WEDNESDAY, JULY 28, 2010
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In long-delayed review, IMF praises China but raises currency question
Fund calls for change while saying Beijing ‘led the global recovery’
by Howard Schneider In a sign of the deepening co-
operation between the Interna- tional Monetary Fund and Chi- na, the agency issued a softly worded critique of the country’s currency policies Tuesday night while praising its overall actions during the recent economic cri- sis. It was the first public review of
China’s economic policies in three years, after what is typical- ly an annual exercise was post- poned over disagreements be- tween Chinese and IMF officials. During the interim period, the IMF has worked hard to account for China’s growing importance to the world economy, appoint- ing Chinese official Min Zhu as a special adviser to Dominique Strauss-Kahn, the fund’s manag- ing director, and moving forward with proposals to realign voting
power on the IMF executive board to acknowledge the coun- try’s rising influence. The board assessment pub- lished on Tuesday night focused on Beijing’s response during the crisis as it put in place an exten- sive stimulus program that “helped mitigate the impact on the economy and ensured that China has led the global recov- ery.” That and other policies helped the country’s economy grow by more than 9 percent, doing so by importing more commodities and capital goods — a boost for its trading partners.
But the board also gingerly criticized the country’s ex- change-rate policy — a source of contention between the United States and China. U.S. officials and many observers think China deliberately keeps its yuan, also known as the renminbi, under- valued to keep its goods cheaper on world markets and boost ex- ports. The IMF has consistently called for China to enact more flexible exchange-rate policies, and in Tuesday’s notice the board
“stressed that, over time, a stron- ger renminbi would help facil- itate a shift from exports” — something the IMF considers necessary for improving world economic stability.
But the note also acknowl-
edged some dissent on the IMF board, a concession to China’s ar- gument that its trade surplus is driven by forces much larger than the value of its currency. The IMF’s 24 board members in- clude eight who represent indi- vidual countries — including the United States and China — while others represent groups of na- tions. In discussing staff projections of the currency’s value on the open market, some board mem- bers “disagreed with the staff ’s assessment of the level of the ex- change rate, noting that it is based on uncertain forecasts.” The staff assessment — a much more detailed document than the summary of the board dis- cussion — has not been released and would only be made public if China agreed.
schneiderh@washpost.com
S
Economy & Business
GE agrees to settle with SEC on charges of foreign bribery
by Zachary A. Goldfarb General Electric agreed to pay
$23.4 million on Tuesday to set- tle a Securities and Exchange Commission complaint, which alleges that GE bribed Iraqi gov- ernment officials to win con- tracts to supply medical and wa- ter-purification equipment un- der the U.N. oil-for-food program. The SEC alleges that two GE subsidiaries and two companies that the conglomerate later ac- quired paid $3.6 million in kick- backs to the Iraqi Health Min- istry and Iraqi Oil Ministry for valuable contracts. The bribes, which are illegal under the For- eign Corrupt Practices Act, came in the form of cash, computer equipment, medical supplies and services, the SEC said.
“Bribes and kickbacks are bad business, period,” said SEC En- forcement Director Robert Khu- zami in a statement. “This case affirms that law enforcement is active across the globe — off- shore does not mean off-limits.”
Removal of problem equipment urged metro from A1
years to carry out safety improve- ments. But Sarles stopped short of saying Metro would implement the recommendations and told reporters that the 1000 series cars will not begin to be replaced until 2013. Metro gave the manufac- turer of the next generation of rail cars, Kawasaki, approval to begin building the replacements Mon- day night.
All of the problems identified by the NTSB, from specific equip- ment flaws to broad organiza- tional weaknesses, were made public last year in an investigative series in The Washington Post. But the formal announcement Tuesday and the harshness of the board’s language underscored the depth of the problem at Metro. Hersman denounced Metro’s failure to apply lessons from a near-crash by the Rosslyn Station in 2005, which she said could have prevented the June 22, 2009, accident near the Fort Totten Sta- tion, in which one train crashed into another, killing the driver and eight passengers and injuring scores of others. “Metro was on a collision course long before this accident,” Hersman said in an opening statement at the public meeting, attended by senior Metro leaders and safety oversight officials as well as families of the crash vic- tims. “The only question was when Metro would have another accident — and of what magni- tude.”
Widespread failures The NTSB report represented a
scathing critique of Metro’s fail- ings leading to the Red Line crash and called for sweeping changes to bolster safety at Metro and to strengthen federal and local safe- ty oversight of public transit na- tionwide. The investigation found that the specific cause of the June 2009 accident was a failure of the automatic train-control system, which did not detect one train and instead directed another to advance toward it at full speed. Metro has known since the 2005 Rosslyn near-crash that the auto- matic train-control system had experienced dangerous break- downs but had not widely imple- mented a track circuit test devel- oped after that incident, the NTSB found. If two Metro work crews that were on the scene within five days before the Fort Totten crash had used the proper test, they would have known that the track circuit was not detecting trains and they could have acted to prevent the accident. Instead, with track circuit problems setting off thousands of alarms each week, workers at Metro’s Operations Control Cen- ter were not acknowledging them, NTSB investigator Ruben Payan said. “Unfortunately, they were being ignored because of the large amount that were being re- ported,” he said. The NTSB also found that the manufacturer of the circuits, Gen- eral Railway Signal, now owned by Alstom Signaling, did not pro- vide a maintenance plan for the circuits that would detect the anomalies in the track circuit sig- nal that led to the failure to detect the train. Metro was aware of track cir-
cuit problems as far back as 1988, the NTSB said. The federal agency called on Metro to develop a real-time sys-
“Our frustration is that if they don’t listen this time, I am not sure what can be done,” NTSB Chairman Deborah A.P. Hersman says.
tem for monitoring track circuits for problems, and Metro said it intends to have one in place by December. Metro evaluates track circuits twice a day and dispatch- es maintenance personnel to in- spect circuits that do not detect trains. The NTSB said Metro should replace the 1,482 circuits that were built by GRS. Metro tested those circuits after the crash and found that 208 had the same malfunction that caused the crash.
With undisguised irritation,
Hersman criticized Metro for not implementing many previous NTSB recommendations aimed at improving safety. “It’s almost like we are talking with someone who is tone-deaf. They are not hearing it, they are not getting it and they are not addressing the problems,” she said. “Our frustration is that if they don’t listen this time, I am not sure what can be done.” Metro’s top-to-bottom failure to prioritize safety — exhibited by turnover and vacancies in its safe- ty office — is “a manifestation of the sickness that was going on in- side this organization,” Hersman said. “They were monkeying around.”
NTSB members said safety was not made a priority by Metro’s senior management or board of directors, adding that as of Janu- ary, Metro board Chairman Peter Benjamin had not placed safety oversight in the board’s mission statement and that former chair- man Jim Graham had not heard of Metro’s safety oversight organi- zation, the Tri-State Oversight Committee (TOC). For its part, they said the TOC lacks “teeth” and cannot force Metro to be ac- countable for safety problems.
“This accident is a classic or-
ganizational accident,” said NTSB member Robert L. Sumwalt.
Improving oversight The NTSB recommended that
the Transportation Department continue to seek authority — pro- posed in legislation pushed by the Obama administration — to reg- ulate and provide oversight of safety at public transit systems. Transportation Secretary Ray
LaHood welcomed the recom- mendation.
“I thank the NTSB for its rec- ommendation that Congress au- thorize the Federal Transit Ad- ministration [FTA] to enforce na- tional transit safety standards, which could prevent future acci- dents,” he said in a statement. “We will continue to work closely with Congress to move transit safety legislation as quickly as possible.” LaHood sent the Obama ad-
ministration’s bill to Congress in December 2009. Last week, Sens. Christopher J. Dodd (D-Conn.), Richard C. Shelby (R-Ala.) and Robert Menendez (D-N.J.) intro- duced the bipartisan bill, which would authorize the FTA to estab- lish federal safety standards for transit systems. “The Senate must act quickly to pass this bipartisan transit safety package that the Banking Com- mittee has worked so hard to de- velop,” Menendez said in a state- ment. The legislation would grant the
transportation secretary new en- forcement authority over public transit safety, require transit agencies to establish safety plans, improve state safety oversight agencies and increase spending for public transit safety.
GE, which neither admitted nor denied the allegations, said: “GE is committed to the highest standards of conduct in all trans- actions in all of the jurisdictions where we do business through- out the world.” The oil-for-food program was designed to allow food, medical aid and other necessary items to enter Iraq despite economic sanctions during Saddam Hus- sein’s rule.
According to the SEC com- plaint, the bribes were made from 2002 to 2003. GE subsidiar- ies Marquette-Hellige and OEC- Medical Systems (Europa) AG al- legedly paid $2.04 million in kickbacks to the Iraqi govern- ment. Ionics Italba and Nycomed Im- aging, which were later acquired by GE, paid $1.55 million in kick- backs, the SEC said. For its bribes, Marquette re- ceived $8.8 million in contracts and OEC-Medical secured a $2.1 million contract, according to the SEC. Ionics earned $2.3 million in wrongful profit on contracts and
Nycomed made $5 million, the SEC said. The agency said GE cooperat- ed with its investigation. The Justice Department also often files foreign bribery cases, but GE said none would be forth- coming. Violations of the Foreign Cor-
rupt Practices Act have been an increasing source of cases for the SEC. One of the five specialized units created as part of an over- haul of the enforcement division focuses on foreign corruption. Cheryl J. Scarboro, chief of the unit, said Tuesday, “GE failed to maintain adequate internal con- trols to detect and prevent these illicit payments by its two subsid- iaries to win oil-for-food con- tracts, and it failed to properly record the true nature of the pay- ments in its accounting records.” The GE case is the fourth larg- est to be brought in the oil-for- food program, after cases filed against German conglomerate Siemens, energy giant Chevron and chemical company Innos- pec.
goldfarbz@washpost.com Highlights of the NTSB report
Here are the key points in the National Transportation Safety Board’s report. A summary will be available on the NTSB’s Web site,
www.ntsb.gov. The full report won’t be available for several weeks.
PROBABLE CAUSES OF THE CRASH Failure of track circuit modules that were built by General Railway Signal/Alstom Signaling. The problem caused the automatic train-control system to fail to detect a train stopped near the Fort Totten Station. Metro’s failure to widely use a track circuit test instituted after a 2005 near-collision in a tunnel near Rosslyn Station.
CONTRIBUTING FACTORS TO THE CRASH Metro’s lack of a work culture devoted to safety. Metro’s failure to effectively maintain and monitor its automatic train-control system. GRS/Alstom’s failure to provide a maintenance plan for detecting false signals in the track circuit modules. Ineffective safety oversight by Metro’s board and the Tri-State Oversight Committee, the regional supervisory body. The lack of federal regulations governing oversight. Metro’s failure to replace or retrofit its oldest rail cars contributed to the severity of injuries and the number of deaths.
PHOTOS BY CHARLES DHARAPAK/ASSOCIATED PRESS “Who’s going to hold [Metro] accountable?” asked Kenneth Hawkins, whose brother died in the crash. on
washingtonpost.com
Extensive archives on the Red Line crash
Scan the NTSB report; check out an animated
re-creation of the crash; view images and witness accounts from that day; peruse recollections one year later.
postlocal.com
Impact in other cities The NTSB also called on Al- stom to conduct a comprehensive analysis of its track circuit mod- ules to identify possible failures that could cause systems to not detect trains and to work with not only Metro but also transit agen- cies in Boston, Philadelphia, Los Angeles, Cleveland and Chicago to establish inspection and main- tenance procedures for the circuit modules and remove any that ex- hibit the problem known as “par- asitic oscillation” that caused the Red Line crash.
Since the accident, Alstom has been working with Metro on test- ing and evaluating the 1970s-era equipment and developing re- medial measures for the train- control system, Alstom spokes- man Tim Brown said. The com- pany is also working with the oth- er agencies that use the part. The American Public Transpor-
tation Association, which is made up of public transit agencies across the country, will convene a panel of experts to review the NTSB’s recommendations, associ- ation spokesman Mantill Wil- liams said. Kenneth Hawkins, whose brother Dennis was killed in the accident, expressed satisfaction that “hard-core facts” about the causes of the crash emerged Tues- day. But he remained dissatisfied overall. “The question for me is: Who’s
going to hold [Metro] account- able?” he told reporters during a lunch break. “Who’s putting his foot on the neck of” Metro? Hawkins said the NTSB has is- sued recommendations in the past without much impact. “They’re coming out with the truth . . . but what’s really going to happen?” he asked.
tysona@washpost.com
Staff columnist Robert McCartney and the Associated Press contributed to this report.
KEY RECOMMENDATIONS OF THE NTSB Metro should replace all 1000 series rail cars, the oldest in the fleet, with cars that are at least as crashworthy as the 6000 series, which is the newest model in use by the agency. (Metro placed an order Monday night with Kawasaki for new 7000 series rail cars.) The NTSB also found that placing the older cars in the middle of trains “is not an acceptable substitute for removing the cars from service.” Metro should replace all of the track circuit modules whose failure is a probable cause of the crash and regularly examine all modules to detect problems consistent with what happened in the Red Line crash. Metro should implement a non-punitive safety reporting program for all employees. Federal agencies should continue to seek authority to make and enforce rules governing subway systems. (Congress is considering such legislation.) Alstom should develop maintenance guidelines for Metro and other U.S. transit agencies using the troubled track circuit modules and help them identify and remove the problematic components.
KEY FINDINGS OF NTSB INVESTIGATORS Some modules of the type involved in the Red Line crash remain in use and exhibit traits that pose an “unacceptable risk to Metrorail users.” Because of the high number of alarms generated by a monitoring system, controllers in Metro’s operations control center “could not have been expected to be aware of the impending collision.” There was not enough time for Jeanice McMillan, the operator of the striking train, to stop and avoid the crash. There was an opportunity five days before the crash to determine that there was a problem with detecting trains in the area, but proper Metro procedures were not followed.
— From staff reports
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