This site deals only with the corporate corruption of science, and makes no inference about the motives or activities of individuals involved.
There are many reasons why individuals become embroiled in corporate corruption activities - from political zealotry to over-enthusiastic activism; from gullibility to greed.
Please read the OVERVIEW carefully, and make up your own mind.
Roger Charles Kormendi
— A Professor of Economics at the university who worked briefly for the Tobacco Institute through Ogilvy & Mather and Savarese & Associates. —
Professor Roger Kormendi was a member of the cash-for-comments economists network run by Robert Tollison and James Savarese for the Tobacco Institute. However he was used in a different way to the main economists on the list — each of whom were required to focus their propaganda on an allocated state, a regional newspaper (or two), and a couple of Congressmen.
Kormendi at the University of Chicago proved to be useful in other ways, and the State of Illinois was already the commissioned territory of Professor Fred McChesney, also of the University of Chicago, who had been one of the founding members of the network, and also Professor James Heins at the University of Illinois. So Illinois was well covered.
Tollison and Savarese acted as contractors and cut-outs for the tobacco industry, using the Center for the Study of Public Choice at George Mason University ( GMU), which supplied the adminstration staff. Anna Tollison worked for Savarese as an administrator and organizer. They recruited ultra-libertarian economics professors at the major state universities through the Public Choice Society and various regional economics societies.
They were not paid retainers or salaries, but were erratically commissioned to perform specified functions (usually for $1000 to $3000 per project) when the tobacco industry came under attack or when it wanted to influence Congress or some local State Assembly. Some earned much more — often in the $20-40,000 range — for producing 'independent research' which was customised to produce the desired results.
Payments were never made directly from the tobacco industry to the economists. Commissions were all carefully laundered through Savarese's company or Tollison's GMU operations — and so the economist (wrongly) assumed this would provide deniability if ever challenged over selling out their academic credibility to the merchants of death.
The problem is not that these scientists were ultra-libertarians, and that many of them were proto-Tea-Party disciples of Ayn Rand, Frederick Hayek and/or Ludwig von Mises. Nor was it necessarily made worse by the fact that the industry they helped prosper made a product that caused the premature death of about four million people globally each year.
The problem is that these academics
- exploited their trusted position as a teacher at a university to promote dubious corporate view-points contrary to the public good.
- hid their corporate links from the university administration and staff, and from the public which ultimately paid their salary.
- exploited the public trust in universities and their reputation for independent research, for their own financial benefit.
- allowed the tobacco industry to preview, edit and alter the reports they wrote specifically as industry propaganda.
- wrote op-ed articles which were planted on their local newspaper — misleading both the editors and the readers,
- maintained a claim of being 'independent academic/scientists' when writing to politicians or giving evidence at hearings, etc. after being coached by tobacco lawyers.
- generally acting secretly as tobacco industry lobbyists.
Over a hundred professors of economics at major American universities were successfully recruited by Tollison and Savarese, and many of them remained in service to the tobacco industry for many years. Others only served for a short time, and then dropped out voluntarily ... or were found to be unreliable or unsatisfactory.
Some key documents
• Associate Professor of Economics University of Chicago and Director of Research Mid-America Institute for Public Policy Research
He spent 13 years on the faculty of the University of Michigan.
1949 July 24: born in New York and grew up in Fairfax County, Virginia.
1967: graduated Woodson High School d
1971: graduated from the University of Virginia.
1975: began teaching in the graduate business school at the University of Chicago.
1977: PhD in economics from the University of California at Los Angeles.
1984: [He founded the think-tank, the Mid-America Institute for Public Policy Research, Inc. [aka Mid American Institute]. His research projects on financial matters led to such publications as "Public Policy in Flux" (1986) and "Black Monday and
the Future of Financial Markets" (1989). However the tobacco archives don't show this think-tank being used to support the cigarette business.
The think-tank later changed its name to Catalyst Institute and it is now part of the extreme corporate-backed libertarian Atlas group of think tanks. There is only one minor reference to Paul Knapp, President & CEO of the Catalyst Institute in the tobacco archives.
1984 June 20: Patricia Milita of Ogilvy & Mather PR writes to Michael Kerrigan at the Tobacco Institute.
Following is the information you requested on The Tobacco Institute's involvement in the U.S. Department of Treasury's tax simplification hearings in your region.
- So far, one hearing has been held in the Northern Sector: in Minneapolis on Tuesday, June 19. Dolores Martin, an economics professor at the University of Nebraska, presented testimony at that hearing. We arranged interviews for her with KSTP-AM (radio) and KSTP-TV (both are St. Paul stations). A copy of her testimony and a biographical sketch are attached.
- The next hearing [June 25] in your region will be in New York on Monday, June 25. Harold Hochman, an economics professor at Baruch College of the City University of New York, will testify. Hochman's testimony (subject to his revision) and biographical information are attached. We are seeking media coverage for him.
- The final hearing is scheduled for Thursday, June 28 in Springfield, Illinois. We are now preparing testimony and seeking both an academician and a small business spokesperson to present testimony at that hearing.
1984 June 28: These are Roger Kormendi's remarks made at the Treasury hearings in Springfield on behalf of the tobacco industry.
[He does not mention at the hearing that his statement was funded by, and requested by, the Tobacco Institute]
1984 July 2: The USA Today Story about the Springfield hearings. One sidebar was totally concerned with reporting that the Tobacco Institute was behind Kormendi's testimony.
The institute backed testimony last week by Roger Kormendi, a University of Chicago economics professor who doesn't like the hidden aspect of excise taxes. A 16-cent excise tax is built into the price. of each pack of cigarettes.
Although not noted in his testimony, Kormendi said later that The Tobacco Institute, through a public relations firm, paid for his travel expenses and time preparing testimony.
But Kormendi stressed that while this might be considered a lobbying effort on the part of the institute, his views were strictly his own: "I speak for myself and hold my own views."
[To echo Mandy Rice Davies — "He would say that: Wouldn't he!" ]
1984 July 2: O&M PR reports to Peter Sparber about the Treasury Department Hearings in New York, Washington and Springfield:
- New York: Harold Hochman, Economics Professor at Baruch College of the City University of New York, testified Monday, July 25 at the U.S. Treasury hearing in New York.
We arranged an interview with Meredith Hollas of WNBC-AM. It lasted 10 minutes and Hochman concentrated on the excise issue.
During his testimony, Hochman was photographed by the Berton County Record (Hackensack, NJ Daily) and Cable News Network. We supplied reporters from these outlets with copies of his testimony as well as several other reporters in attendance. Hochman was very relaxed and animated in his testimony, but was slightly nervous during his interview.
- Washington: Robert Tollison, Professor of Economics at George Mason University, testified Tuesday, July 26 at the Washington tax reform hearing
Tollison's testimony concentrated solely on cigarette excises.
Several reporters attended the hearing and we distributed testimony to each. Fortune and Nation's Business did not attend the event but were interested in receiving Tollison's testimony.
We also taped a Q&A with Tollison regarding excise taxes, an interview with a "man-in-the-street" on the issue, and Tollison's testimony for use in a wrap-up news story on the hearings to be released via satellite.
- Springfield: Roger Kormendi, Professor of Economics at the University of Chicago, testified at the final tax reform hearing on Thursday, July 28 in Springfield, IL.
Kormendi was a very effective speaker and impressed the Treasury Department officials. Both officials asked him numerous questions concerning his testimony and [Dep.Ass.Sec.]Pearlman wanted to get in touch with him over the telephone to further discuss Kormendi's views.
Kormendi was very articulate and relaxed with the press. We arranged an interview with WNNS-AM of Springfield that took place at the hearing. The interview lasted 10 minutes and Kormendi concentrated on the unfairness of "hidden taxes."
He was also interviewed by:
- The Chicago Tribune — Kormendi is a friend of the reporter who covered the hearing.
- TV 31, Peoria, IL — Five minute interview covering his views on excises and consumption taxes.
- Bureau of National Affairs —Reporter talked to him briefly about the main points of his testimony. She took his phone number for further information.
- USA Today — Reporter had received information from O&M and wanted to know if TI had funded Kormendi's speech. Kormendi adamantly told him that although TI funded him, his views.were his own.
- Attached is a tape of Tom Borcherding's interview on the Michael Jackson Show (Los Angeles).
A summary by William Giese carried in USA Today was reported to tobacco executives:
As part of a tax reform study ordered by President Reagan, the Treasury Department has sponsored a cross-country series of eight public hearings on taxes. Big businesss ignored these hearings on tax reform, but at least one powerful lobbying group — The Tobacco Institute — quietly participated. The Institute backed testimony by Roger Kormendi, a University of Chicago economics professor who doesn't like the hidden aspect of excise taxes.
In the USA Today article, Kormendi is reluctantly forced to confess his TI commission:
Although not noted in his testimony, Kormendi said later that The Tobacco Institute, through a public relations firm, paid for his travel expenses and time preparing testimony.
[The Faustian disclaimer]
But Kormendi stressed that while this might be considered a lobbying effort on the part of the, institute, his views were strictly his own: "I speak for myself and hold my own views."
Ogilvy & Mather PR reported on the various hearings to the Tobacco Institute (July 2)
- Harold Hochman, [cash-for-comments] Economics Professor at Baruch College of the City University of New York, testified Monday, July 25 at the U.S. Treasury hearing in New York.
- Robert Tollison, Professor of Economics at George Mason University, testified Tuesday, July 26 at the Washington tax reform hearing.
- Roger Kormendi, Professor of Economics at the University of Chicago, testified at the final tax reform hearing on Thursday, July 28 in Springfield, IL.
Kormendi was a very effective speaker and impressed the Treasury Department officials. Both officials asked him numerous questions concerning his testimony and Pearlman wanted to get in touch with him over the telephone to further discuss Kormendi's views.
1984 July 16: A summary report of the Tobacco Institute notes that they had managed to plant economist witnesses at six of the eight Treasury Department regional hearings.
- Thomas Borsherding at Los Angelos on June 12
- Delores Martin at Minneapolis on June 19
- Fred McChesney at Atlanta on June 20
- Harold Hochman at New York on July 25 (sic...June?)
- Robert Tollison at Washington on June 26
- Roger Kormendi at Springfield June 28
Kormendi was the only one employed by the Tobacco Institute, but not formally a member of their network at this time.
Peter Sparber follows this up a few weeks later with a note to Bill Prendergast in his PR Plan to Deal with Excises: [See below]
1984 Aug 2: Jim Savarese writes to Peter Sparber at the Tobacco Institute RE the Federal Excise Taxes project. He maintains that cigarette taxes are likely to be increased with the New Congress and suggests pre-emptive activities:.
In order to make cigarette taxes a less desirable option for policymakers, it is important for the industry to enlist new allies in order to influence key members of the House Ways and Means Committee and the Senate Finance Committee, especially those members that have not been friendly in the past. He wants them to sponsor some faux-forums on such subjects as "Financing Medicare" (etc.) in key states and congressional districts with labor experts and academics who will articulate the industry position.
The main allies, speaker and lobbyists-for-hire would be
- Arthur Flemming, former HEW Secretary under Eisenhower.
- Wilbur Cohen, former HEW Secretary under Johnson,
- Ray Marshall, former Labor Secretary,
- Bob Mclntyre, Director of Federal Tax Policy for the Citizens for Tax Justice. Mclntyre is prepared to sit down with a representative from TI to discuss specific sections of the study to see whether there might be common interests in the findings.
- [Economist] Peter Gray, Director of the School of Administrative Sciences at Rutgers, is an economist who has done work for the industry in the past. Gray may be the logical choice to serve as host for the conference and his paper could attack consumption taxes from a conservative, pro-business perspective.
- [Chicago symposium] Professor Robert Eisner (Northwestern University) , is the most vocal, and extremely credible, proponent of the notion that the current deficit, if properly defined, is not too large.
If we could get Eisner to agree to participate, we could work with some University sponsoring agent at either Northwestern or the University of Chicago ( Roger Kormendi, a professor in the Business School, worked for us on the Treasury Project).
A well-known economist, perhaps Eisner, should be engaged to produce a "think piece" for a major newspaper which condenses the arguments made during the symposium.
1984 Sept 6: O&M's Monthly Activities Report [Patricial Milita] specifies:
- numerous activities with Al Vogel
- Arranged and attended a meeting with Steve Schlossberg, from the law firm of Zwerdling, Schlossberg, Leibig, and Kahn. (Became a regular witness for TI)
- meeting with Bob McIntyre, the legislative director for CTJ.[Also Dean Tipps]
- Participated in the first meeting of the Tobacco Industry Labor Management Committee and prepared the minutes.
- Began to identify possible minority consultants; one for the long-term and one to write an article criticizing the discrimination inherent in William Weis' work.
- Hired Roger Kormendi to prepare testimony for submission to the Senate Finance Committee.
- Researched and wrote background information on Paul Craig Roberts. Participated in two meetings with him to discuss possible consulting arrangement with The Institute.
1984 Nov: "Reaganomics: Its Impact on the Economic Status of Hispanic Americans" — a blatant Tobacco Institute attempt to use Mexican-Americans to lobby President Ronald Reagan. Reagan had tried to shift the burden of taxes from Income Tax to Excise Taxes. Kormendi wrote for them:
"The problem that arises from hidden taxes is that without the knowledge of their true tax burden, the tax-paying public cannot exercise effective political control over their overall tax burden.
[One could say much the same about the honesty of economists who produce such quotes on behalf of a client like the tobacco industry — and fail to acknowledge their hidden conflicts of interest.]
People will see the resulting price increases and/or wage reductions but will generally fail to recognize the source to be hidden taxes. Constituent political pressure on Congress will therefore be misdirected away from the true problem."
1985: Kormendi was used by the Tobacco Institute to promote the idea that cigarette excise tax increases were "regressive" — impacting the poor proportionally more than the rich [which all charges do]. This idea was promoted through a project to produce the booklet "Excise Taxes: The Fairness Issue" — which sought to extend the 'regressive' argument into the Black and Hispanic communities, and give excise taxes racial overtones.
|Regressive vs. Progressive|
The Fairness Issue.
|"Regressive charges" are those which impact (proportionally) more on the poor than on the rich... which, if you think about it, is virtually everything you can buy, from cigarettes to a skiing holdiay in Aspen. In other words, "regressivity" is the natural state of an economy — made worse by disparities in income.
So the question an honest economist needs to ask about the regressive nature of cigarette cost is: "What overall effect does each component of the cigarette pack charge have ?" These components are:
Honest economists will then offset these cost to the consumer against the value each component brings to those on lower incomes. This gives us the 'net' rather than 'gross' regressivity of each component:
- The cost of the raw materials in a cigarette — most of which flows to the heavily subsidised tobacco farmer.
- The cost of manufacture and distribution... among the lowest proportionally of any consumer product.
- The profit-margin of the cigarette companies and the excessive salaries of company executives, which is among the highest of any industry.
- The component costs of marketing, advertising, and lobbying... easily the highest of any industry.
- The state, federal and local excise taxes on cigarettes.
So cigarette excises, while superficially 'regressive', are highly 'progressive' at the more fundamental level — that of promoting benefits which service the poor more than the rich. The costs more effectively discourage smoking and its associated financial and health costs in the low-income groups, and earmarking diverts more tax dollars to finance the services they utilise.
- High profits benefit the rich shareholders and top executives... but they may also create employment for maids and gardeners.
- Marketing and advertising costs benefit the ad agencies and the media.
- Lobbying costs flow to thousands of state and federal lobbyists and support generous 'honoraria', bribes and campaign donations to politicians — and secret payments to certain dishonest academics.
- Earmarked excises, usually flowing directly to medical and social welfare schemes directed mainly at those on lower incomes.
Kormendi appears to have disconnected from the tobacco industry about this time. Although he was contracted through Savarese and Ogilvy & Mather and worked to promote cigarettes, he was never formally a member of the cash-for-comments network. He was never allocated a State, or a newspaper, or a Congressman to influence.
1986: produced early report on the Thrift Crisis: Deregulating Financial Services: Public Policy in Flux
1989 Feb 17: Kormendi's Mid America Institute for Public Policy Research, a Chicago-based research organization, has received $148,000 from the Federal Home Loan Bank Board to evaluate the nation`s thrift crisis by next Friday. In particular the group, made up largely of academics, will examine the savings and loan bailouts engineered by the bank board at the end of last year.
- See more at: http://articles.chicagotribune.com/1989-02-17/busi (etc.)
1989 March: Kormendi's Mid-American Institute for Public Policy Research was working for the Republican Party. It ran a task force on the Thrift Crisis, and produced a report to the Banking Committee of the US Senate.
Among these [reports] were Deregulating Financial Services: Public Policy in Flux in 1986 and Black Monday and the Future of Financial Markets in 1989.
The most influential, however, was the Institute's publication of Crisis Resolution in the Thrift Industry in 1989, just as Congress was confronting the savings and loan crisis.
Its analysis and recommendations were incorporated in many respects both in the legislation passed to address the crisis, the Financial Institutions Reform, Recovery and Enforcement Act of 1989, or FIRREA, and in the policies adopted by the federal agency created by FIRREA, Resolution Trust Corporation, which conducted the thrift clean-up.
1989 Jul: In Economic Inquiry: 'Taxation, Aggregate Activity and Economic Growth: Cross-Country Evidence on Some Supply-side Hypotheses."by Reinhard B. Koester and Roger C Kormendi,'
A reduction in marginal tax rates leads to higher per capita income, even if total tax revenues stay the same. [Source: National Center for Policy Analysis]
1991: / E Co-founded Kormendi \ Gardner Partners, known as KGP, a financial advisory firm based in Washington, D.C.
At KGP, Dr Kormendi directed and co-directed many innovative financial engagements for public and private clients.
1996: settled in Washington DC with a second home in Clearwater, FL
2009 Feb 25: Died
Roger C. Kormendi, 59, a founder of a financial advisory business in Washington, who also taught at the business schools of the University of Chicago and the University of Michigan, died February 25, 2009, at his home in Washington. He had Creutzfeldt-Jakob disease, a degenerative brain disorder.
Dr Kormendi was an economist who did research in finance and public policy and was the author of more than 50 scholarly articles and books. In 1991, he co-founded Kormendi\Gardner Partners, a Washington financial consulting and investment firm that helped arrange complex financial partnerships between the public and private sectors. His clients included federal agencies and foreign governments.