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According to a new report from Bloomberg, the Pentagon is spending approximately $1 billion over the next several years for a variety of robots designed to complement combat troops on the modern battlefield.

In addition to scouting and explosives disposal, these new war robots will reportedly be able to perform more complex tasks, including surveillance missions, detection of chemical or nuclear agents, and even have the ability to transport soldiers’ rucksacks.

“Within five years, I have no doubt there will be robots in every Army formation,” said Bryan McVeigh, the Army’s project manager for force protection. He applauded the efforts of the Pentagon to field more than 800 robots over the past 18 months.

“We’re going from talking about robots to actually building and fielding programs,” he said. “This is an exciting time to be working on robots with the Army,” McVeigh added.

Bloomberg says the Pentagon has classified its robot platforms into light, medium and heavy categories.

Last month, the Army awarded a $429.1 million contract to two Massachusetts robotic defense companies, Endeavor Robotics and QinetiQ North America, for miniature size war robots weighing less than 25 pounds. Not too long ago, Endeavor Robotics was awarded two other contracts worth roughly $34 million from the Marine Corps for medium size robots.

Modular Advanced Armed Robotic System. (Source: QinetiQ) 

In 4Q17, the Army awarded Endeavor a $158.5 million contract for 1,200 medium size war robots, called the Man-Transportable Robotic System (MTRS), Increment II, weighing around 165 pounds. Bloomberg said the MTRS is designed to detect “explosives as well as chemical, biological, radioactive and nuclear threats,” with a deployment date set for the second half of 2019.

Endeavor Robotics Product Overview. (Source: Endeavor Robotics)

“It’s a recognition that ground robots can do a lot more, and there’s a lot of capabilities that can and should be exploited,” said Sean Bielat, Endeavor’s chief executive officer. He points out “the dull, the dirty and the dangerous” infantry tasks are being supplemented by war robots.

The introduction of war robots onto the modern battlefield is undoubtedly intended to streamline tasks in combat situations for infantry troops, but the primary objective is to increase the survivability rate of America’s bravest warriors.

“The Army’s current approach is to field more inter-operable robots with a common chassis, allowing different sensors and payloads to be attached, along with standardized controllers for various platforms,” McVeigh explained to Bloomberg.  

While Trump signed the record-setting defense spending bill earlier this year, Bloomberg says the addition of robots on the battlefield is geared towards affordability. “If we want to change payloads, then we can spend our money on changing the payloads and not having to change the whole system,” McVeigh said.

The Army will have a ramp-up period to field the use of its newer, more advanced robots; indications point to more than 2,500 of the medium and small robots will enter the modern battlefield in the next several years.

Line-up of QinetiQ robots. (Source: QinetiQ) 

“Just strapping a conventional weapon onto a robot doesn’t necessarily give you that much” for ground troops, said Bielat, the Endeavor Robotics CEO. “There is occasional interest in weaponizing robots, but it’s not particularly strong interest. What is envisioned in these discussions is always man-in-the-loop, definitely not autonomous use of weapons.”  

There are significant concerns about the rapid development and deployment of advanced robotic technologies on the battlefield, especially the use of autonomous weapon systems.

Last year, a group of the world’s leading AI researchers and humanitarian organizations warned about lethal autonomous weapons systems, or killer robots, that select and kill targets without human control. About two dozen countries have called for the ban on fully autonomous weapons, though the U.S. failed to join.

Killer robots are closer than you think

“It seems inevitable that technology is taking us to a point where countries will face the question of whether to delegate lethal decision-making to machines,” said Paul Scharre, a senior fellow and director of the technology and national security program at the Center for a New American Security.

Last August, Tesla’s Elon Musk and over 100 experts sent a letter to the United Nations demanding the organization ban lethal autonomous weapons.

“Once developed, lethal autonomous weapons will permit armed conflict to be fought at a scale greater than ever, and at timescales faster than humans can comprehend,” the letter warned. “These can be weapons of terror, weapons that despots and terrorists use against innocent populations, and weapons hacked to behave in undesirable ways.”

Peter W. Singer, a leading strategist on 21st-century warfare, chatted with Business Insider about the “the killer robots debate,” and said, “it sounds like science fiction, but it is a very real debate right now in international relations. There have been multiple UN meetings on this.”

As Singer put it, advanced robotic technologies have opened countless discussions about legal and ethical questions for which “we’re really not all that ready.”

“This really comes down to, who is responsible if something goes bad?” Singer said, explaining that this applies to everything from war robots to autonomous vehicles.

“We’re entering a new frontier of war and technology and it’s not quite clear if the laws are ready.”

It seems like the new frontier of war and technology is ushering in a “Terminator”-style dystopic evolution of warfare. It is inevitable that this new generation of weaponry could quickly make its way out of the military and into the hands of terrorist organizations. Nevertheless, with the Pentagon throwing billions of dollars at defense companies to manufacture war robots, we ask one simple question: what could go wrong?

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Authored by Federico Pieraccini via The Strategic Culture Foundation,

A hot topic in military prognostications regarding China, Russia and the United States revolves around the development and use of hypersonic technology for missiles or UAVs as an invulnerable means of attack. As we will see, not all three countries are dealing successfully with this task.

The United States, China and Russia have in recent years increased their efforts to equip their armed forces with such highly destructive missiles and vehicles seen in the previous article. Putin’s recent speech in Moscow reflects this course of direction by presenting a series of weapons with hypersonic characteristics, as seen with the Avangard and the Dagger.

As confirmed by US Under Secretary of Defense for Research and Engineering, Dr. Michael Griffin:

We, today, do not have systems that can hold them [hypersonic weapons] at risk…and we do not have defenses against those [hypersonic] systems. Should they choose to deploy them we would be, today, at a disadvantage.

Further confirmation that the US is lagging in this field came from General John Hyten, Commander of US Strategic Command:

“We don’t have any defense that could deny the employment of such a weapon against us, so our response would be our deterrent force, which would be the triad and the nuclear capabilities that we have to respond to such a threat.”

The development of hypersonic weapons has been part of the military doctrine that China and Russia have been developing for quite some time, driven by various motivations. For one thing, it is a means of achieving strategic parity with the United States without having to match Washington’s unparallelled spending power. The amount of military hardware possessed by the United States cannot be matched by any other armed force, an obvious result of decades of military expenditure estimated to be in the range of five to 15 times that of its nearest competitors.

For these reasons, the US Navy is able to deploy ten carrier groups, hundreds of aircraft, and engage in thousands of weapon-development programs. Over a number of decades, the US war machine has seen its direct adversaries literally vanish, firstly following the Second World War, and then following the collapse of the Soviet Union. This led in the 1990s to shift in focus from one opposing peer competitors to one dealing with smaller and less sophisticated opponents (Yugoslavia, Syria, Iraq, Afghanistan, international terrorism). Accordingly, less funds were devoted to research in cutting-edge technology for new weapons systems in light of these changed circumstances.

This strategic decision obliged the US military-industrial complex to slow down advanced research and to concentrate more on large-scale sales of new versions of aircraft, tanks, submarines and ships. With exorbitant costs and projects lasting up to two decades, this led to systems that were already outdated by the time they rolled off the production lines. All these problems had little visibility until 2014, when the concept of great-power competition returned with a vengeance, and with it the need for the US to compare its level of firepower with that of its peer competitors.

Forced by circumstances to pursue a different path, China and Russia begun a rationalization of their armed forces from the end of the 1990s, focusing on those areas that would best allow them the ability to defend against the United States’ overwhelming military power. It is no coincidence that Russia has strongly accelerated its missile-defense program by producing such modern systems as Pantsir and S-300/S-400, which allows for a defense against ballistic attacks and stealth aircraft. Countering stealth technology became an urgent imperative, and with the production of the S-400, this challenge has been overcome. With the future S-500, even ICBMs will no longer pose a problem for Russia. In a similar vein, China has strongly accelerated its ICBM program, reaching within a decade the ability to produce a credible deterrent with their equivalent of the Russian SS-18 Satan or the American LGM-30G Minuteman III, possessing a long range and multiple independent reentry vehicles (MIRVs) armed with nuclear warheads.

After sealing the skies and achieving a robust nuclear-strategic parity with the United States, Moscow and Beijing begun to focus their attention on the US anti-ballistic-missile (ABM) systems placed along their borders, which also consist of the AEGIS system operated by US naval ships. As Putin warned, this posed an existential threat that compromised Russia and China’s second-strike capability in response to any American nuclear first strike, thereby disrupting the strategic balance inherent in the doctrine of mutually assured destruction (MAD).

For this reason, Putin has since 2007 been warning Russia’s western partners that his country would develop a system to nullify the American ABM system. In the space of a few years, Russia and China have succeeded in this task, testing and entering into production various hypersonic missiles equipped with breakthrough technologies that will strongly benefit the entire scientific sector of these two countries, and against which the US currently has no counter.

Currently there are no defenses against hypersonic attacks; and given the trend of employing ramjet/scramjet engines on new generations of fighter jets, it seems that more and more countries will want to equip themselves with these game-changing systems. Russia, to counter America’s naval superiority, has already entered into service the Zircon anti-ship missile, and already plans an export version with a range of 300 kms.

India and Russia have long been working on the Brahmos, which is yet another type of hypersonic missile that could in the future be launched from the Su-57. Although it is a relatively new technology, hypersonic weapons are already causing more than a headache for many Western military planners, who are only coming to realize just how far they are lagging behind their competitors.

It will take a while for the US to close the hypersonic technological and scientific gap with China and Russia. Lockheed Martin has been awarded a contract to this end. In the meantime, the two Eurasian powerhouses are focusing on their overland integration via the Belt And Road Initiative (BRI) and the Eurasian Union, a strategic arrangement that denies the US and NATO the ability to easily intervene in an area so far inland, compounded by its inability to control the airspace, and ultimately outnumbered on the ground in any case.

The objective of the Russians and the Chinese is the realization of a highly defended (A2/AD) environment on their coasts and in their skies, which are buttressed by hypersonic weapons. In this way, Russia and China possess the means to disrupt the maritime logistical chain of the US Navy in the case of war. In addition, the A2/AD would be able to stop US power projection, thanks to HGV weapons able to sink aircraft carriers and target specific land-based ABM systems or logistic-chain hubs.

It is a defensive strategy that could potentially halt US Naval power projection as well as its ability to control the skies, two linchpins in the way the US plans to fight its wars. No wonder think-tanks in Washington and four-star generals are starting to sound the alarm on hypersonic weapons.

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After last Thursday’s relatively brief meeting in Sochi between Russian President Vladimir Putin and Syria’s Bashar al-Assad wherein Putin stressed that it is necessary for all “foreign forces” to withdraw from Syria, there’s been much speculation over what Putin actually meant. 

Many were quick to point out that Assad had agreed that “illegal foreign forces” should exit Syria — meaning those uninvited occupying forces in the north and northeast, namely, US troops, Turkish troops and their proxies, and all foreign jihadists — while most mainstream Western outlets, CNN and the Washington Post among them, hailed Putin’s request to see Iran withdraw from Syria. 

Whatever non-Syrian entity Putin intended to include by his words, both Syria and Iran gave their unambiguous response on Monday: Iran announced it would stay in Syria at the request of the Assad government.

“Should the Syrians want us, we will continue to be there,” Foreign Ministry spokesman Bahram Qasemi declared from Tehran, cited by Iran’s state-run IRNA news agency. “Nobody can force Iran to do anything; Iran has its own independent policies,” Qasemi said, in response to a question referencing the widespread reports that Russia desires Iran to withdraw forces from Syria.  

“Those who entered Syria without the permission of the Syrian government are the ones that must leave the country,” he said further in a clear reference to the some 2000 US troops currently occupying Syrian-Kurdish areas in the northeast and eastern parts of the country.   

As we noted in the aftermath of Israel’s May 10 massive attack on multiple locations inside Syria which marked the biggest military escalations between the two countries in decades, Russia has appeared content to stay on the sidelines while Syria and Israel test confrontational limits; however, Russia is carefully balancing its interests in Syria, eager to avoid an uncontrolled escalation leading to a direct great power confrontation. 

But increasingly Israel’s patience appears to be wearing thin after Prime Minister Netanyahu’s oft-repeated “Iranian red line” warning has gone unheeded. In multiple summits with Putin going back to 2015 (the two have met over 6 times since then), Netanyahu has repeatedly stressed he would not tolerate an Iranian presence in Syria and further signaled willingness to go to war in Syria to curtail Iranian influence. 

“Iran is already well on its way to controlling Iraq, Yemen and to a large extent is already in practice in control of Lebanon,” Netanyahu told Putin in one especially tense meeting in August 2017, and added further that, “We cannot forget for a single minute that Iran threatens every day to annihilate Israel. Israel opposes Iran’s continued entrenchment in Syria. We will be sure to defend ourselves with all means against this and any threat.”

Israel’s uptick in military strikes on Syria — attacks on sites purported to be Iranian bases housing Iranian assets — have intensified exponentially over the past half-year, nearly leading to an unprecedented breakout of region wide war during the May 10 exchange of fire, wherein Israel claimed to have been attacked by Iranian rocket fire. 

The fact that both Iran and Syria can so openly and confidently announce Iran’s intent to stay in Syria means Damascus sees itself in new position of strength after both shooting down multiple Israeli missiles and simultaneously firing rockets into Israeli occupied Golan territory — a response perhaps very unexpected by Israel’s leadership which had grown accustomed to attacking the Syrian army and its allies with impunity. 

Meanwhile, Damascus announced Monday that all suburbs around the capital have been fully liberated from al-Qaeda and ISIS terrorists, marking the end of a years long insurgency in and around the capital. As Al-Masdar News noted, “The Syrian Arab Army (SAA) is in full control of Damascus city and its countryside for the first time since the advent of this conflict.”

Yet the pattern which has emerged over the past few years has been that every time the Syrian Army emerges victorious or carries overwhelming military momentum, Israel or the US launches an attack. 

#Pompeo‘s Iran plan is practically a declaration of war. No country with any dignity and self respect would accept the conditions he is putting on #Iran to stop the sanctions campaign that he announced. #Irandeal https://t.co/eVeqOktqzd

— Walid (@walid970721) May 21, 2018

The US for its part issued one of its strongest ultimatums yet to Iran yet via Secretary of State Mike Pompeo, who vowed on Monday that Tehran will struggle to “keep its economy alive” if it does not comply with a list of 12 US demands, including Iranian withdrawal from Syria.

Here is Secretary Pompeo’s list of 12 demands from Iran via @GalloVOA pic.twitter.com/3nZ1qM0QUT

— Golnaz Esfandiari (@GEsfandiari) May 21, 2018

Iranian President Hassan Rouhani rejected Pompeo’s bombastic demands and vowed to continue “our path,” insisting that the US could not “decide for the world.”

Rouhani’s words, as quoted by ILNA news agency, were as follows: “Who are you to decide for Iran and the world? The world today does not accept America to decide for the world, as countries are independent … that era is over… We will continue our path with the support of our nation.” This continuing escalation of rhetoric will likely only ensure Iran becomes even more entrenched in Syria, but it will be interesting to see how Russia responds diplomatically.

We’ve already seen Israel’s “diplomacy” in the form of repeat missile attacks, but how much will Russia and Iran sit back and take before enforcing their own red lines against Israel and the West? 

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Authored by Lawrence Thomas via The Gold Telegraph,

Do you feel as if you’re drowning in debt? It’s worse than you think.

The U.S. government reached a new milestone when our country’s debt topped $21 trillion for the first time. The national debt grows by an average of $17,000 every second – more than some people earn in an entire year. That’s only an average, and During the past eight months, the national debt grew by $52,000 per second. And the trend toward bigger and higher spending is only getting worse.

The ratio of national debt to GDP is at 105 percent, larger than the economy as a whole. In 1981, the national debt comprised a mere 31 percent of GDP. We are not moving in the right direction. The Treasury Department has plans to borrow $1 trillion this year, an 84% jump from last year. 

When individuals borrow, they can use the money wisely to increase their wealth. That’s what happens when people make good investments. What does the government do with all this money? While some of it may be put to good use, the National Science Foundation’s spending $856,000 on having mountain lions run on treadmills can’t be termed prudent spending. Nor can the $2 billion spent on former President Obama’s healthcare website. In 2017, Brooklyn, NY spent $2 million on a 400 square feet restroom in a public park. Flushing money down the toilet?

Even the government’s legitimate spending is out-of-control. In 2017, half the entire budget went toward Social Security and Medicare. More than all tax revenues are spent on entitlement programs and defense. The rest is “borrowed,” and that creates interest payments. Of course, as the debt increases, so do the interest payments. Which means the government needs to borrow even more money just to pay interest on money it’s already borrowed. What happens when the U.S. debt reaches $30 million? President Trump is showing no signs of curtailing this spending/borrowing spree. The interest rate was recently raised to 3 percent, and it will go higher yet.

Since the government can print fiat money at will, it probably isn’t overly concerned. However, what about companies and individuals who need to borrow at increasingly higher rates?

When it comes to interest rates, we need to look at LIBOR, the benchmark interest rate used by leading banks around the globe. The LIBOR rate is intrinsically tied to government debt. According to JP Morgan, the U.S. has approximately $7.5 trillion in LIBOR-related-debt alone. Individual loan debts are 97 percent LIBOR-related. Fifty percent of the corporate debt is tied to LIBOR. As interest rates rise, it will hurt individuals and corporations.Chapter 11 bankruptcies have increased to a seven-year high.

Why is the government raising interest rates at a time consumer prices and wages are rising only marginally? During Obama’s administration, prices rose 14.6 percent, and the Federal Reserve kept interest rates low. Inflation is up by a mere 2.2 percent since Trump took office, and interests rates keep rising. Is the Federal Reserve playing politics? While the rate of inflation was somewhat higher during the Obama years, the Federal Reserve didn’t get aggressive in handling the problem until Trump came to office. If it’s politics, what game is being played?

One thing is certain. Government borrowing will continue at an increasingly faster rate, and the unprecedented debt is creating a very vulnerable economy. While revenues are growing, the spending increase is 300 percent of our total revenue.

The current budget for 2018 is expected to be $804 billion, up from $665 billion in 2017. By 2020, the annual budget is expected to top $1 trillion. How long can this type of borrowing be sustained without creating an eventual economic crisis?

People have cause to be concerned. But how does U.S. Treasury Secretary Steve Mnuchin feel about this pile of debt? “It’s a very large, robust market — it’s the most liquid market in the world [U.S. bond market], and there is a lot of supply… But I think the market can easily handle it… I’m not concerned about that. I think that there are still a lot of buyers for U.S. Treasuries.”

Mnuchin assumes there will be a continuing supply of foreign investors willing to buy up U.S. bonds. The interest in U.S. bonds is decreasing, however. Foreign buyers currently hold about 40 percent of U.S. bonds – or debt. This is at a new low since November 2016. Foreign investors have been on a downward trend since its high of 55 percent in 2008. The combination of reduced foreign demand and the need for increased funding could spell disaster for the U.S. economy.

During times of economic chaos, the government has historically resorted to giving the printing presses free reign and flooding the economy with fiat currency. This will devalue the dollar more than it is already, leading to higher inflation.

But Mr. Mnuchin isn’t worried a bit. At least, he won’t admit that he is. The problem is that putting on a smiley face won’t rescue a troubled economy. We can only hope Mr. Mnuchin has the good sense to begin frowning very soon…

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Weeks before Saudi Arabia is set to lift its longtime ban on women driving, a group of seven women’s rights activists has been arrested on treason and espionage related charges — offenses which can bring the death penalty. The kingdom plans to lift the driving ban on June 24th, though significant restrictions will still remain to allow women to drive “in accordance with Islamic laws.” 

This comes after the Western public has been subjected to months of propaganda editorializing by the likes of David Ignatius and Thomas Friedman ensuring us the young crown prince Mohammed bin Salman is a “modernizer and reformer” (Friedman penned a hagiographic style essay declaring MbS is spearheading an “Arab Spring” revitalization of the kingdom), and after MbS completed an extended tour across the US which took him from from the the White House to Silicon Valley to Hollywood — all places where he was fawned over as the red carpet rolled out. 

On Saturday Human Rights Watch (HRW) and the Gulf Centre for Human Rights issued a statement indicating the seven activists have been detained since May 15th, and further that they had come to the attention of Saudi authorities as leading voices campaigning on behalf of women driving, and against the male guardianship system in general. They had reportedly been previously ordered by the royal court to cease all contact with foreign media, something which they apparently defied. 

The detained include a prominent Saudi blogger, Eman al-Nafjan, and Lujain al-Hathloul, who had previously been imprisoned for 73 days after driving from UAE into Saudi Arabia. Multiple reports indicate further that the crackdown on women’s rights activists may be ongoing, and that charges have reached the level of espionage.

And perhaps most shockingly, the detained activists could face the death penalty, as Middle East Eye reports:

According to Saudi lawyers and judges, the prominent women’s rights activists, who were arrested last week and branded as “traitors” by government-aligned media outlets, may by sentenced to death should investigations result in the charge of treason and conspiracy against the state.

The Riyadh-based English language daily newspaper, Arab News, has accused the women of being part of a “spy cell” supported by hostile foreign entities — echoing the claims of Saudi authorities and the official Saudi Press Agency:

Members of a “spy cell,” arrested by Saudi Arabia’s state security presidency two days ago, sought to “incite strife by communicating with foreign entities hostile to the Kingdom and to establish a false legal organization,” according to information received by Asharq Al-Awsat from informed sources.

The sources said most of the cell’s suspects claim to have religious obligations and were using human rights as a pretext to violate the country’s systems.

The report further accuses the women of using their activist groups as fronts for communications and financial dealings with countries “hostile to Saudi Arabia, to receive financial support in exchange for continuing to incite trouble.” Over the past year especially, this has typically been code for interaction with Iran or Shia-linked groups, viewed by the Saudis as desiring to infiltrate and destabilize Saudi society. 

HRW’s Rothna Begum told Al-Jazeera that the move ultimately aims to silence critics of the Saudi regime: “While it’s not clear why they were arrested, today we have seen Saudi press reports come to suggest that these women are traitors and have been arrested because they are undermining the national unity of the country,” she explained.

It appears the women have been charged within the guidelines of current Saudi law, as last November a new anti-terror law (which replaced a prior 2014 law) was put in place which defines specific acts of terror and corresponding sentencing guidelines in an incredibly vague way, and is further broad in its application while allowing for severe consequences for so much as criticizing the king or crown prince.

The kingdom has long aggressively rooted out dissent, arresting and prosecuting individuals for engaging in protest, even if merely on social media, but the November anti-terror law now gives the Saudi regime greater ease in labeling political activities treasonous. The law also brings terror-related cases under the direct administrative oversight of the king — thus the arrests and detentions are sanctioned directly under the authority of the king and/or crown prince.

Late last year HRW provided examples of the types of vague protest related activities that Saudi Arabia can now deem “terrorism”: The new law, however, does not restrict the definition of terrorism to violent acts. Other conduct it defines as terrorism includes “disturbing public order,” “shaking the security of the community and the stability of the State,” “exposing its national unity to danger,” and “suspending the basic laws of governance,” all of which are vague and have been used by Saudi authorities to punish peaceful dissidents and activists.

As the media continues celebrating the ‘reforming prince’ and much hyped newly opened cinemas and greater employment opportunities for Saudi women, it appears MbS is playing a double game in enhancing his public image abroad while cleaning house of unwanted critics at home (something made especially clear by MbS’ rounding up over 300 royals and other prominent officials to lock them at Riyadh’s Ritz Carlton, many of them forced to pay their way out). And the American mainstream is all too happy playing along.

As we recently noted, close US ally Saudi Arabia has executed over 48 people so far this year, half of them related to nonviolent drug charges, according to HRW. Meanwhile the US State Department has remained completely silent, choosing instead to talk solely of Iran and Syria’s human rights violations.  

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Authored by Caitlin Johnstone via Medium.com,

Gina Haspel has been confirmed and sworn in as America’s new CIA Director, fulfilling her predecessor Mike Pompeo’s pledge to turn the CIA into “a much more vicious agency”. “Bloody Gina” has reportedly been directly involved in both torturing people and destroying evidence of torture in her long and depraved career, which some say hurts the CIA’s reputation.

Others say it just makes it more honest.

The lying, torturing, propagandizing, drug trafficking, coup-staging, warmongering Central Intelligence Agency has done some of the most unspeakably horrific things to human beings that have ever happened in the history of our species. If you think I’m exaggerating, do your own research into into some of the CIA’s activities like the Phoenix Program, which used “Rape, gang rape, rape using eels, snakes, or hard objects, and rape followed by murder; electric shock (‘the Bell Telephone Hour’) rendered by attaching wires to the genitals or other sensitive parts of the body, like the tongue; the ‘water treatment’; the ‘airplane’ in which the prisoner’s arms were tied behind the back, and the rope looped over a hook on the ceiling, suspending the prisoner in midair, after which he or she was beaten; beatings with rubber hoses and whips; the use of police dogs to maul prisoners,” and “The use of the insertion of the 6-inch dowel into the canal of one of my detainee’s ears, and the tapping through the brain until dead. The starvation to death (in a cage), of a Vietnamese woman who was suspected of being part of the local political education cadre in one of the local villages…The use of electronic gear such as sealed telephones attached to…both the women’s vaginas and men’s testicles [to] shock them into submission.”

This is what the CIA is. This is what the CIA has always been. This is what Mike Pompeo said he wanted to help make the CIA “much more vicious” than. Appointing Gina Haspel as head of the agency is just putting an honest face on it.

It really couldn’t be more fitting that the US now has an actual, literal torturer as the head of the CIA. It also couldn’t be more fitting that it has a reality TV star billionaire President, an Iraq-raping Bush-era neoconservative psychopath as National Security Advisor, a former defense industry directoras Secretary of Defense, a former Goldman Sachs executive as Secretary Treasurer, and a former Rothschild, Inc. executive as Secretary of Commerce. These positions have always facilitated torture, oppression, war profiteering and Wall Street greed; the only thing that has changed is that they now have a more honest face on them.

The mask of the nationless Orwellian oligarchy which dominates our world is slipping off all over the place.

Israel is now openly massacring unarmed Palestinian civilians, prompting a UN investigation into possible war crimes. Only two nations voted in opposition to the investigation, and surprise surprise it was the two nations apart from Israel who most clearly owe their existence to the institutionalized slaughter and brutalization of their indigenous occupants in recent history: the US and Australia. All other members of the UN Human Rights Council either voted in support of the investigation or abstained.

Important to note that the US and Australia, two countries built on the genocide of the indigenous populations have objected to the UN inquiry and are effectively expressing support to Israel’s on going genocide of the Palestinians.

— Tariq Zarif (@TariqZarif) May 18, 2018

Internet censorship is becoming more and more brazen as our governments become increasingly concerned that we are developing the wrong kinds of political opinions. Ever since the establishment Douma and Skripal narrativesfailed to take hold effectively, we’ve been seeing more and more frantic attempts to seize control of public discourse. Two weeks after the Atlantic Council explained to usthat we need to be propagandized by our governments for our own good, Facebook finally made the marriage of Silicon Valley and the western war machine official by announcing a partnership with the Atlantic Council to ensure that we are all receiving properly authorized information.

The Atlantic Council is pure corruption, funded by powerful oligarchs, NATO, the US State Department, empire-aligned Gulf states and the military-industrial complex. Many threads of the establishment anti-Russia narrative trace back to this highly influential think tank, from the DNC hack to the discredited war propaganda firm Bellingcat to imaginary Russian trolls to the notorious McCarthyite PropOrNot blacklist publicized by the Washington Post. Facebook involving itself with this malignant warmongering psyop factory constitutes an open admission that the social media site considers it its duty to manipulate people into supporting the agendas of the western empire.

We’re seeing similar manipulations in Twitter, which recently announced that it will be hiding posts by more controversial accounts, and by Wikipedia, which has been brazenly editing the entries of anti-imperialist activists with a cartoonishly pro-establishment slant.

Announcing New Election Partnership with the Atlantic Council https://t.co/piSxpTDJfa

— Facebook Newsroom (@fbnewsroom) May 17, 2018

At long last, the union of Silicon Valley and the military-industrial complex becomes official. They’ve been dating for years, now they’re finally tying the knot. This is your real royal wedding, everyone. https://t.co/3CkVtvBs0s

— Caitlin Johnstone (@caitoz) May 17, 2018

It is always a good sign when people in power become concerned that their subjects are developing the wrong kinds of political opinions, because it means that truth is winning. All this gibberish we’ve been hearing about “Russian disinformation” and “Russian propaganda” is just a label that has been pinned on dissenting narratives by a mass media propaganda machine that has lost control of the narrative.

And this is why it’s getting so overt, barely even attempting to conceal its true nature anymore. Our species’ newfound ability to network and share information has enabled a degree of free thinking that the cultural engineers did not anticipate and have not been able to stay ahead of, and they’re being forced to make more and more overt grabs to try and force us all back into our assigned brain boxes.

But the oligarchs who rule us and their Orwellian power structure is already in a lose-lose situation, because the empire that they have built for themselves rests upon the illusion of freedom and democracy. The most powerful rulers of our world long ago eschewed the old model of sitting on thrones and executing dissidents in the town square, instead taking on a hidden role of influence behind the official elected governments and using mass media propaganda to manufacture the consent of the governed.

This system is far more efficient than the old model because a populace will never rebel against rulers it doesn’t know exist, and it has enabled the western oligarchs to amass more power and influence than the kings of old ever dreamed possible. But it has a weakness: they have to control the narrative, and if they fail to do that they can’t switch to overt totalitarianism without shattering the illusion of freedom and provoking a massive public uprising.

So the wealth-holding manipulators are stuck between a rock and a hard place now, trying to use new media outlets like Facebook, Twitter and Wikipedia to herd the unwashed masses back into their pens. The more brazen they get with those manipulations, however, the more the mask slips off, and the greater the risk of the public realizing that they aren’t actually free from tyrannical rule and exploitation.

The real currency of this world is not backed by gold, nor by oil, nor by bureaucratic fiat, nor even by direct military might. No, the real currency of this world is narrative, and the ability to control it. The difference between those who rule this world and those who don’t is that those who rule understand this distinction and are sufficiently sociopathic to exploit it for their own benefit.

Power only exists where it exists because of the stories that humans agree to tell one another. The idea that government operates a certain way, that money operates a certain way, these things are purely conceptual constructs that are only as true as people pretend they are. Everyone could agree tomorrow that Donald Glover is the undisputed King of America and the new official US currency is old America Online trial CDs if they wanted to, and since that was the new dominant narrative it would be the reality. Everyone could also agree to create a new system which benefits all of humanity instead of a few sociopathic plutocrats. The only thing keeping money and government moving in a way that benefits our current rulers is the fact that those rulers have been successful in controlling the narrative.

They’ll never get that cat back into the bag once it’s out, and they know it. We the people will be able to create our own narratives and write our own rules about how things like money and government ought to operate, and there is no way that will work out to the benefit of the ruling manipulators and deceivers. So they fight with increasing aggression to lull us back to sleep, often overextending themselves and behaving in a way that gives the public a glimpse behind the mask of this entire corrupt power structure. Someday soon that mask will slip right off and come crashing to the floor. That crash will wake the baby, and that baby will not go back to sleep.

*  *  *

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Brookfield Asset Management is one of Canada’s largest investing firms, with over $285 billion under management. The company was formerly founded in 1899 as the Sao Paulo Railway, Light and Power Company, but over the course of over a century has turned itself into somewhat of a Berkshire Hathaway of Canada, with deep ties to investing in Brazil. Not unlike Berkshire Hathaway, Brookfield looks for deep value and distressed situations – exactly what it was able to find, and capitalize on, in Brazil over recent years.

The recent economic climate of corruption and recession in Brazil has meant that assets have been put up for sale at dirt cheap prices. Brookfield has been quietly and methodically scooping up these assets, using its experience in Brazil as a guided to navigate a volatile economy. Reuters reported:

In 2016, for example, Brookfield Infrastructure Partners LP (BIP.N) led a $5.2 billion acquisition of a pipeline operator from Petroleo Brasileiro SA (PETR4.SA), the state-controlled oil company at the heart of the Car Wash scandal. Recently, another Petrobras pipeline network with half the capacity fetched a top bid of around $8 billion from other investors. Bargain-hunting Brookfield gave that deal a pass.

The Canadians’ savvy is built on nearly 120 years of experience in South America’s largest economy. But the recent buying spree pushed the company to new extremes of due diligence and bulletproofing, according to interviews with six people involved in the deals.

Brookfield’s CEO was tongue in cheek about the way he described buying distressed assets in the company’s letter to its investors from February of this year, using the term “sellers in need of capital” instead of something less tasteful, like “desperate sellers”:

Chief Executive Bruce Flatt, whom some call the Warren Buffett of Canada for his value-investing approach, called recent Brazil acquisitions “quality businesses from sellers in need of capital” in a February letter to investors.

Left wing politicians in Brazil have been notably against the scooping up of state assets by private companies. But Brookfield has been sharper, drawing up agreements that result in compensation if they are broken, and covering their bases when it comes to due diligence and potential legal liabilities:

Brookfield’s purchase of gas pipeline operator Nova Transportadora do Sudeste SA (NTS) from Petrobras was part of a controversial divestment program aimed at trimming the oil firm’s massive debt load.

Critics have decried the privatizations, and Ciro Gomes, a leading leftist presidential candidate, has pledged to reverse sales of state energy assets if elected this year.

Foreseeing the risk, Brookfield tasked dozens of lawyers with drafting an ironclad agreement. Brookfield has a right to compensation if Petrobras changes the contracts in a way that hurts the Canadians’ cash flow, according to three people with knowledge of the matter.

The head of Brazilian investment banking at a global bank, who was not involved in the NTS deal, said it was an example of Brookfield’s willingness to bet big while protecting itself.

The climate of corruption in Brazil has not come without its challenges, even for Brookfield. The company has been accused of being involved with a few relatively smaller bribery scandals of its own. Reuters continued:

Its homebuilding unit was among around 30 developers accused of paying bribes to building inspectors in Sao Paulo between 2010 and 2012. Former employees of the unit, which later changed its name to Tegra, confessed to paying bribes and were cooperating witnesses in the trial of the building inspectors.

Brookfield said the company was not a target of the investigation and cooperated with authorities.

In a separate case, the U.S. Securities and Exchange Commission (SEC) opened an investigation in 2012 into accusations that Brookfield’s Brazil shopping mall unit bribed Sao Paulo officials to win construction permits. The SEC dropped the case in 2015 without bringing any enforcement action. Brookfield denied wrongdoing.

One of Brookfield’s toughest recent deals will test its ability to avoid fallout from another municipal graft scandal.

Last year it agreed to pay $1 billion for a 70 percent stake in a sewage and water utility owned by Odebrecht SA, an engineering group ensnared in the Car Wash probe. Prosecutors accused Odebrecht of paying bribes to secure contracts with some of the 186 municipalities where the utility operates.

Odebrecht, which reached a leniency deal with prosecutors, said in a statement it is cooperating with law enforcement and “has created internal controls to detect and prevent unlawful behavior.”

But Brookfield, with its seemingly bottomless pit of capital and resources at its disposal, made sure that it had the legal protection in place to cover itself:

Some 60 lawyers working for Brookfield spent eight months assessing the risks. They arranged for $100 million of the purchase price to be set aside to cover potential liabilities if city governments break off contracts or demand compensation due to alleged kickback schemes.

Since subsidiary Brookfield Business Partners LP (BBU_u.TO) closed the deal in April 2017, none of the municipal contracts held by the company, now called BRK Ambiental, were rescinded and only one is in litigation, according to two people with knowledge of the matter.

At this point, Brookfield’s “investment” in Brazil is starting to look like the country could eventually become a wholly-owned subsidiary of the company.

We commented a couple of months ago about the turmoil and unrest in Brazil, writing about how the Army was tasked with “restoring order” in Rio de Janeiro. With public spending on police and social services collapsing amid Brazil’s worsening economic crisis, violent crime has crept back up in Rio de Janeiro, a city widely recognized for its favelas – urban hillside slums teeming with violence, drugs and prostitution, according to Bloomberg.

And ahead of an October election where President Michel Temer will try to win his first full term in office, the president is trying to send in the army to seize control of the city’s streets and restore order to an increasingly lawless town.

President Michel Temer issued a decree on Friday putting an Army general in charge of Rio’s security forces, including the state’s civilian police. The intervention, which requires congressional approval, will last until the end of the year, according to the decree.

“Our prisons will no longer be offices for thieves, our public squares party halls for organized crime,” Temer said after signing the decree.

“I know it’s an extreme measure but many times Brazil requires extreme measures to put things in order.”

But as is often the case with Brazilian politics, Temer has a plausible ulterior motive: By sending in the army, he might create enough of a distraction to avoid voting on an unpopular pension bill because Brazilian law conveniently prohibits making constitutional changes during times of military crisis.

Temer told Reuters that the intervention wouldn’t halt negotiations over pension reform or stop a vote on the plan, which is deeply unpopular with the country’s retirees, who stand to see their benefits cut.

Meanwhile, crime in the city has erased nearly a decade of progress, climbing back to its highest level since 2009. Temer’s decision is the first time the military has intervened in public affairs since the former military dictatorship ended in the mid-1980s and the country returned to democracy.

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Authored by Jeff Thomas via InternationalMan.com,

For years, I’ve been writing about Venezuela, describing it as the “movie” by which we can view the future of other jurisdictions that are presently in decline.

The reason is that declining nations follow the same pattern, time and time again, over the centuries. This is not coincidence. The pattern exists because human nature never changes, regardless of the era or the locale. Political leaders make the same mistakes as their forebears, and the people of a nation react in kind.

For this reason, countries have a sort of “shelf life.” They rise in prominence, due to work ethic and productivity. They then go through a period of abundance, which eventually deteriorates, due to complacency and apathy. Finally, they collapse into a period of bondage.

If we recognize that this pattern has played out countless times over the millennia, we can track any given country and assess where it is at present, in the pattern.

For example, Europe and North America are presently in the last stages prior to collapse, Venezuela is in the process of collapse and Cuba is in the post-collapse recovery.

But, although this may be historically interesting, of what value is it to us in terms of our own lives and the choices we make for our future?

Well, we can observe Venezuela and see the effects of the present policies evident in our own country, if we happen to live in one that’s on the verge of collapse.

For example, we can see that ever-increasing largesse by a government—on the backs of productive taxpayers—is a major destructive trend. “Protective” tariffs and capital controls also lead to collapse. And excessive debt is a pathway to economic collapse.

We can see from the recent history in Venezuela how these political mistakes caused their collapse, and we can now observe how that collapse plays out.

But, going back to the title of this essay, how do we invest in collapse?

Well, the reader will be familiar with the investment principle of “buy low, sell high.” This means that the investor should not wait until an investment is already popular. He should invest when it’s at its leastpopular.

So, let’s look at that a bit more closely.

The principle would suggest that, in the main, the US, in its final, declining stage, is a poor country for investment, but that Venezuela could be a far better possibility.

But at what point should investment take place? Well, there are a few basic assumptions that might be made. First, investment is difficult at a time when there’s massive unrest. If a “boots on the ground” assessment can be made fairly safely, this can be a very advantageous time to begin studying possibilities.

Also, during a collapse, local businessmen and government officials are desperate and will cut virtually any deal with anybody, just to get a bit of money into their hands. Such deals are normally cancelled wholesale by the incoming government, after power has been transferred to them (often just for spite).

So, for any investor, the country should ideally be researched both during and following the collapse and a decision made as to what investments to focus on. Then, when the new government has largely stabilized the country (the riots are over and commerce has begun to function normally), the greatest opportunities for investment occur. The country is desperate for inward investment, and opportunities abound.

So, let’s have a look at a country that has already passed through its collapse stage and has stabilized.

Cuba collapsed for much the same reasons as its neighbour, Venezuela is now collapsing. But that was back in the 1990s. An anomaly in Cuba’s case is that the government was not overturned and the re-stabilisation was left to the still-collectivist government. Being unable to admit that they’d caused the collapse, but desperately needing a recovery, the Castro government chose the obvious solution—capitalism. By this time, the once-committed communist Raul Castro advised his brother Fidel that collectivism was a failure and that they must adopt a free-market if the country was to recover.

However, being unable to admit that the problem was of their own doing (they blamed the American blockade), they set about introducing free-market principles within the existing system.

Over the years since that time, it’s become increasingly possible for Cubans to open their own businesses, and to pay the government taxes on the profits.

Today, there are now so many cuentapropistas (business owners) in Cuba that the taxes generated have not only enriched many of the Cuban people, but have refloated the government. (Even a mid-level bureaucrat understands that the reason he’s been able to discard his thirty-year-old Russian Lada and now has a new Hyundai is due to the influx of tax revenue.) No one in Cuba has the cheek to call it “free-market,” but most everyone understands that the end of food shortages and the importation of such goods as appliances and stylish clothing is due to the cuentapropista revenue.

So, then, why isn’t this big news in the larger world? Well, although the free market has been taking over the Cuban economy (from the bottom, up) for over a decade, the Castro government still maintains ownership of much of the real estate, still owns many businesses, and controls the military. However, the government businesses (as they are collectivist) are highly inefficient, so the flood of tourists prefer the privately run businesses, which are thriving.

And the military is now in charge of renovating Havana’s old buildings for new shops—they’ve become a sort of urban public works department.

Yet the claim internationally is that Cuba is still communist.

Strictly speaking, this is so. But each year, more government businesses fold and more opportunities are given to allow restaurants, tourist accommodations, taxi services, farm cooperatives and factories to be started up privately by the Cuban people.

The government not only condones the free-market development, but encourages it, as today, the butter on their own bread comes from tax receipts, not Russian subsidies.

At present, the government still holds many areas of investment for itself. An outside investor cannot legally make an investment deal with a local unless he’s a “relation.” But the government creates opportunities and joint-ventures with outside investors for tourism, mining, telecommunications, energy, biotechnology, etc., and, in fact, each day cruise ships arrive in Havana Harbour from Miami, loaded with American tourists, whose countrymen are under the impression that they cannot enter Cuba legally.

The anomaly in Cuba is that it’s a country that’s being reinvented from within, but without the customary announcements from the political leaders that the “rebirth” is underway.

Raul Castro has just stepped down as president, but as I’d expected, he’ll stay on as the Secretary General of the Communist party until 2021, which would mean that he’ll continue to engineer the rebirth of Cuba from behind the scenes.

After this date, the cloak of free-market secrecy may be tossed off in Cuba, and those who have invested at the bottom will watch their investments blossom.

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On May 10, the Defense Advanced Research Projects Agency (DARPA) unveiled the Urban Reconnaissance through Supervised Autonomy (URSA) program, which addresses the issues of reconnaissance, surveillance, and target acquisition within urban environments.

The primary objective of the URSA program is to evaluate the feasibility and effectiveness of blending unmanned aerial systems, sensor technologies, and advanced machine learning algorithms to “enable improved techniques for rapidly discriminating hostile intent and filtering out threats in complex urban environments,” said FedBizOpps.

In other words, the Pentagon is developing a program of high-tech cameras mounted on drones and other robots that monitor cities, which enable identification and discrimination between civilians and terrorists through machine learning computers.

DARPA provides a simple scenario of what a URSA engagement would look like: 

“A static sensor located near an overseas military installation detects an individual moving across an urban intersection and towards the installation outside of normal pedestrian pathways. An unmanned aerial system (UAS) equipped with a loudspeaker delivers a warning message. The person is then observed running into a neighboring building. Later, URSA detects an individual emerging from a different door at the opposite end of the building, but confirms it is the same person and sends a different UAS to investigate.

This second UAS determines that the individual has resumed movement toward a restricted area. It releases a nonlethal flash-bang device at a safe distance to ensure the individual attends to the second message and delivers a sterner warning. This second UAS takes video of the subject and determines that the person’s gait and direction are unchanged even when a third UAS flies directly in front of the person and illuminates him with an eye-safe laser dot. URSA then alerts the human supervisor and provides a summary of these observations, warning actions, and the person’s responses and current location.”

The URSA program is a two-phase, 36-month development effort. The first phase of concept/development will begin in the first quarter of FY19 and continue into the second half of FY20. Phase two will start in 3Q20 and continue through 2Q22.

Figure 1. URSA Program Schedule

DARPA describes Phase 1: 

“Phase 1 will include initial technology research and trade studies to develop an evolutionary demonstration architecture and demonstration approach.

The Phase 1 program will be comprised of two performer tracks. Track A will be focused on system-level solutions and demonstrations. Track B will be used to fund compelling critical enabling capabilities such as component-level algorithms, behavioral analysis techniques, technologies or other unique research that could enhance multiple system level approaches.

The objective of Track B is to enable participation by companies with niche expertise who can only offer partial solutions to URSA. Track B performer results will be due approximately 12 months after award to enable assessment and potential teaming with Track A performers for Phase 2.”

Table 1. Phase 1 Metrics

Point of departure examples for a simulated URSA environment (left) and DARPA Phase 1 notional test environment (right) are shown below in Figure 2

In Phase 2, one or more Track A performers will continue to improve their system-level capabilities and test the program above a much larger city environment for field demonstrations by the second half of 2020.

Table 2. Phase 2 Metrics

DARPA recognizes that URSA “requires significant advances in active sensing, behavior understanding, and autonomous decision making to determine intent.”

The National Interest said this is “likely an understatement.”

‘An automated urban monitoring and threat detection system—that also tries to determine which inhabitants are hostile—would seem vulnerable to false alarms and spoofing,” the international affairs magazine added.

While the technology behind URSA’s advanced machine learning algorithms is classified, there is a reason to believe the program could be utilizing Google’s Project Maven, an artificial intelligence system used to speed up analysis of drone footage.

Project Maven, a fast-moving Pentagon project also known as the Algorithmic Warfare Cross-Functional Team (AWCFT), was established in April 2017. Maven’s stated mission is to “accelerate DoD’s integration of big data and machine learning.” In total, the Defense Department spent $7.4 billion on artificial intelligence-related areas in 2017, the Wall Street Journal reported.

The project’s first assignment was to help the Pentagon efficiently process the deluge of video footage collected daily by its aerial drones—an amount of footage so vast that human analysts can’t keep up. -Gizmodo

DARPA is setting the stage for a future of algorithmic warfare, where the military minds of the military-industrial complex in Washington feel URSA is the future for fighting in urban terrain. While the machines are not taking over just yet, the cross-functional use of URSA in urban cities across America is even more frightening.

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Submitted by Douglas Litowitz, law professor and securities lawyer in Chicago who has lived and worked in Asia.

The EB-5 investment program – created by Congress and administered by the USCIS – is defrauding Chinese investors by the thousands.  The Chinese investors are stuck in an American-made morass of federal securities law violations and state law fiduciary violations.  

For those who don’t know what EB-5 is (or who know it only vaguely as a shady scheme that President Trump’s former son-in-law was tied up in), the term “EB-5” is simply a visa designation for entry to the United States – like, for example, “H1-B.”  Under the EB-5 program, a foreigner can earn a green card and a path to  citizenship by investing in a new American business that creates a certain number of jobs.  Each big city in America is covered by one or more “regional centers” which act as sponsors for EB-5 projects.

Once upon a time, EB-5 was rarely used.  When the program was created, the USCIS designated a limited number of slots for permanent residence approval each year. This numerical limit was not a problem because EB-5 was restricted mostly to small groups of investors who funded small-scale developments.  No one dreamed of using it to build massive projects.

But then came the financial crisis.  

Lending dried up.  Developers started to panic. They scrambled for money.  If they wanted to build a hotel or a mall, they could not obtain junior financing. Sure, they could get a senior loan and maybe a secondary loan from American banks that insisted on being fully secured by the real estate and fixtures, but what about the junior financing that they needed?  If the project needed $500 million but the land and fixtures were worth only $300 million, who would supply the remaining $200 million of risky financing? No American bank wanted to lend that money because it was essentially unsecured and junior in ranking.  

The solution was found by mutating the small-scale EB-5 funds into massive Delaware entities with hundreds of Chinese investors.  Each of these massive EB-5 funds holdsup to hundreds of millions of dollars which are then lent out to a developer in risky financing.  In a shamelessconflict of interest, the developer itself often sets up the EB-5 fund under his complete control, then fills it up with Chinese money, and then loans the money to another of his corporations in a risky 4th and 5th position loan. In this way, most EB-5 funds are mere playthings of America developers and their enablers; once the money is in, the Americans shut out the Chinese from any involvement or information.

The EB-5 funds are sold in China through ‘finders’ (that is, unlicensed brokers) who put on lavish productions with raffles and free buffets and winking assurances that the Chinese investors are getting the American dream with profit.  Americans who are associated with the project usually come to China to tout the project, and the marketing is effective (this is what put Trump’s son-in-law in hot water).  The Chinese sign up by the thousands, even though they can barely read a paragraph of the paperwork.  They don’t even know what they are signing, they are just told that it is a gold rush with profit and path to citizenship at the end of the rainbow, so they sign everything put in front of them, even if they cannot read English. They trust in the American system. They cannot imagine that American law would leave them broke and without any remedy or citizenship.

* * * *

Let’s compare the theory of EB-5 with the reality of EB-5.

In theory, EB-5 works like this: (1) Chinese investors are recruited to each give $550,000 for a project that has been sponsored by a regional center and tentatively approved by the USCIS – typically a resort, hotel, shopping mall, or condominium complex; (2) the investor’s money is divided into $50,000 of ‘administrative expenses’ that is pulled off the top and $500,000 of ‘investment funding’ for which the investor receives a Delaware limited partnership interest; (3) the Delaware limited partnership eventually recruits hundreds of Chinese investors and holds up to hundreds of millions of dollars, calling itself an “EB-5 Fund”; (4) this massive pool of money is put into escrow and then loaned out to a development company under a loan agreement that makes the EB-5 Fund an extremely junior lender to the project; (5) the project gets built and hopefully generates sufficient returns to repay the loan; (6) once the loan is repaid, the EB-5 Fund returns the money back to the Chinese investors with interest and then dissolves; and (7) while the above has been taking place, the investors have been working with immigration lawyers for the project who have by now successfully petitioned the USCIS for permanent residency, which eventually gets granted on the grounds that the project generated sufficient jobs.  Then the investor becomes a US citizen.

In theory, everyone wins.  A city gets a new hotel or hospital or mall.  Americans get good jobs.  A developer gets junior financing to complete a construction project.  The immigration lawyers get a stream of clients. And the Chinese investors have the legal right to live out their days in America.  

In reality, every American involved in this project carefully avoids telling the Chinese directly and point blank that the escalating number of Chinese investors cannot be absorbed by the yearly 10,000 EB-5 visa quota, forcing the Chinese to wait indefinitely while a federal bureaucracy shuffles its feet and bumps against the limit of permissible visas. The wait is now over 10 years.  Meanwhile, the Chinese investors are shocked to realize that the EB-5 fund paperwork says that they cannot get their money back from the EB-5 fund – not even interest payments – until every investor in the fund gets approved for unconditional visas.  Their money, if it even exists, is locked up indefinitely.

I am in Beijing as I write this.  I have just met with investors who point up to the clouds and tell me that their family’s money and green cards and dreams are up in the sky — that is, nowhere.  They have no idea when they will get any money back, no idea how their investment is going, and no idea what is going on.  And no one will talk to them.  When they call the US developers, lawyers, and regional centers, they are told to go away.  When they approach the Chinese ‘finders’, they are told to go away.  American lawyers and American businessmen have played them for suckers.

With nowhere to go, they come to us.  Hundreds of Chinese investors have contacted our team, pleading for help in extricating themselves from an impossible morass.  There are thousands behind them.  They just want their money back, period. They feel gullible and ashamed for believing the rhetoric that American markets were efficient, that managers were accountable, and that regulators were rooting out securities fraud.  They were wrong. They wanted to come to America to escape corruption and fraud, but they found it on the path here.

The SEC should be all over this.  But in fact they have taken action only against the obvious cases of fraud. In Chicago, one EB-5 fund was a Potemkin Village of development signs with no actual ownership of property; in many states, developers absconded with Chinese funds; in Palm Beach, a project barely got started before the EB-5 money disappeared; in South Dakota an investment in a meatpacking plant went bankrupt and left the Chinese with nothing; in Vermont, a ski resort project collapsed spectacularly; lawyers across the country have been punished for pushing clients into EB-5 structures and thereby acting as unlicensed brokers.  The tales of horror keep coming one after another – problems have arisen all across America.  Forbes Magazine called it, “The dark, disturbing world of the visa-for-sale program.”  

Greed is a powerful motivator.  When you give a developer hundreds of millions of dollars of foreign money from nameless and faceless people who cannot monitor the investment, and the developers know that the money doesn’t have to be returned for a decade or more, there is too great a temptation to waste the money or abuse the investors.  And when the developer itself is put in charge of the EB-5 Fund, the developer is effectively both the borrower and the lender, so it has no incentive to act on behalf of the lenders who are Chinese investors.  In many cases, the project runs into trouble and gets turned over to the senior lenders, cutting out the Chinese EB-5 fund.  In other cases, developers simply abscond with the Chinese money since they know that it won’t have to be returned for a decade.  The SEC issued an alert in 2013 warning investors of EB-5 “immigration scams,” but the SEC hasnot yet realized that even the seemingly “normal” EB-5 projects are shot through with securities laws violations.  A few of these are listed below.

* * * *

(1) Money Laundering and Transfer Limits. EB-5 investors typically pay $550,000 to invest in an EB-5 fund.  This is itself a violation of Chinese law that imposes a $50,000 per person annual limit on moving money outside of China. Few people in China are walking around with that kind of money, and if they are, they can get citizenship in easier ways than EB-5.  So for the EB-5 investors who are mostly middle to upper-middle class, this money is assembled from family members and from “grey income” generated in many cases by phony mortgage loans from questionable operators in China.  So right off the bat, the Chinese ‘finders’ are involved in shady contortions to assemble and then convert the investors’ Chinese yuan to American dollars through a mysterious kind of alchemy that is not legal in China. In many cases, family money is transferred out of China in pieces for a stop in Hong Kong where it is reassembled into a chunk of $550,000. The Americans know this, and they turn a blind eye.

(2) Unlicensed Brokers. The Chinese ‘finders’ and the American developers (and their lawyers) are selling US denominated securities in China but are often unlicensed in the US as broker-dealers, and also unlicensed in China, even though they are placing securities with buyers, a classic example of broker-dealer conduct. Many, if not most, of these EB-5 Funds are sold without any licensed broker involvement, and no suitability analysis, to unsophisticated and unaccredited buyers. The EB-5 offerings are not registered in China and should not be marketed to private Chinese citizens in the first place.  The finders are motivated by hefty commissions paid by the American promoters, often receiving millions of dollars to place the securities with Chinese citizens.  And often the immigration lawyers and regional centers and developers are part of the road shows in China, making them effectively brokers as well.  It is odd – indeed, sordid – for lawyers to stand up in front of strangers and promote investment in a project that will funnel legal work to them.

(3) Non-Accredited Investors.  The paperwork for each project requires the Chinese investor to attest that he is an “Accredited Investor” so that the Fund will qualify as a private placement under Regulation D and not be deemed a public offering.  But in fact virtually none of the investors are accredited.  Most of them are using pooled family money or borrowed money. Regulation D requires that the issuer of securities (the American company) verify the Accredited Investor status of the investors, and not simply rely on their statement that they are accredited.  But no one bothers to verify the assets and income of the investors by looking at their bank statements.

(4) Unregistered Investment Companies.  EB-5 funds typically have more than 100 persons in them, which triggers a requirement to register as an Investment Company, and it triggers a requirement that the Fundshould be advised by a Registered Investment Adviser.  But the EB-5 funds refuse to register.  They often divide the investors into two groups of fewer than 100, hoping to come under the threshold by insisting that the two offerings are not integrated, or they proceed under the lie that all investors are accredited or qualified investors (high net worth). Most recently, EB-5 funds claim to be exempt from registration under the Investment Company Act on the preposterous notion that they are ‘real estate funds’ because the EB-5 fund holds a worthless 4th or 5th mortgage with a negligible loan-to-value ratio.  This is akin to borrowing $10 million from your local bank and giving them a mortgage on two square feet in your backyard and then calling it a “real estate loan.” In reality, everyone knows that the Chinese investors are making unsecured loans and basically getting IOUs that have a nominal 5 year term but will almost never get paid at maturity. And rarely are the funds advised by Registered Investment Advisers.  Many of the offerings are made to hundreds or thousands of investors through unregistered brokers, unregistered funds, and without registered investment advisers.

(5) 10b-5 Securities Fraud.  The EB-5 funds do a bait-and-switch whereby they come to China and make promises in person during the road show that are later disavowed in the offering memorandum.  For example, they often make untrue statements to the Chinese about the likely term of the loan being 5 years, the speed of getting USCIS approval in that time frame, that the loan is fully secured, that financing at senior levels is already in place, that the projections show a timely completion date within profitability in a few years, and so forth. I know that this happens because I have been recruited to make these exact types of presentations. It is fraudulent to imply a certain level of performance and to put on a big show and give out raffle prizes, then turn around and saddle the investors with offering documents that waive all their rights and disclaim all representations.

(6) Abuse of Regulation S.  Some of the developers try to hide behind Regulation S, which covers securities that are sold offshore to non-residents.  But the whole point of an EB-5 investment is to bring the investors to America,which is the very opposite of the point of Regulation S.  And further, many of the investors and family memberswho contribute capital to a pool of money invested by a Chinese national are already living in the US under a university visa.  It is not uncommon to attend an EB-5 show in China where you will meet students from American universities who are helping their families pool money so that one of them can be the designated investor. Just from an ethical perspective, it is repugnant to use Regulation S as a shield to prevent US companies from misconduct structured in America.  

(7) Breach of Fiduciary Duties. The next point is shocking. In many, perhaps most cases, the EB-5 fund is controlled by the very developer to whom it lends money. I will say that again so that it sinks in: the Chinese investors put their money into an EB-5 fund that is controlled by the developer who then instructs the Fund to loan money to the developer’s construction company. The Chinese arefunding the developer’s left hand which then lends money to his right hand. This is an inescapable, fatal conflict of interest: no developer will effectively lend money to itself and then declare itself in default.

(8) Non-Waivable Conflicts of Interest.  In most EB-5 arrangements, the Chinese EB-5 Fund is a lender to the project but has no independent lawyer, no independent appraiser, no power to call a vote, and no way to replace the general partner or managing member as the controlling person – the dictator – of the EB-5 fund.  Often the fund has an offshore or remote entity created by the developer as its general partner, who cannot be reached.  The investors’hands are absolutely tied. Even worse, they are forced to be represented by the lawyers for the very developer to whom they are lending money. The lender and borrowers have the same attorneys! In some cases, the Chinese sign partnership agreements that prevent them from even talking to other lenders. Most of their rights as LLC members or limited partners have been waived in the paperwork, including claims of breaches of fiduciary duty.  This is all done in complicated language that 99.9% of Americans cannot understand, let alone Chinese people.  

(9) Mischaracterizing Equity as Secured Debt. Most EB-5 funds are lenders to the project, but they are subject to an Intercreditor Agreement with the senior lenders who are often banks that hold secured 1st or 2nd mortgages. The Intercreditor Agreement prevents the EB-5 fund from declaring a default of the EB-5 loan.  First they have to notify the senior lenders, let those lenders take all the money out first, leaving the EB-5 fund to pick up whatever is left, which in most cases would be nothing.  In other words, there is no residual interest and no remedy for misconduct.

At this point, you might ask, “Where are the lawyers?” They are hiding.  When the Chinese investors call the US lawyers for the developers, they are told to call the immigration lawyers.  When they call the immigration lawyers, they are told to call the developer’s lawyers.  Round and around it goes.  The Chinese investors are lenders – often massive lenders of tens or hundreds of millions of dollars – but they have no idea if they can declare default, they have no right to foreclose, and no independent representation.  

(10) Legal Malpractice and Failure to Warn Clients.  The immigration lawyers do not tell the naked truth to theChinese investors.  They should write in giant black lettersin Mandarin on every document that there is a crippling backlog of citizenship applicants and that the Chinese will have to wait indefinitely for their money and their permanent residence.  But typical for lawyers, they hide disclaimers in the paperwork where the Chinese can’t find them.  Make no mistake: the immigration lawyers purposely don’t tell the Chinese that Congress sets aside only 10,000 visas for EB-5 petitioners each year and that covers only about 3,000 families, and that since 2012 the EB-5 submissions have surpassed the annual quota by 100% to 500%. And what about the practice of bundling their legal services with the fees paid to the Chinese ‘finders’ – it is a very suspicious bundle of legal fees, investment fees, and brokerage commissions. The projects often force investors to use a particular immigration firm or else pay double for the immigration documents if they choose a lawyer of their own. And when the time comes to submit documents to the USCIS, much of the paperwork submitted by immigration lawyers for the projects contain errors, often due to erroneous information submitted by the Chinese finders.  The whole thing is a giant ball of confusion among lawyers, brokers, and securities issuers – an unholy alliance of relationships that should not be combined into a single package.

If you are an American reading this, please try to put yourself in the shoes of a Chinese EB-5 investor. You invest in a Delaware LP or LLC that makes a massive loan to a developer, but even though you are a lender you have no right to foreclose on the loan or even to speak with the other lenders. You and the other Chinese investors hold a worthless mortgage.  The maturity date of your investment is unknown and far away.  You cannot get accurate information about the project.  You have no idea when you will get the promised permanent residence.  You have no idea how the loan is doing or when you can expect your money back. None of the federal securities laws seem to protect you.  You cannot sue for fiduciary duty violations. You are not getting any interest payments. You cannot get an audience with anyone in authority for the transaction. You are completely cut off, and 7,000 miles away from your money.  

Do we really want to tell these people – who are clearly victims of fraud – that this state of affairs is all their own fault for not being scrupulous English readers, and that American law is caveat emptor, and that they have no remedy?  What message will that send about how America regulates its companies and its securities issuers?

* * * *

The EB-5 projects were not built by experts in securities law. Rather, the structures were built by immigration lawyers and real estate lawyers – people who knew very little about the requirements of registration with the SEC and very little about fiduciary duties in business structures.

Robotically, they simply “scaled up” EB-5 investments from 5-person equity deals to 500-person lending funds.  They didn’t realize that this triggered a host of securities laws and corporate fiduciary duties.

The EB-5 program will not end well.  It cannot be “fixed.”  It is shot through with fraud.

The honest course is for the SEC to admit that the program has mutated into a scam, even in ‘normal’ projects.  The Chinese money should be returned to all investors who want it back.

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