Bellingcat’s report on MH17 shows citizens can and will do intelligence work



Large groups inherently possess more diverse knowledge, expertise and perspectives.
Tim de Groot/Unsplash

Tim van Gelder, University of Melbourne

Amid the news last week that the perpetrators responsible for shooting down Malaysia Airlines Flight 17 (MH17) will be put to trial next March, a report was released identifying further suspects responsible for escorting the missile to and from the launch site.

Who were the investigators behind the report? The CIA? MI6? No. It was Bellingcat, a large group of mostly volunteers working from laptops using only information available to anyone with an internet connection.

In February, Bellingcat also identified a third suspect alleged to have been involved in the poisoning of MI6 double agent Sergei Skripal and his daughter Yulia in the United Kingdom last year.

Bellingcat describes itself as citizen journalists, but its activities illustrate a growing phenomenon my colleagues and I call “citizen intelligence.” This is work that would count as intelligence gathering or analysis within an intelligence organisation, but it’s undertaken by citizens operating outside the traditional intelligence ecosystem.




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The rise of citizen intelligence

Citizen intelligence has been made possible by the internet in various ways.

Since its advent, we’ve seen an explosion of “open source” information. That is, data that’s accessible without any special organisational privileges. For example, just by opening Google Earth you can view satellite data of the kind only available to analysts in government agencies not many years ago.

There are now free new tools for gathering and analysing these vast troves of information, such as the analysis platform Maltego. Aspiring citizen analysts can now train themselves using resources available online or in workshops offered by various organisations.

Expertise in intelligence work is no longer the preserve of those hired and trained by traditional organisations. Powerful collaboration platforms, such as Google Docs, allow interested individuals to work effectively together, even when scattered around the world.

It could get even bigger

We’ve all seen how global, cloud-based marketplaces such as Amazon, Airbnb and Uber have transformed their respective domains. Citizen intelligence could grow even faster if a suitable marketplace is developed. At the SWARM Project, we’ve begun exploring the potential design of a platform where those seeking intelligence can transact with those willing to provide it.

What might that look like? A marketplace for citizen intelligence could be built on a “sponsored challenge” crowdsourcing model.

Imagine an organisation with an intelligence question. Say, for example, the organisation wants to identify potential threats to a proposed infrastructure development in an unstable region. The organisation pays to have the question posed as a challenge on the platform, with a prize for the best answer. Groups of citizen analysts self-organize and submit reports. When the deadline is up, the best report garners the prize – and bragging rights.




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Why crowdsourced citizen intelligence could be effective

There are reasons to think that crowdsourced citizen intelligence could match, or outperform, traditional intelligence organisations on some kinds of tasks. Traditional organisations have advantages, such as access to classified information and highly trained analysts, but crowdsourcing has compensating strengths.

Scale

Many intelligence organisations are small and under-resourced for the number and complexity of issues they are supposed to handle. Crowdsourced intelligence can potentially draw from much larger pools of citizens. For example, the analytics crowdsourcing platform Kaggle has over a million people signed up, and it gets literally thousands of teams competing on big challenges.

Diversity

With scale comes diversity. Large groups inherently possess more diverse knowledge, expertise and perspectives. A question like the one in the example above might require fluency in an obscure dialect, or specific technical know-how. No intelligence agency can maintain in-house everything it might need for any problem.

Agility

Crowds can be more agile than agencies, which are risk-averse bureaucracies. For example, individuals can more quickly access and use many of the latest analytical methods and tools.

Passion

Perhaps most importantly, intelligence work by unpaid volunteers is driven primarily by passion. Passion certainly exists within agencies, but is often stifled in various ways.




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The SWARM Project ran a tournament-style experiment in 2018 that illustrated how everyday citizens can sometimes beat the professionals. Teams tackled four tough, fictional intelligence problems over four weeks. Some teams were made up of analysts provided by organisations with intelligence functions, some of analysts recruited via Facebook, and some of citizens (non-analysts) recruited via Facebook.

On average, the citizen teams outperformed the professional analysts – and some of the citizen reports were astonishingly good.

How this could affect the intelligence industry

Citizen intelligence will likely create some headaches for intelligence agencies. For example decision makers might increasingly look to citizen sources over formal intelligence agencies – particularly where citizen intelligence delivers reports more quickly, or with more “convenient” findings.

On the other hand, citizen intelligence could have a lot to offer intelligence organisations. A suitably designed marketplace might enable the traditional agencies to take advantage of the power inherent in the crowd. Such a platform could be a “force multiplier”, at least for certain aspects of intelligence.

In view of these potential threats and opportunities, the Australian intelligence community should get on the front foot, shaping the future of citizen intelligence rather than just reacting to it.


This is a condensed version of a presentation given at the Technology Surprise Forum, Safeguarding Australia Summit, Canberra May 2019The Conversation

Tim van Gelder, Enterprise Research Fellow, University of Melbourne

This article is republished from The Conversation under a Creative Commons license. Read the original article.

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MH17 charges: who the suspects are, what they’re charged with, and what happens next


Amy Maguire, University of Newcastle

Four men – three Russians and one Ukrainian – will be charged in relation to the shooting down of the Malaysia Airlines flight MH17, which killed all 298 passengers and crew on board.

Dutch prosecutors will launch a criminal trial in The Hague on March 9, 2020. But the accused are beyond the jurisdiction of the court, and will most likely be tried in absentia. This means the accused will not be physically present in the court room.

The prosecutors argue the four accused were jointly responsible for obtaining a BUK TELAR missile launcher (a launcher for self-propelled, surface-to-air missiles allegedly owned by the Russian military) in the city of Kursk, and launching it from Ukraine.

They say the four men are responsible for the atrocity because they had the intention to shoot down an aircraft, and obtained the missile launcher for that purpose.




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While investigators have not accused any suspects of actually firing the missile, they say in future they may identify others with that responsibility.

For the victims and their loved ones, these Dutch criminal trials present the best hope of legal acknowledgement for the tragedy.

The MH17 atrocity

On July 17, 2014, flight MH17 was travelling from Amsterdam to Kuala Lumpur when it was shot down over Ukraine.

The Joint Investigative Team (JIT), led by Dutch authorities and comprising investigators from Malaysia, Australia, Belgium and Ukraine, concluded in 2016 that the flight was shot down by a Russian BUK missile.

The JIT identified the launch location as a field in eastern Ukraine, which at the time was in territory controlled by pro-Russian fighters.

The countries central to the investigation – including Australia, which lost 38 people – and the victims’ families have explored a range of legal strategies to assign blame for the attack.

Then Foreign Minister Julie Bishop initially proposed a war crimes trial for MH17, but this was vetoed by Russia in the UN Security Council.

Some civil claims on behalf of victims’ families are ongoing before the European Court of Human Rights.

And hearings are ongoing before the International Court of Justice, where Ukraine seeks to make a case against Russia. Ukraine cites the MH17 atrocity as characteristic of broader Russian aggression and lack of respect for Ukrainian sovereignty and independence.

Russia’s response

The Russian Foreign Ministry rejected this week’s announcement, in line with its earlier rejections of the JIT conclusions. It said:

Once again, absolutely groundless accusations are being made against the Russian side, aimed at discrediting the Russian Federation in the eyes of the international community.

Russian President Vladimir Putin earlier called the crash a “terrible tragedy”, but said Russia bore no responsibility for it.

Russian officials have claimed they were prepared to assist the investigation but had been “frozen out” of it.

Who are the accused?

Three of the four accused are Russian nationals, believed to be living in Russia.

Igor Girkin is a former colonel in the Russian security service. At the time of the atrocity, Girkin was the minister of defence in the so-called Donetsk People’s Republic, a pro-Russian separatist region of Ukraine.

The other two Russian accused, Sergey Dubinsky and Oleg Pulatov, are former Russian military intelligence agents who worked under Girkin.

Leonid Kharchenko is the only Ukrainian national accused. Investigators are not certain of his current location. At the time of the atrocity, Kharchenko led a separatist combat unit.

The specific charges in relation to the four named suspects will be:

  1. Causing the crash of flight MH17, resulting in the death of all persons on board, punishable pursuant to Article 168 of the Dutch Criminal Code

  2. The murder of the 298 persons on board of flight MH17, punishable pursuant to Article 289 of the Dutch Criminal Code.

The investigation is ongoing and continues to call for witnesses to assist.

What are the prospects for the trial?

Dutch investigators will issue international arrest warrants for the four accused and place them on international wanted lists. But they won’t issue extradition requests because they know already that no extradition of nationals is available under the Ukrainian or Russian constitutions.

It seems impossible for the Dutch court to gain actual jurisdiction over the Russian accused. Potentially, should Ukrainian authorities apprehend Kharchenko, he could be tried via video-link.

The Netherlands and Ukraine have entered into an agreement that would permit such an arrangement and – should Kharchenko be convicted – allow for his imprisonment in Ukraine.




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The charges and any penalties originate in Dutch, rather than international, criminal law. Convictions for murder or the intentional downing of an aircraft could result in sentences of up to life imprisonment.

It’s fair to question the value of a prosecution without a court having actual jurisdiction over the accused. The only real answer is that such a trial would enable the presentation and adjudication of evidence and the judgement of a court as to whether charges are made out.

A memorial for the victims of MH17 in the Donetsk region, Ukraine.
Shutterstock

As time goes, the chances of successful prosecutions decline. Meanwhile, interested countries and the victims’ families continue to call for legal redress for the atrocity.

It is also legitimate to ask whether a court can ensure a fair trial for accused persons tried in absentia.

Although it is not explicitly prohibited by international human rights law, the absence of defendants and presumably any legal representative from the courtroom means the accused will not hear the evidence against them or have the ability to present a defence.

Given the four named accused are beyond the actual jurisdiction of the Dutch courts, it can be argued that they (and, at least in the case of Russia, their country) are wilfully avoiding the process of justice. This may be, for some or many observers, sufficient justification for trying them in their absence.The Conversation

Amy Maguire, Associate Professor, University of Newcastle

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Bottom of the canal: Pfizer’s billion-dollar tax ploy



File 20170803 28984 16qhxo6
The Netherlands is where nearly $1 billion from Australia was sunk into two companies liquidated three years later.
Alex de Haas/flickr, CC BY-NC

Michael West, University of Sydney

Pharmaceutical giant Pfizer has engaged in a series of paper transactions to create a A$936 million loss in Australia. It is, for all intents and purposes, a billion-dollar exercise in tax avoidance.

Pfizer and its auditor KPMG, the “Big Four” global accounting firm, refused to comment on the transactions or to defend them when presented with questions by this columnist. Pfizer was contacted on numerous occasions and refused. Both parties refused to return emails and phone calls.

These are transactions housed within a byzantine corporate structure. We will outline, in brief, the series of transactions with Pfizer associates in the Netherlands which led to this “bottom of the canal” tax scheme, then provide the background to the company’s activities.

The sequence of transactions

2011: Pfizer Australia Investments Pty Ltd issues $728 million in shares to Pfizer companies in the Netherlands, the US and Luxembourg.

Pfizer Australia Investments (PAI) then uses the cash from this share issue to buy two subsidiaries incorporated in the Netherlands. These are called Pfizer Australia Investments B.V. and Pfizer Pacific Cooperatief U.A.

There is no record of these two companies in Pfizer’s global accounts before December 31 2010.

2014: PAI issues more shares and invests another $208 million in the two Dutch companies. This brings the total investment in these companies to $936 million.

By the end of 2014, the Dutch subsidiaries have been liquidated with zero return for PAI. The financial effect of this round-robin transaction is that share capital of $936 million has been created in Pfizer’s Australian entity and losses of $936 million are recorded in Australia.


Michael West/Rachell Li, Sydney Democracy Network

This ring-a-ring-a-rosy has all the hallmarks of a transaction designed to create almost a billion dollars in losses which can be used for tax purposes in Australia. The Australian company has “invested” almost a billion dollars into two overseas companies which were suddenly liquidated – with no value left for shareholders. Nothing is heard of them since.

It brings to mind the infamous Bottom of the Harbour tax schemes of the 1970s and ’80s where the financial engineers – aided by the top end of the accounting community – made investments in companies, stripped those companies of their assets and left nothing for the taxman.

In Pfizer’s case, almost $1 billion of cash was “invested” in two companies in the Netherlands which went belly up within three years. That left the Australian entity – indeed Australian taxpayers – carrying the can for its losses as the freshly created $1 billion in share capital is now sitting pretty for tax-effective distribution to Pfizer overseas.

A company with form

Pfizer has form on such transactions.

Back in 2011, another Pfizer entity, Pfizer Australia Holdings, created new share capital of $733 million after it bought two subsidiaries from Pfizer Inc. The two subsidiaries were acquired for hundreds of millions of dollars.

Pfizer issued shares, rather than paid cash, to buy these assets from themselves. So, new shares were created at a value of $733 million. This enormous price relied on a fancy asset valuation for the intangible assets held by these subsidiaries, notably “product development rights” of $461 million. These were the main assets acquired.

By 2014, share capital of $408 million of this new share capital had been returned in cash, repatriated to Pfizer companies overseas. And the product development rights had already evaporated (amortised) by $161 million.

Share capital created, assets written off, again. This is the Pfizer pattern. Share capital is created and its assets vanish.

On December 1 2014, yet another Pfizer entity here, Pfizer PFE Pty Ltd, acquired the Innovative Products Oncology and Consumer business from Pfizer Australia Holdings for nil consideration. This included the mysterious product development rights. Nil consideration. These are the rights valued three years earlier at $461 million.

Traditionally, when one company acquires a business from another company, one company is the buyer and the other company is the seller. This immutable principle of commerce does not necessarily pertain to Pfizer.

Pfizer Australia Holdings describes the transfer of this Innovative Products business as a “distribution”, a “transaction with owners in their capacity as owners”, according to its statutory financial statements.

In reality it is no such thing. Pfizer PFE is not an owner of Pfizer Australia Holdings. It holds no shares. It is merely a related party with a common ultimate parent in the US, Pfizer Inc.

Behind this narrative of a “distribution to owners” is tax. When you make profits of hundreds of millions of dollars, avoiding the 30% corporate income tax rate is big business.

Then and now

In 2007, Pfizer Australia Holdings was at the helm of Pfizer’s tax consolidated group in Australia and prepared “General Purpose” financial statements, full financial statements and full disclosures.

In 2008, it switched to preparing “Special Purpose” financial statements with far less disclosure, especially about income tax. KPMG’s 2008 audit report gave this special purpose report a clean bill of health even though required disclosures of changes in accounting policies were not made.

From 2009 to 2012, Pfizer Australia Holdings paid franked dividends to shareholders of $576 million; that is more than half-a-billion dollars going overseas. This is the good stuff, though, the above-board stuff, dividends paid out of profits already taxed in Australia.

After 2012, Pfizer ran out of Australian profits to distribute. It had hit the “patents cliff”. The blockbuster drugs Lipitor and Viagra were coming off patent and being challenged by generic competitors. Pfizer’s sales peaked at $2.2 billion in 2012. This used to be the biggest pharmaceutical company in the country.

Yet Pfizer had hit another cliff. The company was running out of Australian profits to distribute as dividends. It needed another way to rake the money offshore. And it came in the guise of return of share capital – better than dividends as there are far lighter tax obligations.

In 2014, a return of capital of $408 million was made offshore. And now, in 2016, Pfizer has made sure, through transactions with associates in the Netherlands, that there is another billion dollars ready to go offshore when the US overlords make the call.

Two things stand out, two takeaways from the “magic pudding” of Pfizer share capital creation and its bottom-of-the-canal tax scheme.

One, PAI’s audited financial statements claim that two Netherlands subsidiaries were incorporated in Australia. We can find no record of this.

Two, in 2014, PAI invested $208 million in the two Netherlands subsidiaries that were liquidated in the same year for no return. What is an observer to make of that?


The ConversationThis column, co-published by The Conversation with michaelwest.com.au, is part of the Democracy Futures series, a joint global initiative between The Conversation and the Sydney Democracy Network. The project aims to stimulate fresh thinking about the many challenges facing democracies in the 21st century.

Michael West, Adjunct Associate Professor, School of Social and Political Sciences, University of Sydney

This article was originally published on The Conversation. Read the original article.