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The US Pavilion Controversy and the Threat to American Public Diplomacy

2010. 19 May

by Bob Jacobson
( When Hillary Clinton travels to Shanghai on Friday, May 21, to applaud the US Pavilion at the Shanghai 2010 World Expo for which she personally raised the funds necessary to save the project when it looked as if it would implode last year, she will arrive with a retinue including Ambassador William Huntsman, Consul General Bea Camp, and the personable Commissioner General Jose Villarreal. As the key players in the US Pavilion’s self-proclaimed “success,” they may arrive expecting to open the champagne and toast a “Mission Accomplished!” of their own.

What they may discover in Shanghai, however, is a much more complicated situation.

The US Pavilion has been a subject of controversy since the State Department in 2007. That’s when State, on the verge of choosing a team of Expo veterans to produce the US Pavilion, aborted its year-long, competitive RFP process. Three months later, in March 2008, State sole-sourced the project secretly, without public notice or review, to individuals with alleged insider connections in the State and Commerce Departments.

A year later, the team was still struggling. It had publicly resigned after blowing through half a million dollars in seed capital (apparently supplied by the Chinese), only to be shocked back to life by Consul General Bea Camp, who infused another half-million of mystery money. The team had just about burned through this second tranche when newly appointed Secretary of State Clinton took time off from her Mideast peace initiative to make dozens of solicitations in its behalf to her corporate friends. After $60 million-plus dollars had been pledged by 60 odd multinational firms, Clinton had saved the project from imminent foreclosure by the Expo hosts.

The whole Pavilion backstory up to that point has been told by The Atlantic correspondent Adam Minter in Foreign Policy magazine and via continuous reports on his blog, Shanghai Scrap; and by me in the HuffPost earlier this month.

As things stood when the Expo opened on May 1, Clinton was being praised for her rescue mission, a new Commissioner General (Villarreal) had been appointed to oversee the pavilion’s operations (late in the game, but better late than never), and the pavilion had opened on time. Though nothing special in Expo terms, the mundane US Pavilion, having been heavily hyped by PR firm Ruder Finn, the Ogilvy & Mather advertising agency, and a boosterish Associated Press early on was visited by long lines of Chinese visitors who waited hours to get in. (Those lines have since abated.)

The visitors came expecting to learn what makes America tick and how our nation is meeting the challenges posed by the Expo’s theme, “Better City, Better Life.” Many left disappointed by its content, three superficial short films costing $23 million, a fast-food court selling food that Americans would disdain, and a trophy room of corporate technology – much of it problematic in terms of fulfilling the Expo’s theme. But the relief in Foggy Bottom that the Chinese saw anything at all must have been palpable.

The State Department’s relief is premature.

A look at papers filed by SE 2010 in 2009 with the IRS, in support of its application for tax-exempt status, reveals that despite its surface appearances, the US Pavilion project was planned as a commercial real-estate and advertising brokerage that ill deserves either its tax exemption, expedited by an less than careful IRS inspector, or its place at the Expo representing America in all the fullness that that would require.

Upwards of $70 million were contributed to SE 2010, all of it tax exempt or tax deductible (so far as we know from press accounts, since SE 2010’s books have never been opened and it has failed to file required tax returns for years 2008 and 2009.) That’s how much revenue will have to be made up by the rest of us who won’t enjoy the exposure and sales – possibly totalling in the tens of millions of dollars – to be made by corporations whose individual contributions were far more modest. That’s bad enough

But deeper analysis of those papers and related historical facts suggests a more pernicious strategy being played out, using the US Pavilion as a stalking horse for the policy of privatizing State’s public diplomacy activities. It appears that this policy of “Blackwatering” American public diplomacy was conceived by the Bush Administration in 2006 (it shows up in the 2007 RFP) but was fumbled by SE 2010 and the Shanghai Consulate.

As with so many Bush initiatives, it required the more professional Obama Administration, in this case led by Clinton, to successfully execute on this policy. If this is true, and there are many reasons to believe it is, then what we are witnessing is the further dissembling of the public American government in favor of its operation in the future by private interests, likely multinational corporations.

To find out more, I’ve filed a Form 13909 Complaint with the IRS, a request for an investigation into SE 2010’s filing in June 2009 for tax exempt status, the IRS’ expedited granting of this status, and many apparent misstatements and misrepresenations made in the application regarding the US Pavilion effort made to the IRS and to the Chinese hosts and the American people. These alleged half-truths and untruths were intended to secure the tax exemption, of course – but I believe, also served to justify the US Pavilion’s being handed off entirely to private interests for the first time in recent American history.

There is in the application, for example, the by-now familiar claim, recited since 2007 by State Department operatives, that federal law forbids Federal funding of US participation in Expos. No such prohibition exists. This claim, conceived and initially promulgated by the Bush White House – the 2007 RFP says something different – was repeated over and over by a gullible press. This claim has since evolved through several “weasel wordings” to cover for the privatization policy in less extreme terms, but it exists in its original, pristine form in SE 2010’s Form 1023 Application for Tax Exempt Status.

It had become such a staple that Secretaries Rice and Clinton themselves were deceived: each wrote letters presented to the IRS that repeated this false assertion, letters used to justify outsourcing the pavilion to private operators while helping them to acquire tax-exempt status.

For another matter, SE 2010, it appears, may not have been a legitimate nonprofit corporation at the time it filed for tax-exempt status. That remains to be confirmed. Congress is looking into it, too.

I’ve posted my 13909 complaint on the Web for all parties and the American people to examine since I can’t go into it here – and once the IRS has the complaint in its possession, Federal law prevents it from disclosing the progress of an investigation, if there is one, or its disposition unless presumably it discovers criminal activity, in which case it would become a matter for the Justice Department. But an independent press and people can do their own checking.

Also, to provide context, I’ve posted a copy of my November 2009 Request for an Investigation sent to the State Department Office of the Inspector General and subsequently referred to the Secretary’s Executive Office, where it lies moldering today. It provides my understanding of events as they transpired from 2006 when the Bush Administration allegedly concocted an “Action Plan” laying out the privatization strategy up to the panicky days when everything was a rush to get the US Pavilion done, one way or another.

I had hoped that Secretary Clinton on being notified of this document and having studied it, would have convened a meeting to discuss remedies and reforms. Regrettably, so far as I know, this hasn’t happened yet. Perhaps it will be announced on Friday.

Because much more is at stake here than the possible malfeasances that resulted in a maudlin but very expensive US Pavilion that represents Corporate America – or more accurately, Corporate Multinatinalism – but not the American people. (The one exception: the dozens of American graduate student “ambassadors” who greet the Chinese visitors in impeccable Mandarin, and whom everyone agrees are the pavilion’s silver lining and its saving grace.)

Serious reforms need to be instituted to ensure that US participation in Yeosu, Korea 2012 (“The Living Ocean and Coast” – how timely!) and Milan 2015 (“Feeding the Planet, Energy for Life”) is public, open, transparent, and inclusive.

Equally important — and here, the Congress and citizens must intervene — is the need for a thorough examination of and debate about the State Department’s privatization policy that stands to eviscerate American public diplomacy. In the future, a strong public diplomacy capability will be America’s most important tool for making its case to the world and garnering cooperation from other nations.