VILNIUS, Lithuania — It was never a secret that China tightly controls what its people can read and write on their cellphones. But it came as a shock to officials in Lithuania when they discovered that a popular Chinese-made handset sold in the Baltic nation had a hidden though dormant feature: a censorship registry of 449 terms banned by the Chinese Communist Party.
Lithuania’s government swiftly advised officials using the phones to dump them, enraging China — and not for the first time. Lithuania has also embraced Taiwan, a vibrant democracy that Beijing regards as a renegade province, and pulled out of a Chinese-led regional forum that it scorned as divisive for the European Union.
Furious, Beijing has recalled its ambassador, halted trips by a Chinese cargo train into the country and made it nearly impossible for many Lithuanian exporters to sell their goods in China. Chinese state media has assailed Lithuania, mocked its diminutive size and accused it of being the “anti-China vanguard” in Europe.
In the battlefield of geopolitics, Lithuania versus China is hardly a fair fight — a tiny Baltic nation with fewer than 3 million people against a rising superpower with 1.4 billion. Lithuania’s military has no tanks or fighter jets, and its economy is 270 times smaller than China’s.
met with Secretary of State Antony Blinken, who pledged “ironclad U.S. support for Lithuania in the face of attempted coercion from the People’s Republic of China.”
European Council on Foreign Relations indicate that most Europeans don’t want a new Cold War between the United States and China. But they also show growing wariness of China.
“There is a general shift in mood,” said Frank Juris, a researcher at the Estonian Foreign Policy Institute who tracks Chinese activities in Europe. “Promises have not materialized and countries are tired of being constantly threatened with the whip.”
That whip is now being brought down hard on Lithuania, a member of the European Union and also NATO.
Particularly galling for Beijing was Lithuania’s announcement in July that it had accepted a request by Taiwan to open a “Taiwanese representative office” in Vilnius.
by Lithuania’s Defense Ministry Cyber Security Center was yet another provocation. The hidden registry found by the center allows for the detection and censorship of phrases like “student movement,” “Taiwan independence,” and “dictatorship.”
The blacklist, which updates automatically to reflect the Communist Party’s evolving concerns, lies dormant in phones exported to Europe but, according to the cyber center, the disabled censorship tool can be activated with the flick of a switch in China.
The registry “is shocking and very concerning,” said Margiris Abukevicius, a deputy defense minister responsible for cybersecurity.
The maker of the Chinese phones in question, Xiaomi, says its devices “do not censor communications.”
In addition to telling government offices to dump the phones, Mr. Abukevicius said in an interview that ordinary users should decide “their own appetite for risk.”
The Global Times, a nationalist news outlet controlled by the Chinese Communist Party, derided the Lithuanian report as a “new trick” by a small “pawn” in Washington’s anti-China agenda.
China has steadily ramped up pressure on Lithuania, last month recalling its ambassador from Vilnius and urging Lithuania’s envoy in Beijing to go home, which she did. It halted a regular cargo train to Lithuania, though it still lets other trains transit through the Baltic country filled with Chinese goods destined for Germany.
While not announcing any formal sanctions, China has added red tape to block Lithuanian exporters from selling goods in China.
Lithuania’s economy minister, Ausrine Armonaite, downplayed the damage, noting Lithuania’s exports to China accounted for only 1 percent of total exports. Losing that, she said, “is not too harmful.”
A bigger blow, according to business leaders, has been the disruption in the supply of Chinese-made glass, electronic components and other items needed by Lithuanian manufacturers. Around a dozen companies that rely on goods from China last week received nearly identical letters from Chinese suppliers claiming that power cuts had made it difficult fulfill orders.
“They are very creative,” said Vidmantas Janulevicius, the president of the Lithuanian Confederation of Industrialists, noting that the delays were “targeted very precisely.”
Lithuania has made “a clear geopolitical decision” to side decisively with the United States, a longtime ally, and other democracies, said Laurynas Kasciunas, the chairman of the national security and defense committee. “Everyone here agrees on this. We are all very anti-communist Chinese. It is in our DNA.”
Tomas Dapkus in Vilnius, Monika Pronczuk in Brussels, and Claire Fu contributed reporting
The handwritten doctor’s order was just eight words long, but it solved a problem for Dundee Manor, a nursing home in rural South Carolina struggling to handle a new resident with severe dementia.
David Blakeney, 63, was restless and agitated. The home’s doctor wanted him on an antipsychotic medication called Haldol, a powerful sedative.
“Add Dx of schizophrenia for use of Haldol,” read the doctor’s order, using the medical shorthand for “diagnosis.”
But there was no evidence that Mr. Blakeney actually had schizophrenia.
Antipsychotic drugs — which for decades have faced criticism as “chemical straitjackets” — are dangerous for older people with dementia, nearly doubling their chance of death from heart problems, infections, falls and other ailments. But understaffed nursing homes have often used the sedatives so they don’t have to hire more staff to handle residents.
one in 150 people.
Schizophrenia, which often causes delusions, hallucinations and dampened emotions, is almost always diagnosed before the age of 40.
“People don’t just wake up with schizophrenia when they are elderly,” said Dr. Michael Wasserman, a geriatrician and former nursing home executive who has become a critic of the industry. “It’s used to skirt the rules.”
refuge of last resort for people with the disorder, after large psychiatric hospitals closed decades ago.
But unfounded diagnoses are also driving the increase. In May, a report by a federal oversight agency said nearly one-third of long-term nursing home residents with schizophrenia diagnoses in 2018 had no Medicare record of being treated for the condition.
hide serious problems — like inadequate staffing and haphazard care — from government audits and inspectors.
One result of the inaccurate diagnoses is that the government is understating how many of the country’s 1.1 million nursing home residents are on antipsychotic medications.
According to Medicare’s web page that tracks the effort to reduce the use of antipsychotics, fewer than 15 percent of nursing home residents are on such medications. But that figure excludes patients with schizophrenia diagnoses.
To determine the full number of residents being drugged nationally and at specific homes, The Times obtained unfiltered data that was posted on another, little-known Medicare web page, as well as facility-by-facility data that a patient advocacy group got from Medicare via an open records request and shared with The Times.
The figures showed that at least 21 percent of nursing home residents — about 225,000 people — are on antipsychotics.
The Centers for Medicare and Medicaid Services, which oversees nursing homes, is “concerned about this practice as a way to circumvent the protections these regulations afford,” said Catherine Howden, a spokeswoman for the agency, which is known as C.M.S.
“It is unacceptable for a facility to inappropriately classify a resident’s diagnosis to improve their performance measures,” she said. “We will continue to identify facilities which do so and hold them accountable.”
significant drop since 2012 in the share of residents on the drugs.
But when residents with diagnoses like schizophrenia are included, the decline is less than half what the government and industry claim. And when the pandemic hit in 2020, the trend reversed and antipsychotic drug use increased.
A Doubled Risk of Death
For decades, nursing homes have been using drugs to control dementia patients. For nearly as long, there have been calls for reform.
In 1987, President Ronald Reagan signed a law banning the use of drugs that serve the interest of the nursing home or its staff, not the patient.
But the practice persisted. In the early 2000s, studies found that antipsychotic drugs like Seroquel, Zyprexa and Abilify made older people drowsy and more likely to fall. The drugs were also linked to heart problems in people with dementia. More than a dozen clinical trials concluded that the drugs nearly doubled the risk of death for older dementia patients.
11 percent from less than 7 percent, records show.
The diagnoses rose even as nursing homes reported a decline in behaviors associated with the disorder. The number of residents experiencing delusions, for example, fell to 4 percent from 6 percent.
A Substitute for Staff
Caring for dementia patients is time- and labor-intensive. Workers need to be trained to handle challenging behaviors like wandering and aggression. But many nursing homes are chronically understaffed and do not pay enough to retain employees, especially the nursing assistants who provide the bulk of residents’ daily care.
Studies have found that the worse a home’s staffing situation, the greater its use of antipsychotic drugs. That suggests that some homes are using the powerful drugs to subdue patients and avoid having to hire extra staff. (Homes with staffing shortages are also the most likely to understate the number of residents on antipsychotics, according to the Times’s analysis of Medicare data.)
more than 200,000 since early last year and is at its lowest level since 1994.
As staffing dropped, the use of antipsychotics rose.
Even some of the country’s leading experts on elder care have been taken aback by the frequency of false diagnoses and the overuse of antipsychotics.
Barbara Coulter Edwards, a senior Medicaid official in the Obama administration, said she had discovered that her father was given an incorrect diagnosis of psychosis in the nursing home where he lived even though he had dementia.
“I just was shocked,” Ms. Edwards said. “And the first thing that flashed through my head was this covers a lot of ills for this nursing home if they want to give him drugs.”
Homes that violate the rules face few consequences.
In 2019 and 2021, Medicare said it planned to conduct targeted inspections to examine the issue of false schizophrenia diagnoses, but those plans were repeatedly put on hold because of the pandemic.
In an analysis of government inspection reports, The Times found about 5,600 instances of inspectors citing nursing homes for misusing antipsychotic medications. Nursing home officials told inspectors that they were dispensing the powerful drugs to frail patients for reasons that ranged from “health maintenance” to efforts to deal with residents who were “whining” or “asking for help.”
a state inspector cited Hialeah Shores for giving a false schizophrenia diagnosis to a woman. She was so heavily dosed with antipsychotics that the inspector was unable to rouse her on three consecutive days.
There was no evidence that the woman had been experiencing the delusions common in people with schizophrenia, the inspector found. Instead, staff at the nursing home said she had been “resistive and noncooperative with care.”
Dr. Jonathan Evans, a medical director for nursing homes in Virginia who reviewed the inspector’s findings for The Times, described the woman’s fear and resistance as “classic dementia behavior.”
“This wasn’t five-star care,” said Dr. Evans, who previously was president of a group that represents medical staff in nursing homes. He said he was alarmed that the inspector had decided the violation caused only “minimal harm or potential for harm” to the patient, despite her heavy sedation. As a result, he said, “there’s nothing about this that would deter this facility from doing this again.”
Representatives of Hialeah Shores declined to comment.
Seven of the 52 homes on the inspector general’s list were owned by a large Texas company, Daybreak Venture. At four of those homes, the official rate of antipsychotic drug use for long-term residents was zero, while the actual rate was much higher, according to the Times analysis comparing official C.M.S. figures with unpublished data obtained by the California advocacy group.
make people drowsy and increases the risk of falls. Peer-reviewed studies have shown that it does not help with dementia, and the government has not approved it for that use.
But prescriptions of Depakote and similar anti-seizure drugs have accelerated since the government started publicly reporting nursing homes’ use of antipsychotics.
Between 2015 and 2018, the most recent data available, the use of anti-seizure drugs rose 15 percent in nursing home residents with dementia, according to an analysis of Medicare insurance claims that researchers at the University of Michigan prepared for The Times.
in a “sprinkle” form that makes it easy to slip into food undetected.
“It’s a drug that’s tailor-made to chemically restrain residents without anybody knowing,” he said.
In the early 2000s, Depakote’s manufacturer, Abbott Laboratories, began falsely pitching the drug to nursing homes as a way to sidestep the 1987 law prohibiting facilities from using drugs as “chemical restraints,” according to a federal whistle-blower lawsuit filed by a former Abbott saleswoman.
According to the lawsuit, Abbott’s representatives told pharmacists and nurses that Depakote would “fly under the radar screen” of federal regulations.
Abbott settled the lawsuit in 2012, agreeing to pay the government $1.5 billion to resolve allegations that it had improperly marketed the drugs, including to nursing homes.
Nursing homes are required to report to federal regulators how many of their patients take a wide variety of psychotropic drugs — not just antipsychotics but also anti-anxiety medications, antidepressants and sleeping pills. But homes do not have to report Depakote or similar drugs to the federal government.
“It is like an arrow pointing to that class of medications, like ‘Use us, use us!’” Dr. Maust said. “No one is keeping track of this.”
published a brochure titled “Nursing Homes: Times have changed.”
“Nursing homes have replaced restraints and antipsychotic medications with robust activity programs, religious services, social workers and resident councils so that residents can be mentally, physically and socially engaged,” the colorful two-page leaflet boasted.
Last year, though, the industry teamed up with drug companies and others to push Congress and federal regulators to broaden the list of conditions under which antipsychotics don’t need to be publicly disclosed.
“There is specific and compelling evidence that psychotropics are underutilized in treating dementia and it is time for C.M.S. to re-evaluate its regulations,” wrote Jim Scott, the chairman of the Alliance for Aging Research, which is coordinating the campaign.
The lobbying was financed by drug companies including Avanir Pharmaceuticals and Acadia Pharmaceuticals. Both have tried — and so far failed — to get their drugs approved for treating patients with dementia. (In 2019, Avanir agreed to pay $108 million to settle charges that it had inappropriately marketed its drug for use in dementia patients in nursing homes.)
‘Hold His Haldol’
Ms. Blakeney said that only after hiring a lawyer to sue Dundee Manor for her husband’s death did she learn he had been on Haldol and other powerful drugs. (Dundee Manor has denied Ms. Blakeney’s claims in court filings.)
During her visits, though, Ms. Blakeney noticed that many residents were sleeping most of the time. A pair of women, in particular, always caught her attention. “There were two of them, laying in the same room, like they were dead,” she said.
In his first few months at Dundee Manor, Mr. Blakeney was in and out of the hospital, for bedsores, pneumonia and dehydration. During one hospital visit in December, a doctor noted that Mr. Blakeney was unable to communicate and could no longer walk.
“Hold the patient’s Ambien, trazodone and Zyprexa because of his mental status changes,” the doctor wrote. “Hold his Haldol.”
Mr. Blakeney continued to be prescribed the drugs after he returned to Dundee Manor. By April 2017, the bedsore on his right heel — a result, in part, of his rarely getting out of bed or his wheelchair — required the foot to be amputated.
In June, after weeks of fruitless searching for another nursing home, Ms. Blakeney found one and transferred him there. Later that month, he died.
“I tried to get him out — I tried and tried and tried,” his wife said. “But when I did get him out, it was too late.”
WASHINGTON — For months, Apple and Google have been fighting a bill in the South Korean legislature that they say could imperil their lucrative app store businesses. The companies have appealed directly to South Korean lawmakers, government officials and the public to try to block the legislation, which is expected to face a crucial vote this week.
The companies have also turned to an unlikely ally, one that is also trying to quash their power: the United States government. A group funded by the companies has urged trade officials in Washington to push back on the legislation, arguing that targeting American firms could violate a joint trade agreement.
The South Korean legislation would be the first law in the world to require companies that operate app stores to let users in Korea pay for in-app purchases using a variety of payment systems. It would also prohibit blocking developers from listing their products on other app stores.
How the White House responds to this proposal poses an early test for the Biden administration: Will it defend tech companies facing antitrust scrutiny abroad while it applies that same scrutiny to the companies at home?
executive order to spur competition in the industry, and his top two antitrust appointees have long been vocal critics of the companies.
The approach the White House chooses may have widespread implications for the industry, and for the shape of the internet around the world. A growing number of countries are pursuing stricter regulations on Google, Apple, Facebook and Amazon, fragmenting the rules of the global internet.
American officials have echoed some of the industry’s complaints about the proposal, saying in a March report it appeared to target American companies. But trade officials have yet to take a formal position on it, said Adam Hodge, a spokesman for the United States Trade Representative. He said officials were still considering how to balance the claim that the legislation discriminates against American companies with the belief among tech critics in South Korea and America that the legislation would level the playing field.
“We are engaging a range of stakeholders to gather facts as legislation is considered in Korea, recognizing the need to distinguish between discrimination against American companies and promoting competition,” Mr. Hodge said in a statement.
Apple said that it regularly dealt with the United States government on a range of topics. During those interactions it discussed the South Korean app store legislation with American officials, including at the U. S. Embassy in Seoul, the company said in a statement.
The company said the legislation would “put users who purchase digital goods from other sources at risk of fraud, undermine their privacy protections, make it difficult to manage their purchases” and endanger parental controls.
A Google spokeswoman, Julie Tarallo McAlister, said in a statement that Google was open to “exploring alternative approaches” but believed the legislation would harm consumers and software developers.
The proposal was approved by a committee in the Korean National Assembly last month, over the opposition of some in the Korean government. It could get a vote in the body’s judiciary committee as soon as this week. It would then require a vote from the full assembly and the signature of President Moon Jae-in to become law.
The proposal would have a major impact on Apple’s App Store and the Google Play Store.
The Google store accounted for 75 percent of global app downloads in the second quarter of 2021, according to App Annie, an analytics company. Apple’s marketplace accounted for 65 percent of consumer spending on in-app purchases or subscriptions.
One way software developers make money is by selling products directly in their apps, like Fortnite’s in-game currency or a subscription to The New York Times. Apple has insisted for years that developers sell those in-app products through the company’s own payment system, which takes up to a 30 percent cut of many sales. Last year, Google indicated it would follow suit by applying a 30 percent cut to more purchases than it had in the past. Developers say that the fees are far too steep.
After South Korean lawmakers proposed the app store bill last year, the Information Technology Industry Council, a Washington-based group that counts Apple and Google as members, urged the United States Trade Representative to include concerns about the legislation in an annual report highlighting “barriers” to foreign trade. The group said in October that the rules could violate a 2007 accord that says neither country can discriminate against firms with headquarters in the other.
Apple said that it was not unusual for an industry group to provide feedback to the trade representative. The company said the government had explicitly asked for comment on potentially discriminatory laws. In a statement, Naomi Wilson, the trade group’s vice president of policy for Asia, said that it encouraged “legislators to work with industry to re-examine the obligations for app markets set forth in the proposed measure to ensure they are not trade-restrictive and do not disproportionately affect” American companies.
When the trade representative’s report was published in March — just weeks after Mr. Biden’s nominee to the position was sworn in — it included a paragraph that echoed some of the tech group’s concerns. The report concluded that the South Korean law’s “requirement to permit users to use outside payment services appears to specifically target U.S. providers and threatens a standard U.S. business model.”
The American report did not say the law would violate the free trade agreement with South Korea. But in July, the managing director of a group called the Asia Internet Coalition, which lists Apple and Google as two of its members, pointed to the report when he told Korea’s trade minister that the law “could provoke trade tensions between the United States and South Korea.”
“The Biden administration has already signaled its concerns,” the director said in a written comment in July.
American diplomats in Seoul also raised questions about whether the legislation could cause trade tensions.
“Google said something like that, and a similar opinion was expressed by the U.S. Embassy in Korea,” said Jo Seoung Lae, a lawmaker who backs the legislation. He added that the embassy had been in touch with his staff throughout June and July. Park Sungjoong, another lawmaker, also said that the embassy had expressed trade concerns about the law.
Mr. Jo said that a Google representative had visited his office to express opposition to the proposal, and that Apple had also “provided their feedback” opposing the legislation.
Mr. Jo said that he had requested that the United States provide its official position, but he said he had not received one yet.
American trade officials sometimes defend companies even when they are criticized by others in the administration. While former President Donald J. Trump attacked a liability shield for social media platforms, known as Section 230, his trade representative wrote a similar provision into agreements with Canada, Mexico and Japan.
But Wendy Cutler, a former official who negotiated the trade agreement between South Korea and the United States, said that it would be difficult for America to argue that the Korean rules violate trade agreements when the same antitrust issues are being debated stateside.
“You don’t want to be calling out a country for potentially violating an obligation when at the same time your own government is questioning the practice,” said Ms. Cutler,now the vice president at the Asia Society Policy Institute. “It weakens the case substantially.”
South Korean and American app developers have run their own campaign for the new rules, arguing it would not trigger trade tensions.
In June, Mark Buse, the top lobbying executive at the dating app company Match Group and a former board member of a pro-regulation group called the Coalition for App Fairness, wrote to Mr. Jo, the Korean lawmaker, supporting the proposal. He said that the Biden administration knew about concerns around the tech giants, making trade tensions less likely.
Later that month, Mr. Buse attended a virtual conference about the app store legislation hosted by K-Internet, a trade group that represents major Korean internet companies like Naver, Google’s main search competitor in South Korea, and Kakao.
Mr. Buse, who traveled to Seoul this month to press the case for the legislation on behalf of the Coalition for App Fairness, made it clear that his employer considered it a high-stakes debate. He listed the many other countries where officials were concerned about Apple’s and Google’s practices.
“And all of this,” he said, “is following the leadership that the Korean assembly is showing.”
A summer travel bonanza is exceeding expectations, helping airlines earn profits again and brightening the outlook for the rest of the year. It’s a welcome relief for a battered industry and a sign that the rebound that began this spring appears to be here to stay.
The economic upturn, aggressive cost-cutting and an enormous federal stimulus that paid many salaries have helped to improve the finances of the largest carriers, which took on vast amounts of debt and lost billions of dollars during the pandemic.
This month, consumer spending on airlines briefly exceeded 2019 levels on a weekly basis for the first time since the pandemic began, according to Facteus, a research firm that monitors millions of online payments. Ticket prices have rebounded, too: In June, fares were down only 1 percent from the same month in 2019, according to the Adobe Digital Economy Index, which is similarly based on website visits and transactions.
And on Sunday, the Transportation Security Administration screened more than 2.2 million travelers at its airport checkpoints, the most in one day since the start of the pandemic.
planned to hire hundreds of flight attendants and bring back thousands who volunteered for extended leaves during the pandemic.
increase its minimum wage to $15 an hour to retain and attract workers, while Delta is in the middle of hiring thousands of employees. United last month announced plans to buy 270 new planes in the coming years, the largest airplane order in its history and one that would create thousands of jobs nationwide.
Southwest on Thursday reported a profit of $348 million for the quarter that ended in June, its second profitable quarter since the pandemic began. American reported a $19 million profit over the same period, while Delta last week reported a $652 million profit, a pandemic first for each airline. United this week reported a loss, but projected a return to profitability in the third quarter as its business improved faster than forecast.
The financial turnaround has been buoyed by an infusion of $54 billion of federal aid to pay employee salaries over the past year and a half. Without those payments, none of the major airlines would have been able to report profits for the quarter that ended in June. The aid precludes the companies from paying dividends through September 2022.
Each airline offered a hopeful outlook for the current quarter. American projected that passenger capacity would be down only 15 to 20 percent from the third quarter of 2019, while United projected a 26 percent decline and Delta forecast a 28 to 30 percent drop. Southwest, which differs from the other three large carriers in that it operates few international flights, said it expected capacity to be comparable to the third quarter of 2019.
Daily Business Briefing
“We are just really excited about the momentum we’re seeing in the numbers,” Doug Parker, American’s chief executive, told analysts after the company delivered its earnings report.
The financial results and forecasts for the rest of the summer are the latest sign of strength in a comeback that has been building for months. But the airlines have vast amounts of debt to repay — American, the most indebted carrier, announced a plan on Thursday to pay down $15 billion by the end of 2025 — and the rebound hasn’t been free of setbacks.
recent poll from the Global Business Travel Association, an industry association. If other companies follow Apple’s lead in delaying a return to the office, though, the corporate travel recovery could be held back.
Delta said it expected domestic business trips to recover to about 60 percent of 2019 levels by September, up from 40 percent in June. Those figures roughly align with estimates from United.
“The demand is recovering even faster than we had hoped domestically,” Mr. Kirby of United said on Wednesday.
International travel has slowly started to recover, too, as more countries, particularly in Europe, open up to American travelers who can provide proof of vaccination or a negative coronavirus test. But airlines are lobbying the Biden administration to loosen restrictions in kind, which, they say, will allow the recovery to accelerate.
“I think the surge is coming, and just as we’ve seen it on the consumer side, we’re getting ready for it on the business side,” Mr. Bastian of Delta said last week. “Once you open businesses, offices, and you get international markets opened, I think it’s going to be a very good run over the next 12 to 24 months.”
The nation is facing once in a generation choices about how energy ought to be delivered to homes, businesses and electric cars — decisions that could shape the course of climate change and determine how the United States copes with wildfires, heat waves and other extreme weather linked to global warming.
On one side, large electric utilities and President Biden want to build thousands of miles of power lines to move electricity created by distant wind turbines and solar farms to cities and suburbs. On the other, some environmental organizations and community groups are pushing for greater investment in rooftop solar panels, batteries and local wind turbines.
There is an intense policy struggle taking place in Washington and state capitals about the choices that lawmakers, energy businesses and individuals make in the next few years, which could lock in an energy system that lasts for decades. The divide between those who want more power lines and those calling for a more decentralized energy system has split the renewable energy industry and the environmental movement. And it has created partnerships of convenience between fossil fuel companies and local groups fighting power lines.
At issue is how quickly the country can move to cleaner energy and how much electricity rates will increase.
senators from both parties agreed to in June. That deal includes the creation of a Grid Development Authority to speed up approvals for transmission lines.
Most energy experts agree that the United States must improve its aging electric grids, especially after millions of Texans spent days freezing this winter when the state’s electricity system faltered.
“The choices we make today will set us on a path that, if history is a barometer, could last for 50 to 100 years,” said Amy Myers Jaffe, managing director of the Climate Policy Lab at Tufts University. “At stake is literally the health and economic well-being of every American.”
The option supported by Mr. Biden and some large energy companies would replace coal and natural gas power plants with large wind and solar farms hundreds of miles from cities, requiring lots of new power lines. Such integration would strengthen the control that the utility industry and Wall Street have over the grid.
batteries installed at homes, businesses and municipal buildings.
Those batteries kicked in up to 6 percent of the state grid’s power supply during the crisis, helping to make up for idled natural gas and nuclear power plants. Rooftop solar panels generated an additional 4 percent of the state’s electricity.
become more common in recent years.
Some environmentalists argue that greater use of rooftop solar and batteries is becoming more essential because of climate change.
After its gear ignited several large wildfires, Pacific Gas & Electric began shutting off power on hot and windy days to prevent fires. The company emerged from bankruptcy last year after amassing $30 billion in liabilities for wildfires caused by its equipment, including transmission lines.
Elizabeth Ellenburg, an 87-year-old cancer survivor in Napa, Calif., bought solar panels and a battery from Sunrun in 2019 to keep her refrigerator, oxygen equipment and appliances running during PG&E’s power shut-offs, a plan that she said has worked well.
“Usually, when PG&E goes out it’s not 24 hours — it’s days,” said Ms. Ellenburg, a retired nurse. “I need to have the ability to use medical equipment. To live in my own home, I needed power other than the power company.”
working to improve its equipment. “Our focus is to make both our distribution and transmission system more resilient and fireproof,” said Sumeet Singh, PG&E’s chief risk officer.
But spending on fire prevention by California utilities has raised electricity rates, and consumer groups say building more power lines will drive them even higher.
Average residential electricity rates nationally have increased by about 14 percent over the last decade even though average household energy use rose just over 1 percent.
2019 report by the National Renewable Energy Laboratory, a research arm of the Energy Department, found that greater use of rooftop solar can reduce the need for new transmission lines, displace expensive power plants and save the energy that is lost when electricity is moved long distances. The study also found that rooftop systems can put pressure on utilities to improve or expand neighborhood wires and equipment.
Texas was paralyzed for more than four days by a deep freeze that shut down power plants and disabled natural gas pipelines. People used cars and grills and even burned furniture to keep warm; at least 150 died.
One reason for the failure was that the state has kept the grid managed by the Electric Reliability Council of Texas largely disconnected from the rest of the country to avoid federal oversight. That prevented the state from importing power and makes Texas a case for the interconnected power system that Mr. Biden wants.
Consider Marfa, an artsy town in the Chihuahuan Desert. Residents struggled to stay warm as the ground was blanketed with snow and freezing rain. Yet 75 miles to the west, the lights were on in Van Horn, Texas. That town is served by El Paso Electric, a utility attached to the Western Electricity Coordinating Council, a grid that ties together 14 states, two Canadian provinces and a Mexican state.
$1.4 million, compared with about $1 million to Donald J. Trump, according to the Center for Responsive Politics.
In Washington, developers of large solar and wind projects are pushing for a more connected grid while utilities want more federal funding for new transmission lines. Advocates for rooftop solar panels and batteries are lobbying Congress for more federal incentives.
Separately, there are pitched battles going on in state capitals over how much utilities must pay homeowners for the electricity generated by rooftop solar panels. Utilities in California, Florida and elsewhere want lawmakers to reduce those rates. Homeowners with solar panels and renewable energy groups are fighting those efforts.
Building power lines is hard.
Despite Mr. Biden’s support, the utility industry could struggle to add power lines.
Many Americans resist transmission lines for aesthetic and environmental reasons. Powerful economic interests are also at play. In Maine, for instance, a campaign is underway to stop a 145-mile line that will bring hydroelectric power from Quebec to Massachusetts.
New England has phased out coal but still uses natural gas. Lawmakers are hoping to change that with the help of the $1 billion line, called the New England Clean Energy Connect.
This spring, workmen cleared trees and installed steel poles in the forests of western Maine. First proposed a decade ago, the project was supposed to cut through New Hampshire until the state rejected it. Federal and state regulators have signed off on the Maine route, which is sponsored by Central Maine Power and HydroQuebec.
But the project is mired in lawsuits, and Maine residents could block it through a November ballot measure.
set a record in May, and some scientists believe recent heat waves were made worse by climate change.
“Transmission projects take upward of 10 years from conception to completion,” said Douglas D. Giuffre, a power expert at IHS Markit. “So if we’re looking at decarbonization of the power sector by 2035, then this all needs to happen very rapidly.”
As Federal Reserve Chair Jerome H. Powell and Treasury Secretary Steven Mnuchin scrambled to save faltering markets at the start of the pandemic last year, America’s top economic officials were in near-constant contact with a Wall Street executive whose firm stood to benefit financially from the rescue.
Laurence D. Fink, the chief executive of BlackRock, the world’s largest asset manager, was in frequent touch with Mr. Mnuchin and Mr. Powell in the days before and after many of the Fed’s emergency rescue programs were announced in late March. Emails obtained by The New York Times through a records request, along with public releases, underscore the extent to which Mr. Fink planned alongside the government for parts of a financial rescue that his firm referred to in one message as “the project” that he and the Fed were “working on together.”
While some conversations were previously disclosed, the newly released emails, together with public calendar records, show the extent to which economic policymakers worked with a private company as they were drawing up a response to the financial meltdown and how intertwined BlackRock has become with the federal government.
60 recorded calls over the frantic Saturday and Sunday leading up to the Fed’s unveiling on Monday, March 23, of a policy package that included its first-ever program to buy corporate bonds, which were becoming nearly impossible to sell as investors sprinted to convert their holdings to cash. Mr. Mnuchin spoke to Mr. Fink five times that weekend, more than anyone other than the Fed chair, whom he spoke with nine times. Mr. Fink joined Mr. Mnuchin, Mr. Powell and Larry Kudlow, who was the White House National Economic Council director, for a brief call at 7:25 the evening before the Fed’s big announcement, based on Mr. Mnuchin’s calendars.
book on funds.
On March 24, 2020, the New York Fed announced that it had again hired BlackRock’s advisory arm, which operates separately from the company’s asset-management business but which Mr. Fink oversees, this time to carry out the Fed’s purchases of commercial mortgage-backed securities and corporate bonds.
BlackRock’s ability to directly profit from its regular contact with the government during rescue planning was limited. The firm signed a nondisclosure agreement with the New York Fed on March 22, restricting involved officials from sharing information about the coming programs.
were contracting and its business outlook hinged on what happened in certain markets.
While the Fed and Treasury consulted with many financial firms as they drew up their response — and practically all of Wall Street and much of Main Street benefited — no other company was as front and center.
Simply being in touch throughout the government’s planning was good for BlackRock, potentially burnishing its image over the longer run, Mr. Birdthistle said. BlackRock would have benefited through “tons of information, tons of secondary financial benefits,” he said.
Mr. Mnuchin could not be reached for comment. Asked whether top Fed officials discussed program details with Mr. Fink before his firm had signed the nondisclosure agreement, the Fed said Mr. Powell and Randal K. Quarles, a Fed vice chair who also appears in the emails, “have no recollection of discussing the terms of either facility with Mr. Fink.”
“Nor did they have any reason to do so because the Federal Reserve Bank of New York handled the process with great care and transparency,” the central bank added in its statement.
Brian Beades, a spokesman for BlackRock, highlighted that the firm had “stringent information barriers in place that ensure separation between BlackRock Financial Markets Advisory and the firm’s investment business.” He said it was “proud to have been in a position to assist the Federal Reserve in addressing the severe downturn in financial markets during the depths of the crisis.”
Daily Business Briefing
The disclosed emails between Fed and BlackRock officials — 11 in all across March and early April — do not make clear whether the company knew about any of the Fed and Treasury programs’ designs or whether they were simply providing market information.
Fed chair’s official schedule from that March. Those calendars generally track scheduled events, and may have missed meetings in early 2020 when staff members were frantically working on the market rescue and the Fed was shifting to work from home, a central bank spokesman said.
Mr. Powell’s calendars did show that he talked to Mr. Fink in March, April and May, and he has previously answered questions about those discussions.
“I can’t recall exactly what those conversations were, but they would have been about what he is seeing in the markets and things like that, to generally exchanging information,” Mr. Powell said at a July news conference, adding that it wasn’t “very many” conversations. “He’s typically trying to make sure that we are getting good service from the company that he founded and leads.”
BlackRock’s connections to Washington are not new. It was a critical player in the 2008 crisis response, when the New York Fed retained the firm’s advisory arm to manage the mortgage assets of the insurance giant American International Group and Bear Stearns.
Several former BlackRock employees have been named to top roles in President Biden’s administration, including Brian Deese, who heads the White House National Economic Council, and Wally Adeyemo, who was Mr. Fink’s chief of staff and is now the No. 2 official at the Treasury.
in early 2009 to $7.4 trillion in 2019. By the end of last year, they were $8.7 trillion.
As it expanded, it has stepped up its lobbying. In 2004, BlackRock Inc. registered two lobbyists and spent less than $200,000 on its efforts. By 2019 it had 20 lobbyists and spent nearly $2.5 million, though that declined slightly last year, based on OpenSecrets data. Campaign contributions tied to the firm also jumped, touching $1.7 million in 2020 (80 percent to Democrats, 20 percent to Republicans) from next to nothing as recently as 2004.
short-term debt markets that came under intense stress as people and companies rushed to move all of their holdings into cash. And problems were brewing in the corporate debt market, including in exchange-traded funds, which track bundles of corporate debt and other assets but trade like stocks. Corporate bonds were difficult to trade and near impossible to issue in mid-March 2020. Prices on some high-grade corporate debt E.T.F.s, including one of BlackRock’s, were out of whack relative to the values of the underlying assets, which is unusual.
People could still pull their money from E.T.F.s, which both the industry and several outside academics have heralded as a sign of their resiliency. But investors would have had to take a financial hit to do so, relative to the quoted value of the underlying bonds. That could have bruised the product’s reputation in the eyes of some retail savers.
fund recovery was nearly instant.
When the New York Fed retained BlackRock’s advisory arm to make the purchases, it rapidly disclosed details of those contracts to the public. The firm did the program cheaply for the government, waiving fees for exchange-traded fund buying and rebating fees from its own iShares E.T.F.s back to the New York Fed.
The Fed has explained the decision to hire the advisory side of the house in terms of practicality.
“We hired BlackRock for their expertise in these markets,” Mr. Powell has since said in defense of the rapid move. “It was done very quickly due to the urgency and need for their expertise.”
There were two weeks left in the Trump administration when the Treasury Department handed down a set of rules governing an obscure corner of the tax code.
Overseen by a senior Treasury official whose previous job involved helping the wealthy avoid taxes, the new regulations represented a major victory for private equity firms. They ensured that executives in the $4.5 trillion industry, whose leaders often measure their yearly pay in eight or nine figures, could avoid paying hundreds of millions in taxes.
The rules were approved on Jan. 5, the day before the riot at the U.S. Capitol. Hardly anyone noticed.
The Trump administration’s farewell gift to the buyout industry was part of a pattern that has spanned Republican and Democratic presidencies and Congresses: Private equity has conquered the American tax system.
one recent estimate, the United States loses $75 billion a year from investors in partnerships failing to report their income accurately — at least some of which would probably be recovered if the I.R.S. conducted more audits. That’s enough to roughly double annual federal spending on education.
It is also a dramatic understatement of the true cost. It doesn’t include the ever-changing array of maneuvers — often skating the edge of the law — that private equity firms have devised to help their managers avoid income taxes on the roughly $120 billion the industry pays its executives each year.
Private equity’s ability to vanquish the I.R.S., Treasury and Congress goes a long way toward explaining the deep inequities in the U.S. tax system. When it comes to bankrolling the federal government, the richest of America’s rich — many of them hailing from the private equity industry — play by an entirely different set of rules than everyone else.
The result is that men like Blackstone Group’s chief executive, Stephen A. Schwarzman, who earned more than $610 million last year, can pay federal taxes at rates similar to the average American.
Lawmakers have periodically tried to force private equity to pay more, and the Biden administration has proposed a series of reforms, including enlarging the I.R.S.’s enforcement budget and closing loopholes. The push for reform gained new momentum after ProPublica’s recent revelation that some of America’s richest men paid little or no federal taxes.
nearly $600 million in campaign contributions over the last decade, has repeatedly derailed past efforts to increase its tax burden.
Taylor Swift’s back music catalog.
The industry makes money in two main ways. Firms typically charge their investors a management fee of 2 percent of their assets. And they keep 20 percent of future profits that their investments generate.
That slice of future profits is known as “carried interest.” The term dates at least to the Renaissance. Italian ship captains were compensated in part with an interest in whatever profits were realized on the cargo they carried.
The I.R.S. has long allowed the industry to treat the money it makes from carried interests as capital gains, rather than as ordinary income.
article highlighting the inequity of the tax treatment. It prompted lawmakers from both parties to try to close the so-called carried interest loophole. The on-again, off-again campaign has continued ever since.
Whenever legislation gathers momentum, the private equity industry — joined by real estate, venture capital and other sectors that rely on partnerships — has pumped up campaign contributions and dispatched top executives to Capitol Hill. One bill after another has died, generally without a vote.
An Unexpected Email
One day in 2011, Gregg Polsky, then a professor of tax law at the University of North Carolina, received an out-of-the-blue email. It was from a lawyer for a former private equity executive. The executive had filed a whistle-blower claim with the I.R.S. alleging that their old firm was using illegal tactics to avoid taxes.
The whistle-blower wanted Mr. Polsky’s advice.
Mr. Polsky had previously served as the I.R.S.’s “professor in residence,” and in that role he had developed an expertise in how private equity firms’ vast profits were taxed. Back in academia, he had published a research paper detailing a little-known but pervasive industry tax-dodging technique.
$89 billion in private equity assets — as being “abusive” and a “thinly disguised way of paying the management company its quarterly paycheck.”
Apollo said in a statement that the company stopped using fee waivers in 2012 and is “not aware of any I.R.S. inquiries involving the firm’s use of fee waivers.”
floated the idea of cracking down on carried interest.
Private equity firms mobilized. Blackstone’s lobbying spending increased by nearly a third that year, to $8.5 million. (Matt Anderson, a Blackstone spokesman, said the company’s senior executives “are among the largest individual taxpayers in the country.” He wouldn’t disclose Mr. Schwarzman’s tax rate but said the firm never used fee waivers.)
Lawmakers got cold feet. The initiative fizzled.
In 2015, the Obama administration took a more modest approach. The Treasury Department issued regulations that barred certain types of especially aggressive fee waivers.
But by spelling that out, the new rules codified the legitimacy of fee waivers in general, which until that point many experts had viewed as abusive on their face.
So did his predecessor in the Obama administration, Timothy F. Geithner.
Inside the I.R.S. — which lost about one-third of its agents and officers from 2008 to 2018 — many viewed private equity’s webs of interlocking partnerships as designed to befuddle auditors and dodge taxes.
One I.R.S. agent complained that “income is pushed down so many tiers, you are never able to find out where the real problems or duplication of deductions exist,” according to a U.S. Government Accountability Office investigation of partnerships in 2014. Another agent said the purpose of large partnerships seemed to be making “it difficult to identify income sources and tax shelters.”
The Times reviewed 10 years of annual reports filed by the five largest publicly traded private equity firms. They contained no trace of the firms ever having to pay the I.R.S. extra money, and they referred to only minor audits that they said were unlikely to affect their finances.
Current and former I.R.S. officials said in interviews that such audits generally involved issues like firms’ accounting for travel costs, rather than major reckonings over their taxable profits. The officials said they were unaware of any recent significant audits of private equity firms.
No Money Owed
For a while, it looked as if there would be an exception to this general rule: the I.R.S.’s reviews of the fee waivers spurred by the whistle-blower claims. But it soon became clear that the effort lacked teeth.
Kat Gregor, a tax lawyer at the law firm Ropes & Gray, said the I.R.S. had challenged fee waivers used by four of her clients, whom she wouldn’t identify. The auditors struck her as untrained in the thicket of tax laws governing partnerships.
“It’s the equivalent of picking someone who was used to conducting an interview in English and tell them to go do it in Spanish,” Ms. Gregor said.
The audits of her clients wrapped up in late 2019. None owed any money.
The Mnuchin Compromise
As a presidential candidate, Mr. Trump vowed to “eliminate the carried interest deduction, well-known deduction, and other special-interest loopholes that have been so good for Wall Street investors, and for people like me, but unfair to American workers.”
wanted to close the loophole, congressional Republicans resisted. Instead, they embraced a much milder measure: requiring private equity officials to hold their investments for at least three years before reaping preferential tax treatment on their carried interests. Steven Mnuchin, the Treasury secretary, who had previously run an investment partnership, signed off.
McKinsey, typically holds investments for more than five years. The measure, part of a $1.5 trillion package of tax cuts, was projected to generate $1 billion in revenue over a decade.
credited Mr. Mnuchin, hailing him as “an all-star.”
Mr. Fleischer, who a decade earlier had raised alarms about carried interest, said the measure “was structured by industry to appear to do something while affecting as few as possible.”
Months later, Mr. Callas joined the law and lobbying firm Steptoe & Johnson. The private equity giant Carlyle is one of his biggest clients.
‘The Government Caved’
It took the Treasury Department more than two years to propose rules spelling out the fine print of the 2017 law. The Treasury’s suggested language was strict. One proposal would have empowered I.R.S. auditors to more closely examine internal transactions that private equity firms might use to get around the law’s three-year holding period.
The industry, so happy with the tepid 2017 law, was up in arms over the tough rules the Treasury’s staff was now proposing. In a letter in October 2020, the American Investment Council, led by Drew Maloney, a former aide to Mr. Mnuchin, noted how private equity had invested in hundreds of companies during the coronavirus pandemic and said the Treasury’s overzealous approach would harm the industry.
The rules were the responsibility of Treasury’s top tax official, David Kautter. He previously was the national tax director at EY, formerly Ernst & Young, when the firm was marketing illegal tax shelters that led to a federal criminal investigation and a $123 million settlement. (Mr. Kautter has denied being involved with selling the shelters but has expressed regret about not speaking up about them.)
On his watch at Treasury, the rules under development began getting softer, including when it came to the three-year holding period.
Monte Jackel, a former I.R.S. attorney who worked on the original version of the proposed regulations.
Mr. Mnuchin, back in the private sector, is starting an investment fund that could benefit from his department’s weaker rules.
A Charmed March
Even during the pandemic, the charmed march of private equity continued.
The top five publicly traded firms reported net profits last year of $8.6 billion. They paid their executives $8.3 billion. In addition to Mr. Schwarzman’s $610 million, the co-founders of KKR each made about $90 million, and Apollo’s Leon Black received $211 million, according to Equilar, an executive compensation consulting firm.
now advising clients on techniques to circumvent the three-year holding period.
The most popular is known as a “carry waiver.” It enables private equity managers to hold their carried interests for less than three years without paying higher tax rates. The technique is complicated, but it involves temporarily moving money into other investment vehicles. That provides the industry with greater flexibility to buy and sell things whenever it wants, without triggering a higher tax rate.
Private equity firms don’t broadcast this. But there are clues. In a recent presentation to a Pennsylvania retirement system by Hellman & Friedman, the California private equity giant included a string of disclaimers in small font. The last one flagged the firm’s use of carry waivers.
The Biden administration is negotiating its tax overhaul agenda with Republicans, who have aired advertisements attacking the proposal to increase the I.R.S.’s budget. The White House is already backing down from some of its most ambitious proposals.
Even if the agency’s budget were significantly expanded, veterans of the I.R.S. doubt it would make much difference when it comes to scrutinizing complex partnerships.
“If the I.R.S. started staffing up now, it would take them at least a decade to catch up,” Mr. Jackel said. “They don’t have enough I.R.S. agents with enough knowledge to know what they are looking at. They areso grossly overmatched it’s not funny.”
Taiwan’s government on Monday criticized the World Health Organization for capitulating to China after it failed to secure an invite to an annual health meeting convened by the international agency.
For months, Taiwan and a coalition of supporters, including the United States, had been intensely lobbying for the self-governed island to be granted observer status at the meeting of the World Health Assembly, or W.H.A., which began today and will be held virtually through June 1.
China, which claims Taiwan as its own territory, has blocked the island from participating in the assembly since 2016. But Taiwan’s calls for inclusion have gained international attention in light of its successful handling of the coronavirus pandemic for nearly a year and a half.
This month, the countries of the Group of 7 — Britain, Canada, France, Germany, Italy, Japan and the United States — for the first time voiced their joint support for Taiwan’s bid for observer status in the W.H.A., the top decision-making body of the W.H.O. Chinese officials condemned the G-7 announcement as “gross interference” in its internal affairs.
a statement released on Monday, Taiwan’s foreign minister, Joseph Wu, rebuked the W.H.O. for its “continued indifference” to the health of the island’s 23.5 million people and urged the organization to “maintain a professional and neutral stance” and “reject China’s political interference.”
Chen Shih-chung, Taiwan’s health and welfare minister, added that the island’s exclusion from the meeting was “not only a loss for Taiwan but also the rest of the world,” according to the statement.
“The world needs to share all available information and expertise in a collective fight against disease,” Mr. Chen said.
Taiwan’s exclusion from the meeting comes as the island’s authorities are racing to tame a surge in coronavirus infections that has prompted what is essentially its first lockdown since the start of the pandemic. After months of reporting very few locally transmitted cases of the virus, officials have confirmed more than 3,000 new cases in the past three weeks.
On Monday, the health authorities added 590 cases of local transmission to the total, including 256 infections that were confirmed because of delayed reporting. Officials also confirmed six new deaths from the virus, bringing the overall death toll to 29.
Taiwan’s health authorities on Monday also accused mainland Chinese actors of taking advantage of the outbreak to spread disinformation. Speaking at a news briefing, Chen Tsung-yen of the Central Epidemic Command Center in Taiwan said that reports of the government’s faking coronavirus data and of dead Covid-19 patients dumped in rivers had been spread by accounts linked to overseas internet addresses.
Mr. Chen added that other signs that mainland Chinese actors were involved in the spread of disinformation included the use of phrases commonly associated with the mainland and the inclusion of the simplified characters used in China, as opposed to the traditional script that is used in Taiwan.
WASHINGTON — The chief executive of Emergent BioSolutions, whose Baltimore plant ruined millions of coronavirus vaccine doses, disclosed for the first time on Wednesday that more than 100 million doses of Johnson & Johnson’s vaccine are now on hold as regulators check them for possible contamination.
In more than three hours of testimony before a House subcommittee, the chief executive, Robert G. Kramer, calmly acknowledged unsanitary conditions, including mold and peeling paint, at the Baltimore plant. He conceded that Johnson & Johnson — not Emergent — had discovered contaminated doses, and he fended off aggressive questions from Democrats about his stock sales and hundreds of thousands of dollars in bonuses for top company executives.
Emergent’s Bayview Baltimore plant was forced to halt operations a month ago after contamination spoiled the equivalent of 15 million doses, but Mr. Kramer told lawmakers that he expected the facility to resume production “in a matter of days.” He said he took “very seriously” a report by federal regulators that revealed manufacturing deficiencies and accepted “full responsibility.”
“No one is more disappointed than we are that we had to suspend our 24/7 manufacturing of new vaccine,” Mr. Kramer told the panel, adding, “I apologize for the failure of our controls.”
Federal campaign records show that since 2018, Mr. El-Hibri and his wife have donated more than $150,000 to groups affiliated with Mr. Scalise. The company’s political action committee has given about $1.4 million over the past 10 years to members of both parties.
Mr. El-Hibri expressed contrition on Wednesday. “The cross-contamination incident is unacceptable,” he said, “period.”
Mr. Kramer’s estimate of 100 million doses on hold added 30 million to the number of Johnson & Johnson doses that are effectively quarantined because of regulatory concerns about contamination. Federal officials had previously estimated that the equivalent of about 70 million doses — most of that destined for domestic use — could not be released, pending tests for purity.
confidential audits, previously reported by The Times, that cited repeated violations of manufacturing standards. A top federal manufacturing expert echoed those concerns in a June 2020 report, warning that Emergent lacked trained staff and adequate quality control.
“My teenage son’s room gives your facility a run for its money,” Representative Raja Krishnamoorthi, Democrat of Illinois, told Mr. Kramer.
Mr. Kramer initially testified that contamination of the Johnson & Johnson doses “was identified through our quality control procedures and checks and balances.” But under questioning, he acknowledged that a Johnson & Johnson lab in the Netherlands had picked up the problem. Johnson & Johnson hired Emergent to produce its vaccine and, at the insistence of the Biden administration, is now asserting greater control over the plant.
The federal government awarded Emergent a $628 million contract last year, mostly to reserve space at the Baltimore plant for vaccine production. Among other things, lawmakers are looking into whether the company leveraged its contacts with a top Trump administration official, Dr. Robert Kadlec, to win that contract and whether federal officials ignored known deficiencies in giving Emergent the work.
Mr. El-Hibri told lawmakers that the government and Johnson & Johnson were aware of the risks.
“Everyone went into this with their eyes wide open, that this is a facility that had never manufactured a licensed product before,” he said. While the Baltimore plant was “not in perfect condition — far from it,” he argued that the facility “had the highest level of state of readiness” among the plants the government had to choose from.
the coronavirus leaked from a laboratory in China, the “lies of the Communist Party of China,” mask mandates and the Biden administration’s call for a waiver of an international intellectual property agreement.
“You are a reputable company that has done yeoman’s work to protect this country in biodefense,” exclaimed Representative Mark E. Green, Republican of Tennessee, adding, “So you gave your folks a bonus for their incredible work.”
Emergent is skilled at working Washington. Its board is stocked with former government officials, and Senate lobbying disclosures show that the company has spent an average of $3 million a year on lobbying over the past decade. That is about the same as two pharmaceutical giants, AstraZeneca and Bristol Myers Squibb, whose annual revenues are at least 17 times higher.
Democrats pressed Mr. Kramer and Mr. El-Hibri about their contacts with Dr. Kadlec, who previously consulted for Emergent. Documents show that Emergent agreed to pay him $120,000 annually between 2012 and 2015 for his consulting work, and that he recommended that Emergent be given a “priority rating” so that the contract could be approved speedily. Dr. Kadlec has said he did not negotiate the deal but did sign off on it.
“Did you or any other Emergent executives speak to or socialize with Dr. Kadlec while these contracts were being issued?” Representative Nydia M. Velázquez, Democrat of New York, asked Mr. Kramer.
“Congresswoman,” he replied carefully, “I did not have any conversations with Dr. Kadlec about this.”
A Times investigation found that Emergent has exercised outsize influence over the Strategic National Stockpile, the nation’s emergency medical reserve; in some years, the company’s anthrax vaccine has accounted for as much as half the stockpile’s budget.
The investigation found that some federal officials felt the company was gouging taxpayers — an issue that also came up at Wednesday’s hearing when Representative Carolyn B. Maloney, Democrat of New York, demanded to know how much it cost to make the vaccine and what it sold for. Mr. El-Hibri promised to supply the information later.
Company executives also view their coronavirus work as one of the “prime drivers” of its 2020 revenues, according to a memorandum released on Wednesday by committee staff members. The executives were rewarded for what the company’s board called “exemplary overall 2020 corporate performance including significantly outperforming revenue and earnings targets.”
Mr. Kramer received a $1.2 million cash bonus in 2020, the records show, and also sold about $10 million worth of stock this year, in trades that he said were scheduled in advance and approved by the company. Three of the company’s executive vice presidents received bonuses ranging from $445,000 to $462,000 each.
Sean Kirk, the executive responsible for overseeing development and manufacturing operations at all of Emergent’s manufacturing sites, received a special bonus of $100,000 last year, in addition to his regular bonus of $320,611, in part for expanding the company’s contract manufacturing capability to address Covid-19, the documents show. Mr. Kirk is now on personal leave.
Emergent officials “appear to have wasted taxpayer dollars while lining their own pockets,” Ms. Maloney charged.
Mr. Krishnamoorthi asked Mr. Kramer if he would consider turning over his bonus to the American taxpayers.
“I will not make that commitment,” Mr. Kramer replied.
“I didn’t think so,” Mr. Krishnamoorthi shot back.
WASHINGTON — The Biden administration’s efforts to provide $4 billion in debt relief to minority farmers is encountering stiff resistance from banks, which are complaining that the government initiative to pay off the loans of borrowers who have faced decades of financial discrimination will cut into their profits and hurt investors.
The debt relief was approved as part of the $1.9 trillion stimulus package that Congress passed in March and was intended to make amends for the discrimination that Black and other nonwhite farmers have faced from lenders and the United States Department of Agriculture over the years. But no money has yet gone out the door.
Instead, the program has become mired in controversy and lawsuits. In April, white farmers who claim that they are victims of reverse discrimination sued the U.S.D.A. over the initiative.
Now, three of the biggest banking groups — the American Bankers Association, the Independent Community Bankers of America and National Rural Lenders Association — are waging their own fight and complaining about the cost of being repaid early.
They also want other investors who bought the loans in the secondary market to get government money that would make up for whatever losses they might incur from the early payoff.
Bank lobbyists, in letters and virtual meetings, have been asking the Agriculture Department to make changes to the repayment program, a U.S.D.A. official said. They are pressing the U.S.D.A. to simply make the loan payments, rather than wipe out the debt all at once. And they are warning of other repercussions, including long-term damage to the U.S.D.A.’s minority lending program.
In a letter sent last month to Tom Vilsack, the agriculture secretary, the banks suggested that they might be more reluctant to extend credit if the loans were quickly repaid, leaving minority farmers worse off in the long run. The intimation was viewed as a threat by some organizations that represent Black farmers.
they wrote to Mr. Vilsack in April.
The U.S.D.A. has shown no inclination to reverse course. An agency official said that obliging the banks would put an undue burden on taxpayers and that the law did not allow the agency to pay interest costs or reimburse secondary market investors. The agency hopes to be able to begin the debt relief process in the coming weeks, according to the official, who requested anonymity because they were not authorized to comment on the program.
The relief legislation that Congress passed in March provided “sums as may be necessary” from the Treasury Department to help minority farmers and ranchers pay off loans granted or guaranteed by the Agriculture Department. Most of the loans are made directly to farmers, but about 12 percent, or 3,078, are made through lenders and guaranteed by the U.S.D.A.
The Congressional Budget Office estimated that the loan forgiveness provision would cost $4 billion over a decade.
While America’s banks have flourished in the last century, the number of Black-owned farms has declined sharply since 1920, to less than 40,000 today from about a million. Their demise is the result of industry consolidation as well as onerous loan terms and high foreclosure rates.
Black farmers have been frustrated by the delays and say they are angry that banks are demanding additional money, slowing down the debt relief process.
“Look at the two groups: You have the Black men and women who have gone through racism and discrimination and have lost their land and their livelihood,” said Bill Bridgeforth, a farmer in Alabama who is on the board of the National Black Growers Council. “And then you have the American Bankers Association, which represents the wealthiest folks in the land, and they’re whining about the money they could potentially lose.”
John Boyd Jr., president of the National Black Farmers Association, a nonprofit, said he found it upsetting that the banks said little about years of discriminatory lending practices and instead complained about losing profits.
“They’ve never signed on to a letter or supported us to end discrimination, but they were quick to send a letter to the secretary telling him how troublesome it’s going to be for the banks,” Mr. Boyd said. “They need to think about the trouble they’ve caused not working with Black farmers and the foreclosure process and how troublesome that was for us.”
Mr. Boyd urged Mr. Vilsack not to let the debt relief stall.
“It’s planting season and Black farmers and farmers of color really could use this relief,” Mr. Boyd said.
Cornelius Blanding, executive director of the Federation of Southern Cooperatives/Land Assistance Fund, said that the letter from the banks appeared to be a veiled threat.
“They are prioritizing profits over people,” Mr. Blanding said, expressing concern that the backlash from banks and white farmers could delay the debt relief. “Debt has been a burden on the back of many farmers and especially farmers of color. Them holding this up really prolongs justice.”
Although the government is paying 120 percent of the outstanding loan amounts to cover additional taxes and fees, banks say that unless they get more, they will be on the losing end of the bailout.
The banking industry groups could not offer an estimate of how much additional money they would need to be satisfied. The Agriculture Department said it would cost tens of millions of dollars to meet the banks’ demands.
In the letter to Mr. Vilsack, the bank lobbyists pointed to one large community bank, which they said had a $200 million portfolio of loans to socially disadvantaged farmers that would lose millions of dollars of net income per year if the loans were quickly paid off. They warned that such a move would “undoubtedly reduce the bank’s ability to retain employees.”
The American Bankers Association defended the request, arguing that lenders have been a lifeline to minority farmers. It said that the matter primarily affects the group’s smaller members that have large portfolios of loans from socially disadvantaged borrowers. Representatives for Goldman Sachs, JPMorgan Chase and Citigroup said that the debt relief program had not been on their radar and that they had not been lobbying against it.
“We recognize the need for U.S.D.A. to carry out this act of Congress, and we support the goal of providing financial relief to socially disadvantaged farmers and ranchers,” said Sarah Grano, a spokeswoman for the American Bankers Association. “We believe it would be helpful if the U.S.D.A. implemented this one-time action without causing undue financial harm to the very lenders who have been supporting farmers with much-needed credit.”
Danny Creel, the executive director of the National Rural Lenders Association, said he had no comment. An official from the Independent Community Bankers of America said that the group was not currently considering litigation and that it anticipated that the federal government would find a way to accommodate its requests.
Lawmakers who helped craft the relief legislation have expressed little sympathy for the banks and are pressing the agriculture department to get the money out the door.
Senator Cory Booker, a New Jersey Democrat, said: “U.S.D.A. should now take this first step toward addressing the agency’s history of discrimination by quickly implementing the law that Congress passed and moving forward without delay to pay off in full all direct and guaranteed loans of Black farmers and other socially disadvantaged farmers.”
The banks are not the only ones who have been fighting the debt relief initiative. A group of white farmers in Wisconsin, Minnesota, South Dakota and Ohio are suing the Agriculture Department, arguing that offering debt relief on the basis of skin color is discriminatory. America First Legal, a group led by the former Trump administration official Stephen Miller, filed a lawsuit making a similar argument in U.S. District Court for the Northern District of Texas this month.
Mr. Vilsack said at a White House press briefing this month that his department would not be deterred by pushback against its plans to help minority farmers.
“I think I have to take you back 20, 30 years, when we know for a fact that socially disadvantaged producers were discriminated against by the United States Department of Agriculture,” Mr. Vilsack said. “So, the American Rescue Plan’s effort is to begin addressing the cumulative effect of that discrimination in terms of socially disadvantaged producers.”