oversight and were afraid of alienating lawmakers. “I could go over to the Hill and put pressure on people above me and get something done,” Mr. Cantrell explained. “With the Army, as long as the senator is not calling over and complaining, everything is O.K. And the senator will not call over and complain unless the contractor you’re working with does not get his money. So you just have to keep the players happy and it works.”

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Once upon a time, a politician took campaign contributions and favors from a friendly constituent who happened to run a savings and loan association. The contributions were generous: They came to about $200,000 in today's dollars, and on top of that there were several free vacations for the politician and his family, along with private jet trips and other perks. The politician voted repeatedly against congressional efforts to tighten regulation of S&Ls, and in 1987, when he learned that his constituent's S&L was the target of a federal investigation, he met with regulators in an effort to get them to back off. That politician was John McCain, and his generous friend was Charles Keating, head of Lincoln Savings & Loan. While he was courting McCain and other senators and urging them to oppose tougher regulation of S&Ls, Keating was also investing his depositors' federally insured savings in risky ventures. In 1989, [Lincoln] went belly up -- and more than 20,000 Lincoln customers saw their savings vanish. Keating went to prison, and McCain's Senate career almost ended. Together with the rest of the so-called Keating Five ... McCain was investigated by the Senate Ethics Committee and ultimately reprimanded for "poor judgment." But the savings and loan crisis mushroomed. Eventually, the government spent about $125 billion in taxpayer dollars to bail out hundreds of failed S&Ls. The $125 billion seems like small change compared to the $700-billion price tag for the Bush administration's proposed Wall Street bailout. But the root causes of both crises are the same: a lethal mix of deregulation and greed.

Less than a week after the federal government committed $85 billion to bail out AIG, executives of the giant AIG insurance company headed for a week-long retreat at a luxury resort and spa, the St. Regis Resort in Monarch Beach, California, Congressional investigators revealed today. "Rooms at this resort can cost over $1,000 a night," Congressman Henry Waxman (D-CA) said. AIG documents obtained by Waxman's investigators show the company paid more than $440,000 for the retreat, including nearly $200,000 for rooms, $150,000 for meals and $23,000 in spa charges. "They're getting their pedicures and their manicures and the American people are paying for that," said Cong. Elijah Cummings (D-MD). Appearing before the committee, Martin Sullivan, the AIG CEO until June, said the company was overwhelmed by a "financial global tsunami," and that "no simple or single cause" was to blame. "I am heartbroken at what has happened," Sullivan said. Robert Willumstad, the CEO from June to September, 2008, maintained AIG was a victim of a "crisis in confidence" and an "unprecedented global catastrophe." But Congressional investigators raised questions of "mismanagement" and whether AIG executives sought to "cook the books" and hide negative information from outside auditors. Waxman also said there is evidence the two men changed the bonus schedule once the company began to post losses, so that executives under the "Senior Partners Plan" would continue to make multi-million dollar salaries. Sullivan was given a $15 million "golden parachute" payment after being replaced as CEO in June.

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Treasury Secretary Paulson's edict to create a $700 billion fund to buy worthless mortgage securities from agitated wealthy bond investors is nothing short of a final step on the path to the end of the republic. The secretary claims he can only be effective if his decisions are beyond judicial review. Our government and its owners appear to be testing how much the American public will tolerate. A few years ago, no one could have imagined that the silent majority would quietly accept thefts of this magnitude from a government that stopped tiny payments to single mothers with poor children in the name of welfare reform because the program's $10 billion cost was breaking the federal budget. If the public allows this theft, then it will signal to powerful forces that they can essentially do anything, because the American public has become so mushy-headed that it will stand up for nothing. When power discovers that those from whom it would exact payment are powerless, its viciousness increases infinitely. Our enemy has revealed itself, and it is our own government. Because the American public has not been introduced to methods for controlling its government for generations, I will suggest one called a general strike. This fundamental democratic power is where everyone decides to send a message to the government by not going to work, to school, shopping, nowhere. This is the critical time when charlatans among us will promise they can save us from the inevitable if we only allow them the power they need to save us. They are lying.

Note: This article's author Sean Olender is an attorney in San Mateo, California. Mr. Oleander predicted the bailout of Fannie Mae and Freddie Mac months before it happened based on clearly disempowering moves by the government. To see his prescient article on this from Feb. 2008, click here.

The market was 500 trades away from Armageddon on Thursday [September 18], traders inside two large custodial banks tell The Post. Had the Treasury and Fed not quickly stepped into the fray that morning with a quick $105 billion injection of liquidity, the Dow could have collapsed. According to traders, who spoke on the condition of anonymity, money market funds were inundated with $500 billion in sell orders prior to the opening. The Fed's dramatic $105 billion liquidity injection on Thursday (pre-market) was just enough to keep key institutional accounts from following through on the sell orders and starting a stampede of cash that could have brought large tracts of the US economy to a halt. Cracks started to show in money market accounts late Tuesday when shares in one fund, the Reserve Primary Fund - which touted itself as super safe - fell below the golden $1 a share level. By Wednesday, banks sensed a run on their accounts. They started stockpiling cash in anticipation of withdrawals. Banks, which usually keep an average of $2 billion in excess reserves earmarked for withdrawals, pumped that up to an astounding $90 billion, Lou Crandall, chief economist at Wrighton ICAP, told The [Wall Street] Journal. And for good reason. By the close of business on Wednesday, $144.5 billion - a record - had been withdrawn. How much money was taken out of money market funds the prior week? Roughly $7.1 billion, according to AMG Data Services. By Thursday, that level ... had grown to $100 billion.

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Regulators had long classified a private Swiss energy conglomerate called Vitol as a trader that primarily helped industrial firms that needed oil to run their businesses. But when the Commodity Futures Trading Commission examined Vitol's books last month, it found that the firm was in fact more of a speculator, holding oil contracts as a profit-making investment rather than a means of lining up the actual delivery of fuel. Even more surprising to the commodities markets was the massive size of Vitol's portfolio -- at one point in July, the firm held 11 percent of all the oil contracts on the regulated New York Mercantile Exchange. The discovery revealed how an individual financial player had gained enormous sway over the oil market without the knowledge of regulators. Other CFTC data showed that a significant amount of trading activity was concentrated in the hands of just a few speculators. The CFTC ... now reports that financial firms speculating for their clients or for themselves account for about 81 percent of the oil contracts on NYMEX, a far bigger share than had previously been stated by the agency. That figure may rise in coming weeks as the CFTC checks the status of other big traders. Some lawmakers have blamed these firms for the volatility of oil prices, including the tremendous run-up that peaked earlier in the summer. "It is now evident that speculators in the energy futures markets play a much larger role than previously thought, and it is now even harder to accept the agency's laughable assertion that excessive speculation has not contributed to rising energy prices," said Rep. John D. Dingell (D-Mich.).

Just before the Department of Interior's inspector general released reports that laid bare the oil-and-sex scandal in the department's oil royalties office this week, Interior won an annual award from the federal Office of Government Ethics. The inspector general said Wednesday that federal officials in the Mineral Management Service's royalty-in-kind program allegedly were plied with alcohol and expensive gifts from industry representatives, and in some cases had sex and did drugs with them. The Denver-area office takes in roughly $4 billion each year in oil and natural gas reserves from companies drilling on federal and Indian land and offshore. But, on Monday, the Interior Department was praised for "developing a dynamic laminated Ethics Guide for employees" that was a "polished, professional guide" with "colorful pictures and prints which demand employees' attention." The guide, the award noted, was small enough for employees to carry. Interior also was lauded for having held a four-day seminar for its ethics advisors nationwide. It isn't known if those seminars included the royalty office, where investigators found that a former program director was paid more than $30,000 for improper outside work, bought cocaine using a personal check from his office and engaged in an illicit sexual relationship with a subordinate; employees accepted gifts, including sports tickets and vacations, from industry executives; and two former officials, with the help of a supervisor, arranged to get themselves hundreds of thousands of dollars in consulting work after they retired.

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The government wasted millions of dollars on four no-bid contracts it handed out for Hurricane Katrina work, including paying $20 million for a camp for evacuees that was never inspected and proved to be unusable, investigators say. A report by the Homeland Security Department's office of inspector general, obtained ... by The Associated Press is the latest to detail mismanagement in the multibillion-dollar Katrina hurricane recovery effort, which investigators have said wasted at least $1 billion. The review examined temporary housing contracts awarded without competition to Shaw Group Inc., Bechtel Group Inc., CH2M Hill Companies Ltd. and Fluor Corp. in the days immediately before and after the August 2005 storm that smashed into the U.S. Gulf Coast. It found that FEMA wasted at least $45.9 million on the four contracts that together were initially worth $400 million. FEMA subsequently raised the total amounts for the four contracts twice, both times without competition, to $2 billion and then $3 billion. FEMA did not always properly review the invoices submitted by the four companies, exposing taxpayers to significant waste and fraud, investigators wrote. In many cases, the agency also issued open-ended contract instructions for months without clear guidelines on what work was needed to be done and the appropriate charges. "We question how FEMA determined that the amounts invoiced were allowable and reasonable," the IG report states, warning that its review was limited in scope so that additional waste and fraud might yet to be found.

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A Washington law firm filed a lawsuit yesterday against KBR, one of the largest U.S. contractors in Iraq, alleging that the company and its Jordanian subcontractor engaged in the human trafficking of Nepali workers. Agnieszka Fryszman, a partner at Cohen, Milstein, Hausfeld & Toll, said 13 Nepali men, between the ages of 18 and 27, were recruited in Nepal to work as kitchen staff in hotels and restaurants in Amman, Jordan. But once the men arrived in Jordan, their passports were seized and they were told they were being sent to a military facility in Iraq, Fryszman said. As the men were driven in cars to Iraq, they were stopped by insurgents. Twelve were kidnapped and later executed, Fryszman said. The thirteenth man survived and worked in a warehouse in Iraq for 15 months before returning to Nepal. The lawsuit, filed in a federal court in California on behalf of the workers' families and the survivor, claims that the trafficking scheme was engineered by KBR and its Jordanian subcontractor, Daoud & Partners, according to Fryszman. This spring, an administrative law judge at the Department of Labor, which has jurisdiction over cases that involve on the job injuries at overseas military bases, ordered Daoud to pay $1 million to the families of 11 of the victims.

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A former colleague of the US Vice-President, Dick Cheney, has pleaded guilty to funnelling millions of dollars in bribes to win lucrative contracts in Nigeria for Halliburton, during the period in the Nineties when Mr Cheney ran the giant oil and gas services company. Albert Stanley, who was appointed by Mr Cheney as chief executive of Halliburton's subsidiary KBR, admitted using a north London lawyer to channel payments to Nigerian officials as part of a bribery scheme that landed some $6bn of work in the country over a decade. Mr Cheney … led Halliburton from 1995 until returning to government in 2000. He had previously been Defence Secretary under the first President George Bush, and the links with Halliburton have been a constant thorn in the side of the current administration as the company has gone on to win billions of dollars of contracts in Iraq and other US military spheres. The corruption scandal … centres on more than $180m channelled into Nigeria via intermediaries between 1994 … and 2004. Prosecutors allege that the payments were vital to a KBR-led consortium securing a succession of construction projects related to a liquefied natural gas plant at Bonny Island, on the Atlantic coast of Nigeria.

Unlike the rest of us, most U.S. corporations and foreign companies doing business in the United States pay no federal income tax, according to a new report from Congress. The study by the Government Accountability Office ... said two-thirds of U.S. corporations paid no federal income taxes between 1998 and 2005, and about 68 percent of foreign companies doing business in the U.S. avoided corporate taxes over the same period. Collectively, the companies reported trillions of dollars in sales, according to GAO's estimate. "It's shameful that so many corporations make big profits and pay nothing to support our country," said Sen. Byron Dorgan, D-N.D., who asked for the GAO study. The GAO study did not investigate why corporations weren't paying federal income taxes or corporate taxes and it did not identify any corporations by name. More than 38,000 foreign corporations had no tax liability in 2005 and 1.2 million U.S. companies paid no income tax, the GAO said. Combined, the companies had $2.5 trillion in sales. About 25 percent of the U.S. corporations not paying corporate taxes were considered large corporations, meaning they had at least $250 million in assets or $50 million in receipts. The GAO said it analyzed data from the Internal Revenue Service, examining samples of corporate returns for the years 1998 through 2005. For 2005, for example, it reviewed 110,003 tax returns from among more than 1.2 million corporations doing business in the U.S. "It's time for the big corporations to pay their fair share," Dorgan said.

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Sovereign wealth funds, the massive investment pools run by foreign governments, are now among the biggest speculators in the trading of oil and other vital goods like corn and cotton in the United States, according to interviews with brokers who handle their investments at leading Wall Street banks, veteran traders and congressional investigators. Some lawmakers say the unregulated activity of sovereign wealth funds and other speculators such as hedge funds has contributed to the dramatic swing in oil prices in recent months. The agency regulating the market said it had not picked up on this activity by sovereign wealth funds. In a June letter, the Commodity Futures Trading Commission told lawmakers that its monitoring showed that these funds were not a significant factor in commodity trading. But the CFTC is not detecting the growing influence of foreign funds because they invest through Wall Street brokers known as "swap dealers" who often operate on unregulated markets. For this reason, the extent of their activities may be known only to the swap dealers at investment banks such as Goldman Sachs, Lehman Brothers and Morgan Stanley, which handle such transactions. The foreign funds involved in commodity trading are ... mainly from countries ... in Asia that do not already make money from producing oil. While it is difficult to quantify how large foreign funds have become, they now represent 12 percent or more of the overall commodity business for some of the largest investment banks, said an industry veteran who spoke on condition of anonymity.

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Several Internet and broadband companies have acknowledged using targeted-advertising technology without explicitly informing customers, according to letters released yesterday by the House Energy and Commerce Committee. The revelations came in response to a bipartisan inquiry of how more than 30 Internet companies might have gathered data to target customers. Some privacy advocates and lawmakers said the disclosures help build a case for an overarching online-privacy law. "Increasingly, there are no limits technologically as to what a company can do in terms of collecting information . . . and then selling it as a commodity to other providers," said committee member Edward J. Markey (D-Mass.). "Our responsibility is to make sure that we create a law that, regardless of the technology, includes a set of legal guarantees that consumers have with respect to their information." Markey said he and his colleagues plan to introduce legislation next year, a sort of online-privacy Bill of Rights, that would require that consumers must opt in to the tracking of their online behavior and the collection and sharing of their personal data. Ari Schwartz, vice president of the Center for Democracy and Technology, said lawmakers are beginning to understand the convergence across platforms. "People are starting to see: 'Oh, we have these different industries that are collecting the same types of information to profile individuals and the devices they use on the network," he said. "Internet. Cellphones. Cable. Any way you tap into the network, concerns are raised."

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The United States this year will have spent [at least] $100 billion on contractors in Iraq since the invasion in 2003, a milestone that reflects the Bush administration’s unprecedented level of dependence on private firms for help in the war, according to a government report to be released [on August 12]. The report, by the Congressional Budget Office ... will say that one out of every five dollars spent on the war in Iraq has gone to contractors for the United States military and other government agencies. The Pentagon’s reliance on outside contractors in Iraq is proportionately far larger than in any previous conflict, and it has fueled charges that this outsourcing has led to overbilling, fraud and shoddy and unsafe work that has endangered and even killed American troops. The role of armed security contractors has also raised new legal and political questions about whether the United States has become too dependent on private armed forces on the 21st-century battlefield. The budget office’s report found that from 2003 to 2007, the government awarded contracts in Iraq worth about $85 billion, and that the administration was now awarding contracts at a rate of $15 billion to $20 billion a year. At that pace, contracting costs will surge past the $100 billion mark before the end of the year. Through 2007, spending on outside contractors accounted for 20 percent of the total costs of the war, the budget office found. The dependence on private companies to support the war effort has led to questions about whether political favoritism has played a role in the awarding of multibillion-dollar contracts.

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Health and life insurance companies have access to a powerful new tool for evaluating whether to cover individual consumers: a health "credit report" drawn from databases containing prescription drug records on more than 200 million Americans. Collecting and analyzing personal health information in commercial databases is a fledgling industry, but one poised to take off as the nation enters the age of electronic medical records. Some insurers have already begun testing systems that tap into not only prescription drug information, but also data about patients held by clinical and pathological laboratories. Privacy and consumer advocates fear [the trend] it is taking place largely outside the scrutiny of federal health regulators and lawmakers. The practice also illustrates how electronic data gathered for one purpose can be used and marketed for another -- often without consumers' knowledge, privacy advocates say. And they argue that although consumers sign consent forms, they effectively have to authorize the data release if they want insurance. "As health care moves into the digital age, there are more and more companies holding vast amounts of patients' health information," said Joy Pritts, research professor at Georgetown University's Health Policy Institute. "Most people don't even know these [companies] exist. Unfortunately the federal health privacy rule does not cover many of them." Tim Sparapani, senior legislative counsel at the American Civil Liberties Union, said, "We've got to stop these practices before the marketplace is fully developed and patients lose all control over their medical information."

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Exxon Mobil Corp. jumped into the political fray Thursday as its $11.7 billion record quarterly earnings — and $8 billion in share buybacks — raised hackles in Washington. "They tell us they want to do more domestic production," said Sen. Charles Schumer, D-N.Y. "They tell us they need to drill offshore. They tell us that they can find oil on the mainland. And what do they do with their profits? They buy back stock, simply to increase their share price." Democrats argue that producers already hold 68 million acres of federal lands on which they are not producing oil or gas. Irving-based Exxon Mobil, the world's largest oil company, was the fourth major oil giant to release quarterly results. Hours earlier, Royal Dutch Shell, based in the Netherlands, announced a 33 percent increase in profit. Houston-based ConocoPhillips last week announced a 13 percent increase in net income during a quarter in which oil prices rose from about $100 to $140 a barrel. London-based BP announced a 28 percent profit increase on Tuesday. Analysts ... focused less on Exxon Mobil's profits than on its 8 percent drop in production. The world's largest oil companies ... are benefiting from record-high oil prices. Exxon Mobil increased spending on capital and exploration projects by 38 percent in the quarter to $7 billion. It also spent $8 billion buying back its own shares and reported $39 billion in cash on hand. A Democratic analysis of the top five oil company's expenditures from 2004 through 2007 found that the majors plowed about $181 billion into stock buybacks, nearly three times as much as they spent on U.S. production activity.

Important Note: Explore our full index to revealing excerpts of key major media news stories on several dozen engaging topics. And don't miss amazing excerpts from 20 of the most revealing news articles ever published.