Palast on past Mendelsohn scandal

This is worth a read. Just to give the Donorgate scandal some depth…

Top investigative reporter GREG PALAST explains how new Labour’s chief fundraiser was caught out trading cash for access years ago.

IT was a stunning admission. Prime Minister Gordon Brown’s crony explained to the US businessman, in evil detail, exactly how the fix is done in Britain.

Unfortunately for Jon Mendelsohn and his partners, the “businessman” was, in fact, an undercover reporter.

Today, Brown’s foes are calling for Mendelsohn’s resignation as chief fundraiser of the Labour Party for his admitted knowledge of £630,000 in dodgy, possibly illegal, campaign contributions to Labour.

What’s odd here are the protestations of shock at the behaviour of Mendelsohn, described in The Guardian as an “ethical” lobbyist. “Ethical” my arse.

It was exactly nine years ago that Mendelsohn and his lobby firm partners were caught trading cash for access. How this Mendelsohn character ended up heading Labour Party fundraising and how he obtained the sobriquet “ethical” is the real shocker.

I know a few things about this Mendelsohn. The “businessman” with the hidden recorder was me. In June 1998, joined by my recorder and a real US businessman, Mark Swedlund, who designed my elaborate corporate front, I met Mendelsohn at his Soho office. There, Mendelsohn confirmed what was already on tape from his partners in the lobby firm he founded, LLM.

I explained my corporate needs – some environmental rules needed bending. I hinted that I was with Enron. Mendelsohn’s partner Neil Lawson told my recorder that, if I paid LLM £5,000 to £20,000 per month, “we can go to anyone. We can go to Gordon Brown if we have to.” Brown was at the time Chancellor of the Exchequer. Could the lobbyist provide concrete examples of a fix?

Easily. Here is a short list of LLM claimed accomplishments:

• Inside information on then-chancellor Brown’s budgets.

• Tax avoided by a supermarket chain following millions donated to a new Labour pet project.

• A pass on anti-trust action against client Rupert Murdoch’s media empire.

• And, for Gordon Brown, a favour that the Mendelsohn team expected to redeem.

LLM, which stands for the founders Lucas, Neil Lawson and Mendelsohn, were about to derail Brown’s plan for a tax on car parks. This would cost Tesco, which was an LLM client, £20 million annually. LLM was holding secret meetings that week in June 1998 with Tony Blair’s Downing Street Policy Unit to get Tesco exempted from the proposed tax.

The tax threat went away after LLM advised Tesco to drop £11 million into funding for Blair’s odd Millennium Dome project.

“This government likes to do deals,” Lucas told me.

But this deal was complex, Mendelsohn said, not so simple as cash paid for a tax break.

“Tony is very anxious to be seen as ‘green’,” Mendelsohn explained to me and my confederate.

“Everything has to be couched in environmental language – even if it’s slightly Orwellian.”

So LLM devised a set of cockamamie gimmicks for Tesco, like offering bus services to the elderly, which would paint the retailer green.

It worked. Tesco was spared the tax – though the company denies categorically that its cash dumped into the Dome bought any favours.

The year of my original investigation – dubbed “Lobbygate” – anti-trust authorities were looking into Rupert Murdoch’s companies’ alleged predatory pricing practices. LLM carried the word from Downing Street, according to Lucas, that, if Murdoch’s tabloids toned down criticism of new anti-trust legislation, the law’s final language would reflect the government’s appreciation.

On the other hand, harsh coverage in Murdoch’s papers could provoke problems for the media group in Parliament’s union-recognition Bill.

The message to muzzle journalists was not, said Lucas, “an easy one in their culture” – journalists being a trying lot. However, the outcome pleased LLM clientele.

It also happened that, on one of the days that I recorded Mendelsohn’s partners, they boasted of informing an LLM client about details of Gordon Brown’s budget plans before the Chancellor’s announcement went public.

A lobbyist competing for my “business,” when asked to match the offer of inside information and deal-making held out by LLM and another new Labour firm, said: “It’s appalling. It’s disturbing” and added that he would refuse to match the LLM services at any price.

If LLM appeared favoured by Brown’s operation, Brown himself received favours from LLM.

“Gordon Brown asked us to have our client (consultancy firm) KPMG host a breakfast for him where it was prearranged that they would praise him for his prudent budgets.”

Brown basked in this Potemkin praise-fest, a favour that would be returned with special access – and for my own clients, if I paid the retainer.

Whether Mendelsohn, Lawson and Lucas actually pulled off all that they claimed, I can’t say. Though just kids in their twenties, LLM had garnered millions in revenue, a lot of loot if for mere advice.

No-one seriously investigated, no-one asked uncomfortable questions of Brown, Blair or the man at the centre of several of these supposed “deals,” Peter Mandelson, now an EU commissioner.

However, because Mendelsohn made these tawdry claims – or grinned at me while his partner made them – and they were published on page one of every newspaper in the realm, with part of an LLM tape broadcast on BBC Newsnight, one would think that perspicacious Brown would have avoided Mendelsohn like the plague.

But the PM embraced Mr Let’s-Make-A-Deal. The reason was made clear to me by Mendelsohn himself, a man as brainy as he is cynical and wealthy. Those many years ago, at the dawn of the Blair regime, Mendelsohn handed me a confidential manifesto that he’d penned for LLM clients only. It was a map of the soul of new Labour.

Here was a chilling combination of Mendelsohn, Mandelson and Nietzsche. “AN OLD WORLD IS DISAPPEARING AND A NEW ONE EMERGING,” he announced in upper case.

In the “Passing World” were “ideology” and “conviction,” which would now be replaced by “pragmatism” and “consumption.” “Buying” would replace “belief.”

And ultimately, in this Brave New Labour World, style was all. “WHAT YOU DO,” wrote Mendelsohn, was passe, replaced by, “HOW YOU DO IT.”

So why demand Mendelsohn’s head now? Gordon Brown is a prudent man whom, I suspect, reads a newspaper or two – and knew exactly whom he had positioned to fill his party’s coin sacks. Mendelsohn is just a gun for hire, a forgettable factotum.

I wouldn’t place the blame on the hired gun, but on the man whose finger is on the trigger.

The series Lobbygate: Cash for Access was originally published by The Observer in July 1998 by Greg Palast and Antony Barnett. For a complete history of the scandal, read Blair and the Sale of Britain in The Best Democracy Money Can Buy (Constable & Robinson 2004). Excerpt at


What would have happened if Remploy was a bank?

This was the comment from The Morning Star:

THURSDAY’S nasty little announcement in the House of Commons by Work and Pensions Secretary Peter Hain that 28 Remploy factories will be closed is more than the “disappointment” that he characterised it as.

It is also confirmation that Mr Hain’s intervention in the dispute during the TUC and Labour conferences was no more than a manoeuvre by an party embarrassed by a heartless and unnecessary policy and determined to put it onto a back burner until the glare of publicity had subsided.

But it is no more than we have come to expect from new Labour and its upper echelons. Evasion, insincerity and eventual betrayal.

Clearly, no consideration has been given to the unions’ alternative proposals, since they were only submitted last week and there simply hasn’t been time to build a business model based on them and develop any projections as to the possibilities of success taking the union-recommended route.

There has certainly been some progress, in that 15 fewer factories are to close and there are also changes in policy on procurement and performance monitoring.

But thousands of jobs for people with disabilities are still to vanish and 28 factories will go to the wall.

But it could so easily have been different. With a little more courage in the procurement policy, all of those jobs could have been saved, at no cost to the government beyond a little expenditure of imagination and planning and 2,000 disabled people would still have a future in an organisation built around their requirements.

And, as GMB general secretary Paul Kenny pointed out, if Remploy had been called Northern Rock, we would not be seeing a single redundancy.

But the new Labour attitude, that shareholders and profiteers’ interests are more important than those of ordinary working people, has again determined government policy.

Just a fraction of the cash which was pointed at saving Northern Rock – money that we are highly unlikely to see back – would have kept Remploy intact.

The main conclusion that the Remploy staff and the trade unions will inevitably draw is that new Labour’s leading lights simply cannot be trusted. Mr Hain has shown what government reviews do in the 21st century and what they are for.

They are not there to produce justice for working people. They are there to dilute the anger of campaigners, to draw the teeth of their campaigns, to postpone awkward decisions until the furore dies down and then to foist limp compromises on a workforce that deserves better.

And all this at a time when the reputation of the Labour Party is at its lowest ebb and it is publicly perceived as dishonest, mendacious and self-serving.

Not much of a way to win the hearts and minds of the voting public, is it?

For the Remploy issue will not go away just because a second-rate politician has decided to make a lame compromise. The unions will not let it drop and neither will the employees.

And new Labour may very well find, when it comes to the next general election, that the Remploy betrayal is the electoral straw that breaks the camel’s back. If Labour is to hold onto power, it will have to rid itself of the pack of unprincipled opportunists that disgrace its ranks at present.

No free care for elderly in England – a matter of principle for New Labour

From The News Line:

IT has emerged that it is a question of principle for the Labour government that elderly people who are now living in nursing and other homes, and have spent a lifetime paying taxes of one kind or another, must pay for their personal care.

This was the message from Health Secretary Johnson to the House of Commons Health Committee yesterday. This positions the Labour government well to the right of the Scottish National Party government in Scotland.

Johnson argued that the policy differences on health between the Labour and Scottish governments were not due to financial pressures, but was ideological. He explained that the Labour government disagreed with the approach of the Nationalists, who have established that the elderly must have free personal care, and that the government had much more important things to spend the taxpayers’ money on.

Johnson rubbished the statement by Labour MP Charlotte Atkins who said that patients in England felt they were getting ‘a raw deal’ compared to those in Scotland.

Johnson responded: ‘I think there are better things you can do with your money to target the people who need it most.’

He argued that by 2025 the number of over 85s will have risen by two thirds, and that therefore it was vital that funding was prioritised, and for Labour free personal care for the elderly including the over 85s was not a priority.

Johnson then enlarged on his subject adding: ‘I wouldn’t go down the free prescriptions route, as I wouldn’t in a previous life go down the free higher education route.’ Once again he stated that there were much better things to spend the taxpayers’ money on.

Johnson boasts of his role in demolishing a large chunk of the Welfare State. Once again the Scottish nationalists are well to the left of the British Labour party.

However as is usual with this type of bourgeois politician – who, by the way, has a huge salary, a massive expense account and a fabulous pension pot building up for his retirement – while he is roughing up the working class and the middle class he has a soft spot for the rich and powerful.

Taleban no threat, says govt minister, as MPs criticise forces’ housing


In a letter to the Independent newspaper, Lord Malloch-Brown said that the Taleban were not a resurgent force and did not pose a credible threat to the democratic government of Afghanistan.

The minister was responding to a Senlis think-tank report last week which said that the Taleban were the de facto governing authority in much of the country.

So, if the Taleban pose no threat to the Afghan government, what the hell are UK forces doing in Afghanistan? For what purpose are they risking their lives?

Is this this recent atrocity what Malloch-Brown means by things getting better?

Nato planes hunting Taleban militants have killed 12 men from a road building crew in Afghanistan’s north-east as they slept, a provincial governor says.

The strike took place in Nuristan province, 180km (112 miles) north-east of the capital, Kabul, said Nuristan governor Tamimi Nuristani.

But Nato and US officials said a local Taleban leader “may have been killed” and the strike was legitimate.

Another story relating to the armed forces is that of their living conditions which, according to the Commons Public Accounts Committee, will remain substandard for the next twenty years:

The committee noted that the MoD had cut £15m from its estates management budget in 2006/07 after “unforeseen rises in the cost of fuel and other problems”.

Its report said: “It decided to cut planned maintenance work, including re-roofing projects and repairs to hangar doors, rather than postponing other work such as the construction of all-weather pitches and the resurfacing of tennis courts.”

Mr Leigh said: “In response to funding cuts the MoD put off essential maintenance work such as re-roofing buildings, but still found the cash to build all-weather sports pitches and spruce up tennis courts.

“Nobody is saying it is inappropriate to offer a range of leisure facilities on site, but the department has to get its priorities straight.

“Let’s mend the leaking roofs first, and then worry about the state of the tennis courts.”

Inside accommodation at Bicester barracks in OxfordshirePicture of barracks sent in by soldier

And it gets worse:

Forty per cent of the £5bn set aside to improve military housing will be spent on renting the buildings from a private landlord […] £2bn will be spent renting back premises sold off by the state in 1996. […]

The Conservative government sold most of the defence housing stock to Annington Homes in 1996 for £1.6bn. […]

The Army Families Federation said the sell-off had led to an under-investment in homes for service personnel and their families.

Corruptly privatised defence firm announces bumper profits and job cuts

Ah, privatisation. Is it ever free of corruption?

No, it’s inherently corrupt. Call it “crony capitalism” or, if you like to be technical , “state monopoly capitalism“.

The QinetiQ sale is the perfect example of the government acting in the interest of big business. In this case, the private equity pirates, the Carlyle Group, home to the two Bush presidents, John Major, and a host of other former government figures from around the world.

Latest word is that QinetiQ has boosted its profits and is about to cut jobs in the UK.

The BBC covers it coldly:

UK defence and security firm Qinetiq has seen half-year profits rise 9%, boosted by sales in the US.

Pre-tax profit was £25.9m ($12.6m) in the six months to 30 September, up from £23.7m in the same period a year ego.

Qinetiq listed on the London Stock Exchange in February 2006, after the Ministry of Defence sold off a stake in the firm to a private equity company.

The sale has proved controversial, with the government accused of selling the stake too cheaply.

A third of Qinetiq was sold to the US private equity group, Carlyle, for £42m in 2003. By the time it listed on the stock exchange last year, the value of the stake had jumped to in value to £372m.

The Morning Star’s Louise Nousratpour gives better copy:

PRIVATISED Ministry of Defence research firm QinetiQ announced plans to axe 400 jobs to cut costs on Wednesday, at the same time that it revealed a massive increase in profits.

Chief executive Graham Love, who made £22 million at the taxpayer’s expense when QinetiQ was floated in February last year, declared that the job cuts would fall among the company’s 8,000 British staff.

The news emerged just one week after a scandalous National Audit Office report which found that Mr Love, along with nine other senior civil servants, had trousered £107.5 million in profits from the flotation of the business.

It also occurred as QinetiQ announced a 9 per cent rise in pre-tax profits to nearly £30 million for the six months to September 30.

Mr Love boasted that the job cuts were part of a business restructuring plan designed to boost the division’s operating profits by £10 million a year.

“As far as we are concerned, we are doing the job, which is delivering value for shareholders,” declared the former public servant.

A spokesman for Civil Service union PCS condemned the planned cuts, warning that staff will be outraged.

“It seems that the bosses are not content with the astronomical returns that they made from the sale of the QinetiQ group and the 9 per cent profit rise so far this year,” he stormed.

“Now, they want to make even more millions by sacking staff.”

The PCS spokesman said that the way that QinetiQ had been privatised was “scandalous and obscene” and he demanded an official investigation into the whole affair.

Scientific union Prospect national secretary David Luxton expressed members’ “shock” at the news so soon after the audit office’s report.

Mr Luxton stressed that the union would resist any compulsory job losses.

“Any job cuts must be done through voluntary redundancy,” he insisted.

“We will now be actively engaged in consultation with the company to ensure that the full contractual redundancy terms are applied rather than any attempt to get people to leave on the cheap.”

QinetiQ can trace its roots from the birth of powered flight in Britain at Farnborough through to the development of radar at Malvern during the second world war.

The company has 38 British sites at locations including Bristol, Plymouth and Rosyth.

From Stalin to Mr Bean

The title of this comes from the killer line delivered by Vince Cable, acting leader of the Lib-Dems, at Prime Ministers’ Questions today.

I’ve not devoted a full post to this latest scandal yet, and not to worry, the Abrahams affair rumbles on.

The Morning Star’s Adrian Roberts writes:

NEW Labour struggled with deepening crisis on Wednesday as senior party figures tripped over each other while trying to explain away the latest donations scandal.

During rowdy exchanges in the Commons, Prime Minister Gordon Brown said that the government would co-operate with any police inquiry into donations to the Labour Party by property developer David Abrahams.

But his excuses did not stop jubilant Tory leader David Cameron from making hay at the hapless Premier’s expense.

Latest word is that Abrahams was badgered for donations by Jonathan Mendelsohn, Brown’s chief fundraiser, and now the Scottish Labour Party has been drawn in:

The row over Labour Party funding has drawn in the party’s Scottish leader Wendy Alexander.

Ms Alexander is checking the source of a donation to her successful campaign to win the leadership in Scotland.

A spokesman said Ms Alexander’s team had acted in good faith but the SNP said Labour “sleaze” had come north.

My blogging companero Wonko asks an interesting question about the party’s solvency:

The Labour Party has outstanding debts of £29,178,692 – nearly £29.2m. Does Labour have sufficient liquidity to meet loan repayments? No, it has had to restructure some of its loans. Does it have sufficient assets – property, cash reserves, guarantors – to repay its debts? No, it has very few assets. The Liebour Party is insolvent.


What happens if a large creditor – the Unity Trust Bank for example – decides to call in its loans? Liebour hasn’t exactly been union friendly this time round and they shouldn’t rely on union support forever – it’ll carry on for as long as they are useful to each other and no longer (Unity Trust Bank is a union bank). If the Liebour Party no longer exists can a Liebour government continue to run the country?

A very pertinent question. Brown’s “government of all the talents” can perhaps be viewed as an attempt to forge a new political party, more akin to the Democrats in the US, with the Liberal Democrats and opportunistic Tories?

New Labour has always said to dissenting unions that there’s nowhere else to go (this, as they do their best to prevent a challenge from the Labour Left and stop a successful anti-capitalist party being established). But if this recent scandal results in state funding of political parties or a cap on donations, there could be a chance some unions decide to cease funding Labour centrally and instead invest in those parliamentary candidates that act in the interests of working people, and not the big business elite.

Demonstrating and rallying for sacked Unison workers

This write up from this weeks’ Socialist Worker:

On the march to defend sacked trade unionist Karen Reissmann
by Yuri Prasad

Trade unionists and health campaigners from across Britain demonstrated in Manchester on Saturday of last week to demand the reinstatement of nurse Karen Reissmann, who was sacked last month for speaking out against cuts and privatisation.

The demonstration came at a crucial point in the dispute.Karen’s appeal against dismissal is scheduled for 3 December. Unison, her union, is calling a day of solidarity two days later.

Police say the Manchester march was attended by over 1,500 people. It was a sea of colour, with more than 50 banners from a wide range of unions, including Unite, CWU, FBU, NUT, PCS and RMT.

Karen is chair of Unison’s Manchester community and mental health branch and a member of the union’s national health executive.

Her sacking has sent a shockwave through Unison and beyond. It represents a fundamental attack on freedom of speech and the freedom to organise. It is a threat to every trade unionist and to everyone who uses public services.

Around 150 mental health workers at the trust where Karen has worked for the past 25 years are now in their fourth week of indefinite strike action, demanding that she is reinstated.

“It’s vitally important that we came to this protest,” Tam Waterson, the chair of Unison’s Scottish health committee, told Socialist Worker. “If they can get away with this in Manchester, no trade unionist will be safe.”

Mick McGahey, a Unison branch secretary at Lothian ­primary care trust, agrees. “This needs to be a political as well as an industrial fight,” he said.

“With so many on strike, clearly the industrial side is going well. Now I want to see the union’s Labour Link organisation getting to work on this one – I want every Unison sponsored MP to be raising this issue in parliament.”

Unison’s assistant general secretary Bob Abberley spoke at the rally, pledging Karen the full support of her national union.

A group of strikers from Glasgow day centre also joined the demonstration. Sobia told Socialist Worker that they had come to show their solidarity.

“We are in the same kind of struggle – though ours is directly over cuts in services and staff salaries,” she said. “It’s obvious we should stand together.”

The Manchester strikers responded by handing a cheque for £500 from their branch towards the Glasgow dispute – despite the intense pressure on their own funds.

It emerged last week that the strike action by community teams is putting the Manchester trust under massive pressure, with ward-based staff saying the service is “close to breaking point”.

Socialist Worker has seen a letter from Dr Judy Harrison, who chairs the trust’s medical committee, which was sent to trust boss Sheila Foley last week.


It says, “Crises are increasingly being dealt with by on-call doctors and social workers and via accident and emergency… as there are no viable community alternatives. We urge the trust to explore all avenues to achieve a resolution to the ­current dispute.”

But Foley has responsed by lashing out at striking staff. Last week she tried to get striking nurses and occupational therapists “struck off” – but was forced to back down after being told that professional staff have a right to withdraw their labour.

The strike regularly appears on the front page of the Manchester Evening News and has split opinion in the local Labour Party.

Some prominent Labour councillors have attacked the strikers, but Tony Lloyd MP has made clear his support for Karen. He told the rally, “Karen is my constituent, but I am not here in that capacity. I am here because there is a basic trade union principle at stake.

“That principle is the right for an active trade union to speak out about what’s happening in a public service that we own.”

Karen’s appeal against her sacking starts on Monday 3 December. The best way to help win back her job is to make the day of action on Wednesday 5 December a huge success.

Unison is asking trade unionists to organise rallies and protests on the day to raise awareness and money for the strike.

The Manchester dispute must become such a touchstone in the trade union movement that health secretary Alan Johnson is forced to act and order the trust to reinstate Karen.

Rush donations and speaker requests to the Manchester community and mental health Unison branch, 70 Manchester Road, M21 9UN. Go to »

Email messages of protest to Alan Johnson, secretary of state for health, at

And from PR, details of the upcoming rally:

Tuesday 11th December

A meeting against privatisation and against the victimisation of those who oppose it – backing the campaigns of Karen Reissmann in Manchester, Michael Gavan in Newham, and the Fremantle workers in Barnet

From 7pm, Committee Room 9 in the House of Commons, London.

Speakers include: John Burgess (Barnet UNISON), Michael Gavan (Newham UNISON), Kelvin Hopkins MP, John McDonnell MP, Karen Reissmann (Manchester UNISON), Matt Wrack (FBU).