Month / November 2015

by Frank Maduri

The Great Escape: Pfizer’s Takeover Bid of Allergan

The pharmaceutical giant known as Pfizer is the latest industry giant to pursue the takeover of a smaller competitor in order to relocate their corporate offices overseas to avoid U.S. corporate taxation. In a transaction known as a tax inversion or “inversions” Pfizer is attempting to obtain Allergan, the maker of Botox among other industry leading products, for $150 billion dollars according to many media reports.

 

Allergan is headquartered in Ireland, which has one of the lowest corporate taxation rates in the world (17%) compared to the U.S. which depending on the size of the company is much higher (it is estimated that Pfizer has a taxation rate around 37%). I wrote an article for UPI previously on this topic when Walgreens mulled a shift of their corporate HQ to the UK and then disbanded the plan (http://www.upi.com/Top_News/Analysis/Outside-View/2014/07/25/Economic-patriotism-and-US-corporate-tax-inversion/6741406146830/).

 

This news comes amid the reports that the Department of Treasury is about to announce some changes in the rules for mergers and acquisitions which will make it more difficult for companies to complete these type of inversion transactions. The other political force at play here is the election cycle which the issue of inversions will be a hot topic for the 2016 Presidential campaign trail.

 

Counterpoint

 

The argument made by Pfizer for the defense of this transaction and the justification for it has three different components:

 

  1. Pfizer will still be spending a ton of money in the U.S. on R&D, employee payroll taxes, and other business spending to boost the domestic economy
  2. The change in HQ to Ireland will allow them to more easily access the foreign currency accounts they have for the business they conduct in their overseas units.
  3. The Pfizer financial advisors have made statements to the media that the bigger issue to the antiquated U.S. tax codes and business regulations which create an environment in their words which is “uncompetitive”.

 

In fair balance, they make some valid points but the fact remains that Pfizer has joined the ranks of other large companies in the pharmaceutical space and beyond to move their headquarters out of the United States which really negatively impacts the American economy from several perspectives.

 

First, the government has to make up that gap in the tax revenues they will lose from that corporation (especially one the size of Pfizer) relocating. The next big issue is the loss of the jobs which are generally higher paying and suitable for candidates with a higher level of education. The recent unemployment reports will demonstrate that our domestic economy is lacking those types of higher paying jobs and that millions of people with college and advanced degrees are “underemployed” working several part time jobs to supplement the income of a full time position that does not exist.

 

It is also bad for the public perception of America to have these corporations relocate and that should be the impetus for Congress and the leaders of businesses to get together and forge some type of agreement that works for both sides to avoid these types of inversions in the future. We all have a vested interest in making America remain the best nation on Earth. We have to work together to make that possible in the future.

 

 

 

 

by Frank Maduri

Below The Ground: Fracking Wastewater & Irrigation

I have covered the drought in California and other Western states as well as the energy industry trend of hydraulic fracturing (aka fracking) to explore new reserves of petroleum products. These concepts converged today when I was conducting research for another story and came across the petitions from environmental groups, such as The Sierra Club, and letters to the editor in the LA Times from concerned citizens about the use of wastewater from fracking operations.

 

My previous research in this topic provided me with the knowledge that the oil companies are not required to disclose what chemicals are used in the fracking process. The test results of the water used is not released publicly, and the EPA has confirmed in the past to NBC News that the wastewater used from fracking has been injected into the groundwater supply wells in California.

 

The Sierra Club petition is aimed at the USDA with the goal of eliminating the use of fracking wastewater in the irrigation for crops used for food for human consumption. The second part of the survey involves an aspect of this issue that will make your mind explode: changing the guidelines which allow the food from some of those crops to be labeled “organic” in the future.

 

So, I imagine many of you out there are like me when you purchase organic foods, you feel like you are protecting your family by spending the extra money for an organic product. I found the news that foods made with petroleum and chemical laced water very unsettling to put it diplomatically.

 

In a report I found through an NBC News affiliate in California at one point over 3 billion gallons of tainted wastewater was pumped back into the groundwater aquifers. This news comes on top of an already angry public sentiment toward oil companies and the state government there because of the horrible drought conditions. It takes millions of gallons of water to conduct fracking operations to force out the potential oil resources below the ground. The state government has put water restrictions in place for residents but allows corporations to use water for fracking and also continues to allow huge companies like Nestle to bottle water (see my earlier article on that issue).

 

In that same report testing was done on the water in wells in the affected area and the samples came back with high levels of arsenic and thallium among other chemicals. This news comes at the same time that the Keystone pipeline proposal was rejected by the Obama Administration and because of the widespread prevalence of fracking, combined with other factors, oil prices are low amidst sagging demand and increased supply levels.

 

I stumbled upon an article a few weeks ago about the growth of the middle class in China which has resulted in increased demand there for American food products particularly fruits and nuts. The majority of the supply for these crops here in the US is from California farms. There is a backlash now, that during a prolonged period of drought, we are essentially exporting water to China in the form of the resources used to make products such as almonds and citrus fruits. It is an interesting concept to ponder.

 

The plight of the California farmer has already made news headlines with stories of water prices skyrocketing which are forcing farmers into very dangerous positions. In some cases what used to cost the farmer $25,000 in water now costs $250,000 for the same amount of this precious resource. The issue now is that some of those water sources have been contaminated with fracking wastewater, which obviously is a huge problem for everyone involved. The EPA has to work with the various levels of government to eliminate this practice.

 

In Too Deep

The standard practice with fracking now with regard to the disposal of wastewater used to find pockets of oil or natural gas is to release it deep into the ground, often as deep as they have drilled in their search for new energy resources. I would maintain based on this issue with irrigation water being tainted that the entire process of handling the wastewater disposal needs to be reviewed and changed. In the current system it becomes too easy to accidentally taint the groundwater supply intended for human and animal use.

 

I have been writing for years now that the entire process of labeling food especially organic products needs to be completely overhauled. This news is evidence of that need and for the USDA and the other federal agencies to move that process forward vigorously in the weeks and months ahead.

 

It also becomes clear through this situation that energy companies are in too deep, quite literally and figuratively when it comes to the process of fracking. The fact that they are not mandated by law to disclose what chemicals and at what level those chemicals are used needs to be revised.

 

I urge you all to learn more about this issue because I know I am not alone when I read that the organic tomatoes I have downstairs some with possible tainting from petroleum based chemicals and other toxins. We need to protect our crops, our land, and our water supply from these harmful chemicals, and we can do it if we act together in unity.