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It All Started with Bribery Charges in Argentina; But Mexico Now Also Balks at IBM, Issues Arrest Warrants

"Big Blue" Is No Longer "Lily White"

Under Pressure from Law Enforcement Officials, IBM Pulling Out of Latin American Government Deals

PHOENIX - Back in the good old days of the Watson era, when high morals complemented IBM's high profit margins, the "Big Blue" used to connote a "Lily White" in the computer industry. No longer. The Gerstner administration has now ushered a new era of corporate immorality, paralleling the "anything goes" ideology which rules Wall Street and Washington these days.

It is, therefore, no surprise that IBM is these days being spindled, folded and mutilated by some of its outraged customers and law enforcement officials - right out of the Latin American government deals. "IBM will no longer make computer engineering deals with Latin American governments," said a July 3 Reuters report filed from Buenos Aires, Argentina.

Big Blue's tail-between-its-legs flight from the Latin American government markets may have been precipitated, in part, by the Argentinean bribery scandal, which involved several of the Big Blue officials (see Appendix A to this Bulletin). But it was also exacerbated by incompetence and cronyism which the world's biggest computer company seems to have displayed in Mexico, for example.

So outraged were some Mexican officials with IBM, that Mexico City's Attorney General's Office said on June 18 that it had issued arrest warrants for three IBM executives and 19 former city officials over a multi-million dollar computer system that failed to work properly.

IBM's Mexico unit was granted a $27 million contract by the previous city administration to upgrade a computer system that would streamline Mexico City's criminal investigations. But the computer giant got the deal without having to bid against competitors, city officials said. "The law calls for a bidding process and there was none,''

Mexico City's Attorney General Samuel Ignacio del Villar, according to Reuters.

The Mexico City computer system was made up of 2,100 personal computers, which were supposed to link more than 70 offices of the attorney general in the capital, and provide a database to speed up criminal investigations. The judicial officials said the system never worked properly and was disconnected last month. They said they had uncovered enough evidence to issue arrest warrants in the case.

None of the 22 sought in the case have yet been detained, officials said. The warrants were issued after police carried out a day-long search of IBM's Mexico City offices and seized documents.

The Mexico officials' action on the computer deal also carried political overtones. Del Villar was appointed to his office by Cuauhtemoc Cardenas, Mexico City's first elected mayor in this century, and a leader of the leftist opposition Democratic Revolutionary Party (PRD).

Cardenas, the PRD's most likely candidate in the year 2000 Mexico presidential elections, took office last December vowing to combat graft in previous city administrations headed by the ruling Institutional Revolutionary Party (PRI).

And so it looks like the Big Blue has become sort of a Mexican political football, although Del Villar denied that the move against IBM was politically motivated.

IBM's legal and business troubles in Mexico come on the heels of its four-year embarrassment in Argentina. In early June, an Argentine federal judge issued international arrest warrants for four current and former IBM executives in connection with a bribery investigation. The judge said he suspected bribes were paid in 1993 to win a $249 million contract for IBM's Argentine unit to upgrade computers at a state-owned Banco de la Nacion Argentina. IBM has denied wrongdoing in the case (see Appendix A for more details).

As if that weren't enough, Reuters reported on July 3 that another Argentine federal judge, Juan Carlos Liporaci, is investigating reported irregularities in a $425.8 million contract signed in 1994 between IBM Argentina and the country's tax-collection agency, DGI. "IBM's name is mud in Argentina," a former industry executive told us, quoting a local source.

Looks like Gerstner's not-so-Lily-White Big Blue could use a large fire hose to wash down all the mud which its cronyism has generated. Yet no such clean-up is in sight, as no Armonk heads have rolled over these scandals. Guess this suggests that bribery charges and arrest warrants for IBM executives are business as usual these days at Armonk. Poor Watsons must be turning in their graves.

Happy bargain hunting!

(Bob Djurdjevic)

Appendix A

A Letter to the Editor of the NYT

May 5, 1998

Toby Harshaw, Letters Editor


New York, NY

Subject Letter to the editor Re. "Argentina to Seek Extradition of 2 Executives from U.S." (5/5/98)

Dear Sir,

Sometimes, silence speaks louder than words. The New York Times' silence in identifying the four IBM executives whose extradition the Argentine judge is seeking is only superseded by your editors' efforts to hide their corporate identity. There was no mention of IBM in your headline, "Argentina to Seek Extradition of 2 Executives from U.S." No wonder that this story, embarrassing the bluest of the Wall Street "blue chips," was relegated to the inside pages (page A8) of your May 5 edition.

Why? Because IBM's chairman has served on the New York Times board of directors? Or is it because of the Big Blue's vast advertising budget?

When Truth in Media questioned today your Buenos Aires reporter, Clifford Krauss, who filed the story, about why he failed to disclose the identities of the four IBM executives - given that the Argentine judge is presiding over a public court, and that IBM is a public company - your reporter sheepishly replied that he "did not want to besmirch their (IBM) names in the press."

Wow! Whatever happened to the New York Times motto - "All the news that's fit to print?"

Lest your latest abuse of our (American) freedom of the press is not crystally clear, your reporter (or editor?) seems to be preempting an Argentine federal judge's opinion who had publicly stated (according to your story), that he would "ask Interpol to capture them (these unnamed, 'untouchable' IBM executives) with or without the assistance of the U.S. government."

Now, why for God's sake would you do a fool thing like that in this "land of the free and of the brave?" Does the New York Times no longer adhere to its motto "All the news that's fit to print?" And if not, why not take it off your masthead? It's an insult to your readers' intelligence, anyway.

And while you're at it, why not rename your paper the "New York Pravda?" "Red" or "Big Blue" Pravda? Who cares. You're not fooling anyone who has read the Soviet Pravda, anyway. It's the same old censorship; the same old brainwashing... Only done in English rather than in Russian.


Bob Djurdjevic


Truth in Media's GLOBAL WATCH Bulletin - 98/5-3               6-May-98

(reprinted by permission from the Truth in Media)



How the New York Times Covered for IBM in a Banking Bribery Scandal


PHOENIX - This is a "P.S." to our May 5 letter to the New York Times re. IBM/Argentina banking bribery scandal. For those of you who may not have seen it or saved it, we enclose the letter at the end of this comment.

Finally, we've got the names now of the four IBM U.S. executives who the Argentine judge now says are wanted as suspects, not just witnesses. They are Robeli Libero, IBM's former Latin American president; Peter Rowley, vice president for marketing; and executives Marcio Kaiser and Steve Lew. But the way we found that out - from another media story - makes the New York Times' effort to "protect" one of its valuable advertisers not only despicable, but also clumsy. A Reuters wire story, filed at about the same time last night (May 5) as we were writing our letter to the New York Times, identified the IBM foursome.

What was especially interesting to us is that the Federal Judge, Adolfo Bagnasco, stressed to Reuters in a telephone interview that, "we don't want them (merely) as witnesses, we want them as suspects." And just in case this wasn't clear enough the first time, he repeated later on in the interview - so as "to dispel any doubts; I believe it is worth stressing once more that the above mentioned have been summoned to give testimony as suspects, not as witnesses.''

The judge suspects bribes were paid in 1993 (estimated at $21 million according to earlier news stories) to help IBM win a contract at the state-owned Banco Nacion. His fraud investigation involves 11 former officials of Banco Nacion, IBM and the Argentine government, Reuters said.

Bagnasco said he wanted to question the four IBM suspects for alleged "fraud against the state and bribery." The judge said he had explained all this in a May 4 letter to Thomas Snow, international affairs director of the U.S. Department of Justice. The judge said earlier he was seeking their extradition and/or arrest by Interpol, in the event they refused to cooperate with the court - "with or without the assistance of the U.S. government."

Several Banco Nacion officials, including its former director, Alfredo Aldaco, have admitted to have taken bribes, and have offered to return the money from their Swiss bank accounts to the judge. An Apr. 29 Associated Press report noted that Aldaco told the court he had received $2.5 million, while Genaro Contartese admitted to have gotten $1.5 million. Former Banco Nacion president, Ricardo Martorana, who also testified last week, implicated Lew, one of the IBMers.

Meanwhile, an IBM spokesman from Armonk, NY, declared as recently as last week that none of its employees in the U.S. had any knowledge of the Banco Nacion bribes, according to the AP report. Echoes of the Clinton White House press conferences?

But the judge begged to differ. After his three year-investigation, Bagnasco told Reuters that he was now sure there "really was a criminal act" (committed), after the Swiss banks gave him the names of account holders alleged to have received the IBM bribes.

Yet, there was an "independent" media giant, the New York Times, yesterday deliberately trying to run interference for IBM instead of reporting the news - "all the news that's fit to print," according to its masthead motto. And the Times did it in a criminal investigation by a Federal Judge!? Have the Times editors been swapping notes with the Clinton stonewalling strategists?

And then, there is the commercial side of the cozy IBM-New York Times relationship. As just one example, you may wish to check out an eight-page ad which IBM placed in the New York Times on Apr. 21 (yes, 8 full pages, folks! ...ever seen anything like that before? ...we haven't). Suddenly, one can see the Times' IBM cover up in an entirely different light. Only a fool should presume the Times to be "an independent," meaning objective, news source after its handling of the IBM Argentine scandal.

"IBM dealt with one of the most publicly embarrassing stories of the Gerstner administration in a typical way," this writer commented in his February 1998 Integration Management (IM) column (IM is a Washington Post publication). The Big Blue fired some local Argentine officials "as sacrificial lambs, even though a contract of this magnitude ($249 million) would have to have been approved in the States. No heads rolled anywhere in or around Armonk."

They still haven't. Yet. But then, Judge Bagnasco may not be done yet, either. What if he starts probing deeper into who Libero's boss was at Armonk at the time the banking deal went down? (Libero, a Brazilian, was the former top IBM Latin American executive - one of the above four suspects sought for questioning). And whose executive "sign-offs" (approvals) were needed if IBM were to have followed its own rules in the Banco Nacion case?

If the Argentine judge - who is looking more and more like a "Ken Starr with teeth" - pursues his IBM suspects in the future as doggedly as he has done it in the past, chances are, he may end up inviting more Armonk big shots to visit him in Buenos Aires. Not for a sightseeing trip...

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Volume XIV, No. 98-25
July 4, 1998

Editor: Bob Djurdjevic
Published by: Annex Research;

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