Flynn Pleads Guilty

Earlier in the year I wrote about Michael Flynn being fired by President Trump. Now the story continues, as he has pleaded guilty to lying to the FBI. Now, if I were writing about this in a novel, it would be important to construct the plot so that there was a reason why Flynn would plead guilty, but in real life, why would that be?

In a novel, one reason might be the noble acceptance that he knows he lied, so he will take what follows on the chin. Strictly speaking, we do not know that this is not what has happened, but the media seems to think he has done a deal with Mueller, and will tell all that will bring down the current administration. That may be wishful thinking, even if Flynn has done a deal, the reason being that while Flynn may have lied, the truth would have had to be sufficiently serious to bring down the administration then.

Another reason may be that he is going to tell what he knows, but given what he has admitted to already, what could that be that will not get him into deeper trouble. Of course Mueller could have dealt immunity, on the basis he tells all and truthfully. That raises the question of what is all Flynn knows?

So, what will happen to Flynn? A detailed account of the Plea Agreement is at https://www.justice.gov/file/1015121/… . As it stands, the sentencing guidelines are estimated as imprisonment for between zero and six months, and if a fine is imposed, that fine will be between $500 and $9,500. As to what Flynn is accused of doing:

(a) On January 24, 2017, Flynn made materially false statements and omissions during an interview with FBI agents who were investigating whether the Russian government interfered with the 2016 Presidential election. These false statements included that following President Obama’s executive order announcing sanctions against Russia, he initially denied receiving a question from the Russian ambassador (Kislyak) relating to Trump’s policy (recall he had campaigned about getting better relations with Russia), then he omitted to mention that he spoke with the Presidential Transition Team (PTT) about this, and received the response that they did not want Russia to escalate the situation by making counter moves. Flynn then passed this request on to Kislyak, and subsequently reported back to the PTT the substance of the conversation. Then, about December 30, Putin announced he would not take retaliatory action.

(b) Flynn made false statements to the effect he did not make specific requests regarding an Egyptian resolution to the United Nations Security Council regarding Israeli settlements. A senior member of the PTT directed Flynn to learn where each government stood on the resolution, and to try to delay the vote or defeat the resolution. Flynn informed the Russian ambassador that the incoming administration opposed the resolution. The Russians responded by telling Flynn that Russia would accommodate the new administration.

(c) When he filed for his company in accord with the Foreign Agents Registration Act, his company did not know the extent to which the government of Turkey was involved in the Turkey project, a project focused on improving US business opportunities in Turkey, and omitted mentioning that officials from Turkey provided supervision and direction over the Turkey project.

My personal view is that Flynn was wrong to lie, but he would have good cause to believe that details of the future policy of the US government is not something to be disclosed to FBI agents. Simply saying, “That is classified,” would have been preferable. Both (a) and (b) are merely acts where he tried to make things easier for the new administration. After all, was it all that bad to ask Russia not to impose some sort of counter punishment on US companies? How is that working against US interests? More to the point, Obama had plenty of time to impose sanctions before the election, but he did not. If that was to make things easier for Clinton, and then he imposed them to undermine Trump, that in my view is just plain wrong. Similarly, the actions to try to improve things for US business in Turkey can hardly be crime of the century. The filing errors were naughty, but this is low-level stuff really. So why did Flynn plead guilty? My guess is he knew there was incontrovertible evidence that he was guilty of some things, including false filing and fibbing, and while he might have been able to defend these to some extent, it would be a lot cheaper to plead guilty, save the legal fees, and most importantly wipe the slate clean.

My guess is also that when this is over for Flynn, he can recover most of his costs by writing a book. I am sure he would get a good deal. So he can’t write? No worries; I am sure a lot of writers would be only too willing to provide their services. Name recognition alone would justify it.

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Science and Sanctions

This may seem an odd title in that most people consider science far away from describing human activities. I am not suggesting the scientific method should govern all of human activities, but I think that a little more attention to its methods would help humanity (and I try to show a little of this in my novels, although I am unsure that most would notice). The first important point, of course, is to clarify what the scientific method is. Contrary to what you may see on TV programs, etc, it is not some super geek sitting down solving impossible mathematical equations. Basically, the scientific method is you form propositions, perhaps manipulate them, then check with reality whether they might be correct. The most important feature here is, check the evidence.

What initiated this post was news that the US House of Representatives has passed a bill that will impose new sanctions on Russia, including (according to reports here) the forbidding of any help with Russia’s oil and gas industry, and President Trump has signed it into law. So, what are the premises behind this?

The first one is that foreign countries will oblige and help carry them out.

The second, presumably, is that Russia will now fall into line and do whatever the sanctions are intended to make it do.

The third is, if Russia cannot export more oil or gas, their prices will rise.

The fourth is, removing Russian hydrocarbons from the international market will lead to further markets for US hydrocarbons. Note the US now has the capacity to be a major exporter, thanks to fracking.

The first two depend on each other, and obviously, seeking evidence of the future is not practical, nevertheless we can look at the history of sanctions. Are there any examples of countries “bending the knee” in response to sanctions when they probably would not have done it anyway? I cannot think of any. Obviously, sanctions are less likely to effective if foreign countries refuse to cooperate, which is why the two are linked. The two most recent examples of sanctions are Iran and North Korea. Both have been imposed for sufficient time, and the question is, how effective are they?

In the case of Iran, one objective is claimed to have been met in that Iran argues it no longer has the capacity to make nuclear weapons, however it also claimed that was never its intention. Everyone seems to delight in arguing whether either of those statements is true, but in my opinion nuclear weapons are a poor strategic objective for Iran. I also believe they are a poor option for North Korea, but seemingly someone has to show Kim that is so. For either of them, what would it gain? Iran has opted (if truthful) to avoid nuclear weapons, but then again, what has it gained from doing so? The sanctions America imposed are still largely there. As for the effectiveness of sanctions, it appears that Iran is doing reasonably well, and a number of countries are buying its oil, including China. So I conclude that sanctions are not particularly effective there.

North Korea does not seem in any immediate hurry to “bend the knee” to the US and while it has suffered the harshest sanctions, apparently over the last few years its exports have increased by at least 40%, mainly to China. President Trump has accused China of not helping, and he is correct, but being correct does not get anyone very far. The obvious question is, why is North Korea chasing after better weapons? The answer is obvious: it is at war with the US and South Korea. The Korean War never ended formally. The sides agreed to a ceasefire, but no permanent treaty was signed, so one of the actions that America could have taken in the last sixty years or so would have been to negotiate a formal peace treaty. You may well say, the US would never launch a preemptive strike against North Korea. You may well be right, but are you that sure? From North Korea’s point of view, the US has launched cruise missile attacks frequently against places it does not like, it has significant military bases in Syria, it invaded Iraq, and so on. You might argue that the US was justified because these countries were not behaving, and you may well be right, but from North Korea’s point of view, it is at war with the US already, so it has decided to do what it can to defend itself. One approach to end this ridiculous position would be to at least offer a treaty.

The third and fourth premises are probably ones the US Congress does not advertise, because they are full of self-interest. Apparently there is enough liquefied natural gas able to be produced to substitute for Russian gas in Europe. So, why don’t they sell it? Competition is a good thing, right? The simplest answer is price and cost. Europe would have to build massive lng handling facilities, and pay a lot more for their gas than for Russian gas. And it is here that these sanctions may run into trouble. The Germans will lose heavily from the loss of Russian gas, in part because their industries are involved in expanding the Russian fields and pipelines, and of course, they would have to pay more for gas, and some equipment would need changing for the different nature of the gas.

So, if we return to the evidence, I think we can conclude that these latest attempts at sanctions are more based on self-interest than anything else. There is no evidence they will achieve anything as far as pushing Russia around goes. It is true, if imposed, they would hurt Russia significantly, but they would also hurt Europe, so will Europe cooperate?

Michael Flynn (Misha to his Russian friends?)

One of the more tragic figures currently in the news is the retired army Lieutenant General Michael Flynn. He had a distinguished military career, which involved 33 years service, and most of the latter part was involved with military intelligence. He retired a year earlier than necessary, but there are assertions he was forced to retire as Director of the Defense Intelligence Agency. There are two versions on the web as to why he was effectively fired. One side says he did not listen, worked against policy, he was a bad manager, and various other things. One such incident involved what Flynn described as a twenty minute meeting with Svetlana Lokhova, who had claimed to have access to Soviet GRU files and was writing a book about them. The meeting was in the presence of an ex-Director of MI6, and a senior person in MI5. Apparently Flynn has been accused of subsequently inviting Lokhova to go to Moscow with him to act as a translator, but that trip did not occur. According to the New York Times, Flynn, as Director of the DIA, exhibited a loose relationship with facts, i.e. initiating “fake facts”. The other version is that Flynn argued al Qaeda was nowhere near defeat, that it would be wrong to topple Assad because radical Islamists were the main force in the Syrian insurgency and that Turkey was looking the other way regarding Daesh in Syria. He criticized Obama for letting al Nusra grow in Syria. The second version suggests he was in fact right, but somewhat inconvenient.

After retiring, he set up a private company as a means of further earning income. This raises a question I cannot answer: what is the exact status of a retired General? Obviously he will be required to keep secure any information he acquired as a General, but as far as I am aware, there is no accusation that he has violated that. However, quite naturally his means of earning income drew on his previous experience. Amongst other things, he had given paid interviews for RT (a Russian television network, which as far as I know, broadcasts in the US), and he also gave an interview unfavourable to Turkish President Erdogan, accusing him of taking Turkey away from secularism. However, after this he was hired by a company indirectly owned by the Turkish Government, to investigate Erdogan’s opponent Fethullah Gulen. Later, Flynn joined the Trump campaign, and spent some time attacking Hillary Clinton. Flynn has been accused of conflict of interest over these events, of accepting money from a foreign agent (although it was an American company) without registering. He also gave a talk in New York for Kaspersky Laboratories (a Russian based company dealing with internet anti-virus software) and received money from these talks. Ex-Presidents are notorious for earning money this way, so it should not be prohibited.

He is also accused of receiving money from Russia in 2015, and he did not fill out the required paperwork and receive consent from Congress, which might violate a clause of the US Constitution. The US Constitution forbids military officers from receiving money from foreign governments, but Flynn could well argue that once he retired from the army, he was no longer a military officer. Added to which, his interview appearing on RT is hardly a covert action. Flynn apparently did report most of these activities to the DIA, so there is no case that he tried to conceal what he was doing. Merely he did not report to all the right places. The essence of all this is, as far as I can see, is that he may or may not have violated laws regarding registration/permission to work, reporting to the required bureaucrats, and he may or may not have done good jobs for those who paid him, but apart from that it is hard to see any problem. Sally Yates, the previous Attorney General, has maintained Flynn would be open to Russian blackmail, but how? Also, like most of the accusers, Yates has several bones to pick with Trump.

President-elect Trump then offered Flynn the job of national security advisor. On the day President Obama announced retaliatory measures in response to Russia’s alleged interference in the US election, Flynn spoke to Russian ambassador Kislyak. The argument was that any secret deal could have violated the Logan act, a rather antique example of a strange law prohibiting a private citizen from discussing anything with a foreign government that might subvert the cause of the US Government, and passed by the 5th Congress. Nobody has ever been prosecuted under it so there is no case law. Flynn argues he never discussed these sanctions. However, somewhere in the mix, Flynn was asked by Mike Pence what happened and Flynn admits he misled Pence. Accordingly he was fired.

Did Flynn offer some deal on sanctions? The evidence that he did seems to be indirect. Immediately after they were announced, Sergei Lavrov announced that Russia would certainly respond. So did some others, but nothing happened. Putin announced there would be no retaliation. The argument is that Flynn had assured Kislyak that the sanctions would not last, and hence had undermined US policy, although how is more questionable, since Russia still received the sanctions that still apply and did nothing back. The US comes out ahead here. A strange way of undermining the government.

The next accusation against Flynn is that he has committed a significant crime. Why? Well, he has been asked to give evidence to Congress about Russian involvement in the US election, and he has demanded immunity from prosecution. According to various experts, this “proves” there was serious wrong-doing. I am not so sure. Various people have already accused him of violating various regulations, such as the Logan Act and the requirement to register as representing foreign agents, and when you know there are accusations against you, wouldn’t you ask for immunity? You would be stupid not to. At the very least, by making it a condition to give evidence he can refuse by arguing the Constitutional Amendment against self-incrimination, which, even if he feels he has nothing to hide, at least gets him out of the expense of having to have lawyers present through what could be an extended witch-hunt. If nothing else, you don’t get to be a Lieutenant General by being stupid. You get there by doing things, which is what Flynn apparently did. That was a mistake. According to Congress, he should have sat on his backside for two months, and maybe that says something about Congress.

As an aside, I tried to write a similar tragic figure in my Dreams Defiled, which is on discount over Easter. I don’t think I quite managed someone like Flynn, though, but I would be curious to know what others think.

The stock market dives. Woe! Woe! Woe!

The news this week appears to be focused on the stock markets around the world seemingly going into a dive. One of the things that puzzles me is why this is regarded as such a disaster. I accept that if some investor actually badly needs money and has to sell, this is not good news, but apart from that, and apart from speculators getting it wrong (and here I have little sympathy) what is the problem? If the number of people employed stays the same, the amount produced stays the same, the wages and salaries stay the same, what is important stays the same. What matters in a business is cash flow. If raw materials are available, if costs are stable, if interest rates are low, and if sales are constant, variations in stock prices seem to me to be irrelevant.

Maybe we are all a bunch of wailers! Recall that as oil prices kept rising, there was a general wailing that energy costs would stifle the market. Well, now oil prices seem to be as low as ever, thanks to fracking, and there is general wailing, seemingly because the oil merchants are no longer able to extort such high profits from everyone. (Although, from the price of petrol locally, I rather fancy oil companies are doing rather well out of this too. Prices go up very quickly, and down rather slowly.) It seems to me quite probable that if oil prices stayed the same, there would also be general wailing.

In the alleged “bad news” column, growth in China is falling. The most pessimistic prediction I have seen is that it will fall to (horrors) 5 % this year. So, there may be problems. Thus the Australian mining sector will suffer because construction in China is slowing to a more sustainable level. So? Who else is growing at 5%? If growth were universally zero, would not things be the same as last year? Was last year that bad?

So the European economies are falling backwards. The Greek financial mess is at least partly the fault of the rest of Europe. The huge number of asylum-seekers from the muslim regions also hardly helps, but surely that is a problem Europe has to face. The sanctions against Russia is self-imposed. Cutting off your biggest markets carries a price, and politicians should have made preparations for those consequences, but they did not. The inability to make good predictions and then act on them was also a failure. Consider the dairy industry. A year or so ago there were very high prices. However, the sanctions against Russia removed one of the bigger consumers, and worse, only too many farmers thought the dairy prices were so high they had to get into it. A major reduction in the market size, and a major increase in production meant that prices would collapse. All the money you pay in taxes and that leads to information gathering might have been analysed and appropriate advice given. Of course this presupposes governments are interested in their citizens.

I suspect reality has little to do with the collapse. Quantitative easing pushed too much money into the system for too long. Low interest rates have forced people to invest in stocks because they are one of the few assets that would normally give much better returns in period of low interest. There was too much cash chasing too few stocks, and the prices rose to ridiculous levels. The price to earnings ratios of many mature shares exceeded 17, and that was in a period of high earnings. Those who know would have decided this could be the time to liquidate. The problem is, once some start selling, everyone wants to sell and the stock prices tank, an issue compounded by computerized trading.

Is this all that bad? If you are a long term investor, or a value investor, this is good, because as the prices tumble, there are bargains out there if you know what you are doing. Those that get hurt are the greedy ones who do not know what they are doing, and surely there is some justice in that.