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Most Canadians distrust their political leaders. In a nutshell, we’ve heard far too many lies and seen far too many deceptive smiles. We can’t believe anything they say. Our political system is jeopardized by losers, who receive the best of health care and pensions while the rest of us fall by the wayside. But I digress. I propose that we, the people, rescue our system, and that we start by poking fun at the fools who govern us. We can prove to them that we know what they’re doing. Let’s vote for a liar of the year, a member of the federal cabinet who has distinguished himself or herself by lies in the previous 12 months. Mensa Calgary will hold an electronic election in June each year, and Canada will dunk the winner on Canada day – with a fun parade and in excellent good humour. The idea isn’t punishment or ridicule. It’s to mock the process that impels our leaders to spin every truth until it looks like an X-file. With any luck, after a few years, our politics will regain some sanity. If the annual winner of the election isn’t willing to be dunked – and it would be deemed a sign of incredible ill humour not to participate – we’ll dunk a straw dummy of the turkey instead. I say: the straw dummy and the real dummy wouldn’t be much different.

There is something deeply wrong with Canadian diplomacy these days. Our Environment Minister in Durban (early December) made some deeply offensive remarks about countries including India, to which India had the audacity to respond. Should we be surprised at this? And yet our Minister immediately rebuked India in reply. We started the chain of insult. But Canada’s posture, even before the talks began, had been more truculent and negative than we’d expect. Perhaps amateurs have taken charge of a segment of Canada’s international presence. You can make a point in many ways, but courtesy is the lubricant best framed to gain us friends when we need them in the future. Antagonizing other countries is childish and counterproductive. But also note the repeated attacks launched by our Finance Minister recently against European nations. Does he really believe that those countries don’t understand the importance of a financial accord, an accord that works, in the short and long term, that voters will support, that markets will take in a positive light? Does he think that devising such an accord is easy, or that Europe needs Canada’s long-distance criticism? No. There has been a directive from a higher source, likely the PMO, that signals a new voice for Canada. Pity that it’s a savage simple-minded uncivilized voice. We deserve better.

I used to strongly support the Kyoto accords and similar efforts to reduce emissions. I still endorse the complex science that has uncovered our warming impact on the environment, and that considers recovery will grow more and more difficult as time passes. The loss of the ozone layer is another factor, which this science has uncovered. The trend seems clear; Canada borrows to improve its standard of living, and prays that its future citizens will become more sober-minded or realistic. At the same time, the developing world has to share the burden if it wants countries such as Canada to reduce emissions. It isn’t enough to argue that China must burn coal to catch up to Canada. Why should China suddenly reverse course once most of its population lives on a par with Canadians? That is a premise difficult to swallow; we’d be naive to believe it. Reluctantly, I adhere to a tough line on Kyoto and its sister endeavours.

Canada’s job market is shrinking, and the employed are working harder and harder for less pay. Attawapiskat received ten visits from federal civil servants over the last year, yet Ottawa claims the town’s terrible conditions are a complete surprise. Women in Afghanistan, where our soldiers have died to defend freedom, are forced to marry their rapists. Enough. We need the NDP to get its act together and become a respectable government in waiting. The opposition must create national policies that appeal to the majority of Canadians and lift us out of the circle of deceit and PR hacks that define or confine our federal leadership. That would be a great service to Canada. It doesn’t matter what the NDP was. Let the past rest in peace. The NDP must hammer the current government and offer us a real choice at the polls. That’s what we need most, a real choice.

Analysis of how the rich pay less tax is interesting, but becomes more sinister when linked to the failure of justice to tackle their misdeeds, in particular the misdeeds by way of fraud and deceit that caused the 2008 crisis. I’m thinking, for example, of mortgages granted on the basis of stated income without proof (also called liar loans) in exchange for a few percent higher interest. The analysis is needed, because it documents the impression held by so many that our political system fails to provide even-handed justice. In a nutshell, it’s corrupt. This isn’t an impartiality issue, but rather whether we should all be held to the same ethical standard. The awfulness of our system was shown when democratically elected leaders used the money of the majority to rescue the deceitful few. But the subtext of such analysis is even more trenchant, that nothing has been done – in either the regulatory or enforcement fields – to prevent similar frauds in the future. Neither Canada nor the US have set in place anything of the kind. And if that’s not bad enough, both governments currently criticize Europe, pretending that the 2008 crisis wasn’t caused by the financial sector in North America, and by deliberate decisions by consecutive governments in Canada and the US to ignore the problem, hoping the present financial disaster won’t endure. Wouldn’t it be entertaining to live an extra 50 years, and see the excuses our leaders will parade to excuse themselves from the next crisis? No wonder young people don’t vote.

We’re getting good at lying. When the roof of Vancouver’s stadium leaked before the Gray Cup game, the response from management was: the leak is good. Better now than during the game. Besides, it isn’t a serious leak. Presumably, a serious leak has a frown and lines across its forehead. Presumably also, it’s good that the economy is dreadful and young people can’t find jobs. A prerequisite to influence these days is the ability to tell lies with a straight face. Maybe it has always been thus, and we’ve just noticed. But one day we’ll grow tired of lies. How do the husbands and wives of these people live with them? Don’t they say, when their spouses come home at night, did you believe the trash that spilled from your lips on television today? A few angry wives and husbands might improve public life in this country.

Euler’s Fabulous Formula, by Paul J. Nahin (2006, with new preface in 2011).

The formula is, of course, e(exponent: iu) = cos(u) + isin(u), of which the most fascinating example occurs when u = pi. In that case, e(exponent: ipi) + 1 = 0. Who but Euler would have found the knot that joins e, pi, and i so concisely?

Nahin has written a marvelous book. The target readership has a modicum of university math plus a burning desire to understand how mathematicians sail their vessel. It is as though we are invited back stage by the Wizard of Oz to see his manipulations. Throughout the book, Nahin’s enthusiasm draws us forward, and his clarity of expression permits us to see how creative talent plus hard work have answered problems that appeared intractable.

The core of this volume is a glimpse into the uses of Euler’s famous equation. But another vista is into Nahin himself. The chapters state an objective, but Nahin allows his pleasures to guide the train of exposition. As a result, we aren’t following merely lines of logic but also paths of joy and insight. These twin channels, entwined of course, are what make the book a delight.

The upside is clarity. I never had to turn a page to find a diagram. Nor did I scratch my head over the starting point for a series of mathematical derivations. Nahin always starts his mathematical expositions from precisely where they left off; if you aren’t an aficionado of math books, you have no idea how rare this is. Moreover, Nahin only manipulates a couple of segments of his equations at a time. His math is easy to follow. The secret, I believe, is that Nahin has an overarching concept of the narrative of his book, including the math ingredients. He doesn’t hesitate to include math in the vector of his imagination. As a result, the math never bogs down the reader. To the contrary, the math carries you forward.

The downside is an occasional lapse in theme. Nahin sometimes takes us on sidetrips that are the equivalent of a naturalist leading a group down a narrow pathway in the everglades, because he has heard the call of an interesting bird. The path isn’t in the line marked out on the brochure, but if you can steel yourself to enjoy a bit of serendipity, you won’t mind the deviation. Towards the end especially, however, Nahim permits himself to wander. The frequent comments about electrical engineering eventually weary the reader: yes, yes, the reader says to himself, get on with the book and stop preening. We come to know, more than we’d like perhaps, the themes of Nahin’s other books.

And yet this is one of the best mathematical books I’ve ever read. There were segments in which I kept repeating to myself the mantra: a man’s reach must exceed his grasp. And yet I never entirely lost track of where Nahin was going. There is a wide audience capable of following Nahin in this journey towards knowing how Euler’s formula has benefited the world. You don’t emerge from the book a baptized mathematician, but you emerge with a great respect for Euler and some concept of how mathematicians sail their vessel.

Click here to see the Calendar for this month. Use it as a reference by rolling your mouse over the links or just as a reminder. Bookmark it today! Email us if you want to try something new. We have glorious hockey nights and a superb book club. The second Tuesdays rock. Find our FaceBook page and Calendar for more.

1) Suited to these difficult economic times, find a couple of clichés and a definition from elementary science to prove that for a fixed amount of work, the more you know, the less you’re paid.

2) This is typical of the count-carefully genre of puzzle. We’re going to cross the Atlantic by boat from New York to London. A ship leaves London every day at four pm (GMT) bound for New York and arrives exactly seven days later. Similarly, at four pm GMT every day, a ship (including ours) leaves New York for London and arrives exactly seven days later. All boats follow the same route and avoid collision by trivial deviations. How many ships from London does our vessel encounter during its voyage? Don’t include ships that arrive just as ours leaves New York, or those that leave London just as ours arrives?

The answers to last month’s puzzles were supplied last month.

Here are the answers to this month’s puzzles:

1) The definition from elementary science is: power = work/time. But time is money (one cliché), which means that power = work/money. If knowledge is power (another cliché), then knowledge = work/money. Expressed differently, for a fixed amount of work, knowledge and money are inversely related; the more you know, the less you’re paid. [Adapted from Ian Stewart’s Hoard of Mathematical Treasures]

2) 13. Assume that our ship leaves New York on January 10. It arrives January 17. The ship that left London on January 3 arrives in New York just as we depart, so we don’t count that one. While on the ocean, we meet the vessels that left London on January 4 through to January 16 inclusive. 13 vessels. [Adapted from Ian Stewart’s Hoard of Mathematical Treasures]

Named for the roman god of doorways, Janus, January, being the first
month, was seen as the entryway into the new year.

It is often perceived as the time of new beginnings. Having passed
the winter solstice, the promise of spring and summer to come can
help us endure the harsh weather which is so often January’s defining
feature. Many of us make resolutions to undertake activities which
will better ourselves (I know from experience, the gyms show a real
uptick in membership and participation during January), or forswear
those things which we know to be detrimental (fortunately single malt,
the properties of which can only be salutary, need not be lumped into
such a category). It is a time at which we can recommit to contacts
which may have fallen by the way, and undertake to meet new friends
and enjoy fellowship with people of similar ilk thereby shortening and
adding enjoyment to the long winter nights at this time of year.

Our new board and events coordinator work hard to keep Calgary Mensa a
vibrant group of friends and acquaintances. It can be even livelier
with you.

Dr. David Fermor
Deputy LocSec, Mensa Calgary

IF yet I have not all thy love,
Dear, I shall never have it all ;
I cannot breathe one other sigh, to move,
Nor can intreat one other tear to fall ;
And all my treasure, which should purchase thee,
Sighs, tears, and oaths, and letters I have spent ;
Yet no more can be due to me,
Than at the bargain made was meant.
If then thy gift of love were partial,
That some to me, some should to others fall,
Dear, I shall never have thee all.

Or if then thou gavest me all,
All was but all, which thou hadst then ;
But if in thy heart since there be or shall
New love created be by other men,
Which have their stocks entire, and can in tears,
In sighs, in oaths, and letters, outbid me,
This new love may beget new fears,
For this love was not vow’d by thee.
And yet it was, thy gift being general ;
The ground, thy heart, is mine ; what ever shall
Grow there, dear, I should have it all.

Yet I would not have all yet.
He that hath all can have no more ;
And since my love doth every day admit
New growth, thou shouldst have new rewards in store ;
Thou canst not every day give me thy heart,
If thou canst give it, then thou never gavest it ;
Love’s riddles are, that though thy heart depart,
It stays at home, and thou with losing savest it ;
But we will have a way more liberal,
Than changing hearts, to join them ; so we shall
Be one, and one another’s all.

(For more love and sensual poetry, look at Elsa’s web sites, for example Elsa’s Wild Poetry. Also dive into Elsa’s mind and heart at Elsa’s Love Poetry or Elsa’s General Page.)

Steven Lin chaired Albert Brull’s General Committee. It should have been called Co-ordinating Panel or Planning Group or something equally clever. But too late now. They were stuck with the name. Steven never fought unnecessary battles. It was the first rule of war. He called it the GC. The initials looked like a high fashion logo.

The GC was the brains of Albert Brull’s election drive. It wove ideas into a concerted strategy. Plans and notions came from all over. They flew in from California and Virginia, Wichita and Tuscaloosa. They arrived by email and delivery and telephone. They came from every kind of specialist: foreign policy, banking, housing, health, water, food, manufacturing, and on and on. Special interest groups lobbied the specialists and specialists lobbied the special interest groups, and they each sent gifts to the GC and profuse thanks for being consulted, and the GC passed the gifts on to charities for the homeless and the reports and suggestions to sub-committees for digestion. The sub-committees skimmed the reports and bounced a rare few back to the GC. Bounced them back as radical summaries, that is, because who had time for more.

Three lines, those summaries were. Plus a recommendation of two lines. The task of advocating proposals rested with members of the GC. The members picked over the days proposals, decided what to present, and how hard to push them. The GC was small and had to tick over like a Swiss watch. That’s why Steven greeted each member privately at the crack of dawn every day. He started at one soundproofed office and moved on to the next. Ten minutes with each, raising the issues of the day. That’s what Steven did Tuesday morning after he returned from Hawaii. At 7 came the meeting.

Steven dropped a sheaf of newspapers on the table with a satisfying thud. “Everybody see the headlines?” he asked rhetorically. He picked up one paper and read: “Death Stalks New York”. He grabbed another: “Is Brull Killing America?” A third: “Panic Hits Dems.”

“The Republicans want Americans to panic,” said Milly.

Raylene: “Good slogan. Is it true?”

“Raylene, you and Milly develop back-up explanations. I want half a dozen on the net before noon, from terrorists to Republicans to Church auxiliary ladies who forgot their rubber gloves when they handed out Immortal pills over the weekend. And Arthur,” Steven swung around. “Get me a couple of class action lawsuits against the City of New York for unsanitary conditions and endangering public health.”

“Why?” asked Arthur.

“Muddy the waters,” Milly answered. “What else?”

“Pick aggressive law firms. Sleaze to the max. You know the profile.”

Arthur nodded.

Sam Carver hadn’t uttered a peep so far. Steven raised an eyebrow. Carver puckered his lips. “Tchaw. Feed the Republicans to that detective, Brendan Shea,” Carver told him. “Give him some names. Get Milly to do it. A handful of suspects. Then leak to the press that the police are investigating Republicans.”

“What names?” Milly asked.

“Anybody you don’t like who’s Republican.”

“What’s the point?” Arthur asked.

Raylene replied under her breath, “Muddy the waters. Weren’t you listening?” She cursed quietly. “The Republicans are probably behind it somehow.”

“How?” Sam snorted.

Arthur waved his hand dismissively at the newspapers. “They’re just trying to boost circulation. None of it’s real.”

“If the headlines continue another day or two,” said Steven. “We won’t have a campaign to manage.”

“We’ll hijack the press somehow,” said Arthur.

Raylene nodded. “They did. Why shouldn’t we? We’ll leak stories about police investigating the Republicans, then lawsuits against the mafia. Money-minded- murderers. Typical sleight of hand.”

Steven shook his head. “All that’s true, but it’s not what I mean. The worst thing about the headlines is they’re boring. They’re predictable, straight from the archives. A six-year old could make them up. We have to stop the deaths immediately. OK, we’ll do that. We have to manage the press. OK, we’ll do that too. But look behind this issue. We have to make people excited about Brull. They have to identify with him. Or it doesn’t matter what the Republicans say. They could claim he landed in a flying saucer. People will believe it if they want to. They’ll figure something’s wrong with Brull without the papers help.” Steven held their attention.

“Bread and circuses,” Sam said. Nobody understood or wanted to admit it.

“Raylene and Fred,” Steven pointed at them. “You come up with thrilling plans for Brull to announce.”

“A war would be nice,” said Fred.

“And a timetable to peak at the election,” Steven concluded. He made a decisive tick on a pad and changed the subject.

To keep you warm over the holidays. Simple and effective.

Ingredients:
2 qt. apple cider
1 pt. cranberry juice
3/4 c. sugar
1 tsp. aromatic bitters
2 sticks cinnamon
1 tsp. whole allspice
1 orange studded whole cloves
1 c. rum (optional, but best to include)

Mix all ingredients in pot. Heat on medium flame 1 hour, stirring occasionally. Reduce flame, just enough to keep warm as you imbibe. Stir now and then.

As he stood in the opulent marble foyer of a Fifth Avenue mansion late last month, greeting the coterie of prominent guests arriving at his private art gallery, Ronald S. Lauder was doing more than just being a gracious host.

To celebrate the 10th anniversary of the Neue Galerie, Mr. Lauder’s museum of Austrian and German art, he exhibited many of the treasures of a personal collection valued at more than $1 billion, including works by Van Gogh, Cézanne and Matisse, and a Klimt portrait he bought five years ago for $135 million.

Yet for Mr. Lauder, an heir to the Estée Lauder fortune whose net worth is estimated at more than $3.1 billion, the evening went beyond social and cultural significance. As is often the case with his activities, just beneath the surface was a shrewd use of the United States tax code. By donating his art to his private foundation, Mr. Lauder has qualified for deductions worth tens of millions of dollars in federal income taxes over the years, savings that help defray the hundreds of millions he has spent creating one of New York City’s cultural gems.

The charitable deductions generated by Mr. Lauder — whose donations have aided causes as varied as hospitals and efforts to rebuild Jewish identity in Eastern Europe — are just one facet of a sophisticated tax strategy used to preserve a fortune that Forbes magazine says makes him the world’s 362nd wealthiest person. From offshore havens to a tax-sheltering stock deal so audacious that Congress later enacted a law forbidding the tactic, Mr. Lauder has for decades aggressively taken advantage of tax breaks that are useful only for the most affluent.

The debate over whether to reduce tax shelters and preferences for the rich is one of the most volatile in Washington and will move to the presidential campaign, now that repeated attempts in Congress to strike a grand bargain over spending cuts and an overhaul of the tax code have failed.

A handful of billionaires like Warren E. Buffett and Bill Gates have joined Democrats in calling for an elimination of the breaks, saying that the current system adds to the budget deficit, contributes to the widening income gap between the richest and the rest of society, and shifts the tax burden onto small businesses and the middle class. Republicans have resisted, saying the tax increases on the wealthy would harm the economy and cost jobs.

An examination of public documents involving Mr. Lauder’s companies, investments and charities offers a glimpse of the wide array of legal options for the world’s wealthiest citizens to avoid taxes both at home and abroad.

His vast holdings — which include hundreds of millions in stock, one of the world’s largest private collections of medieval armor, homes in Washington, D.C., and on Park Avenue as well as oceanfront mansions in Palm Beach and the Hamptons — are organized in a labyrinth of trusts, limited liability corporations and holding companies, some of which his lawyers acknowledge are intended for tax purposes. The cable television network he built in Central Europe, CME Enterprises, maintains an official headquarters in the tax haven of Bermuda, where it does not operate any stations.

And earlier this year, Mr. Lauder used his stake in the family business, Estée Lauder Companies, to create a tax shelter to avoid as much as $10 million in federal income tax for years. In June, regulatory filings show, Mr. Lauder entered into a sophisticated contract to sell $72 million of stock to an investment bank in 2014 at a price of about 75 percent of its current value in exchange for cash now. The transaction, known as a variable prepaid forward, minimizes potential losses for shareholders and gives them access to cash. But because the I.R.S. does not classify this as a sale, it allows investors like Mr. Lauder to defer paying taxes for years.

It was a common tax reduction strategy for chief executives and wealthy shareholders a decade ago, but in 2006 the I.R.S. said it appeared to be an abusive tax shelter and issued tighter restrictions to regulate the practice. That ruling was enough to persuade most wealthy taxpayers to abandon the technique, according to tax lawyers and records at the Securities and Exchange Commission.

Advisers to Mr. Lauder maintain that his deal “was made in compliance with published I.R.S. guidance on these types of transactions and was fully reported as required by S.E.C. rules,” said his spokesman, Gary Lewi.

In theory, Mr. Lauder is scheduled to pay taxes on the $72 million when the shares are actually delivered in 2014. But tax experts say wealthy taxpayers can use other accounting techniques to further defer their payment.

The tax burden on the nation’s superelite has steadily declined in recent decades, according to a sliver of data released annually by the I.R.S. The effective federal income tax rate for the 400 wealthiest taxpayers, representing the top 0.000258 percent, fell from about 30 percent in 1995 to 18 percent in 2008, the most recent data available.

When Mr. Lauder ran unsuccessfully for the Republican nomination for mayor of New York and released his tax return to the public, he reported paying 30 percent in total federal, state and city taxes on about $30 million in income in 1988. At the time, his net worth was estimated at nearly a quarter of a billion dollars.

Mr. Lauder’s more recent tax returns remain private, and he declined to make them available for this article.

The Family Fortune

Mr. Lauder, now 67, was born into a storied American fortune. His mother, Estée Lauder, the daughter of Eastern European immigrants, began selling homemade beauty creams at a few New York City hair salons in the 1940s and built her product line into a multibillion-dollar global empire.

As the son of a fabulously wealthy fashion icon, Mr. Lauder developed aristocratic tastes — and grand aspirations — at an early age. He summered in Vienna as a boy, developing a passion for Austrian art and medieval armor. At age 13, he bought his first Schiele with money from his bar mitzvah. Mr. Lauder grew so enthralled by politics as a young man that he told friends he dreamed of becoming the first Jewish president of the United States.

After studying in Brussels and Paris and at the Wharton School at the University of Pennsylvania, he joined the family business in 1964 and served in a variety of limited roles. While his older brother Leonard rose to become Estée Lauder’s chief executive, Ronald engaged in a variety of pursuits: becoming a major Republican fund-raiser; serving a rocky tenure as ambassador to Austria; running for mayor, an unsuccessful bid in which he spent $363 for each vote he received; and starting an assortment of business ventures in Eastern Europe, one of which went bankrupt during the technology bubble.

While the family’s wealth was created by hard work and ingenuity, it was bolstered by aggressive tax planning, a skill that has become Ronald Lauder’s specialty. When Mr. Lauder’s father, Joseph, died in 1983, family members fought the I.R.S. for more than a decade to reduce their estate tax. The dispute involved a block of shares bequeathed to the family — the estate valued it at $29 million, while the I.R.S. placed it at $89.5 million. A panel of judges ultimately decided on $50 million, a decision that saved the estate more than $20 million in taxes.

Estée Lauder Companies went public in 1995, and Ronald Lauder and his mother cashed in hundreds of millions of dollars in stock but managed to sidestep paying tens of millions in federal capital gains taxes by using a hedging technique known as shorting against the box.

Together, Mr. Lauder and his mother borrowed 13.8 million shares of company stock from relatives and sold them to the public during the offering at $26 a share. Selling borrowed shares in this way is referred to as a short position. Since the Lauders retained their own shares, the maneuver allowed them to have a neutral position in the stock, not subject to price swings. Under I.R.S. rules at the time, they avoided paying as much as $95 million in capital gains taxes that might otherwise have been due had they sold their own shares.

Such transactions allowed investors to cash in their shareholdings without paying taxes. But the Lauders’ use of the technique was so aggressive that Congress enacted a law afterward that limited the length of the tax deferral. And the Lauders eventually paid tens of millions in stock from the transaction.

Still, the family’s tax planning was effective enough that after Estée Lauder died in 2004, she passed down nearly $4 billion to her heirs, according to tax experts who studied the case and estimated that the estate was taxed at an effective rate of 16 percent — about a third of the top estate tax rate at the time.

Ronald Lauder has not been a director of the company since 2009, but he still serves as the president of its Clinique Laboratories subdivision. He also sublets a full floor of office space from Estée Lauder, on the 42nd story of the General Motors Building in Manhattan, which serves as the hub for the matrix of foundations, investment funds, partnerships and trusts used to control his businesses and personal finances.

His stake in Estée Lauder Companies, according to regulatory filings, is valued at more than $600 million. Nearly $400 million of that stock is pledged to secure various lines of credit. Many financial planners consider it imprudent for principal shareholders in a company to borrow against their stock. But it remains a popular way for wealthy taxpayers to get cash out of their holdings without selling and paying taxes.

There is a certain irony that Mr. Lauder has used $72 million worth of his Estée Lauder shares to carry out his latest state-of-the-art tax reduction tactic. These contracts emerged as a popular tool about a decade ago and were developed by accountants and tax planners after Congress closed down the loophole on the Estée Lauder public offering. The I.R.S. began cracking down on these contracts in 2008, and has pursued a prominent case against the billionaire Philip Anschutz, who used one to avoid more than $140 million in federal taxes.

Whether or not the I.R.S. agrees with Mr. Lauder’s contention that his contract is legitimate, some tax policy experts say the deal illustrates how the wealthy take advantage of the system.

“There’s real truth to the idea that the tax code for the 1 percent is different from the tax code for the 99 percent,” said Victor Fleischer, a law professor at the University of Colorado. “Any taxpayer lucky enough to have appreciated property is usually put to a choice: cash out and pay some tax, or hold the property and risk the vagaries of the market. Only the truly rich can use derivatives to get the best of both worlds — lots of cash and very little risk.”

While Mr. Lauder’s stock holdings in publicly traded companies show some of his tactics, much of his wealth is harder to examine because it is controlled by a maze of privately held trusts and companies. Court documents, S.E.C. filings and property tax records spotlight a few of the more ordinary tax breaks used by affluent people.

Significant portions of his inherited stock are held in family trusts, which reduce the ultimate estate tax. Mr. Lauder and his wife have also established their own family trusts, allowing them to bequeath their wealth to their heirs with minimal taxes.

Other trusts and partnerships control his real estate properties in Palm Beach and the Hamptons and at 740 Park Avenue, a building that was once home to John D. Rockefeller, and is known as one of the world’s wealthiest apartment buildings.

United States tax law allows taxpayers to deduct mortgage interest on one’s homes up to $1.1 million in debt. Households with more than $1 million in income claimed more than $27 billion in such deductions from 2006 to ’09, according to a report this month by Senator Tom Coburn of Oklahoma, who said some wealthy taxpayers even deducted mortgage interest on their yachts.

And there is no limit on the amount of property taxes that can be deducted from federal income. So Mr. Lauder is entitled to deduct the $400,000 he pays annually on his Palm Beach mansion as well as what he pays on his home on Park Avenue and his holdings in the Hamptons.

“This welfare for the well-off — costing billions of dollars a year — is being paid for with the taxes of the less fortunate, many who are working two jobs just to make ends meet, and i.o.u.’s to be paid off by future generations,” said Senator Coburn, a Republican, who has called for limits on tax breaks for high earners.

Mr. Lauder deducts property taxes on all of his holdings, his spokesman said. Mr. Lauder declined to say how much that reduced his federal taxes, but said he did not receive tax benefits in some years because of the alternative minimum tax and other limits.

Charity and Tax Breaks

A week before the opening at the Neue Galerie last month, Mr. Lauder appeared at another gala, 40 blocks south, at the New York Public Library, to receive the Carnegie Foundation’s Medal of Philanthropy.

The program honored people who have given profusely to charities, including Mr. Lauder’s brother Leonard and his wife, Evelyn (who died Nov. 12), whose causes include the Whitney Museum and the pink ribbon campaign for breast cancer awareness.

Ronald Lauder and his wife, Jo Carole, were honored for a variety of contributions: the work of their joint foundation supporting hospitals, rebuilding monuments and refurbishing American embassies around the world — more than a quarter of a billion dollars over the last five years, according to his spokesman.

The Ronald S. Lauder Foundation has donated tens of millions of dollars to rebuild Jewish communities devastated by the Holocaust and communist rule. Mr. Lauder has also given to a variety of Jewish and Israeli organizations, including the World Jewish Congress, where he has served as president since 2007. Richard Parsons, the former Time Warner chairman, presented the award, calling Mr. Lauder and his wife two of “the nation’s pre-eminent supporters of the arts and civic causes.”

Mr. Lauder said his life was changed 25 years ago when he visited a kindergarten in Austria and met a classroom full of Jewish children who were refugees from Russia. Still, he said he found it odd to be referred to as a philanthropist.

“I did what I wanted to do,” he said. “What I thought was right.”

A Passion for Art

In the United States, Mr. Lauder has focused on what he calls his greatest passion — art.

In 1976, at age 32, his generous donations helped him become the youngest trustee of the Metropolitan Museum of Art. He later served as chairman of the Museum of Modern Art and remains an honorary chairman. He has donated and lent artwork to an assortment of museums. Part of his collection of lavishly decorated ceremonial armor is on display at the Met, in a gallery named for him.

As all art collectors may, Mr. Lauder is entitled to deduct the full market value of artworks donated to museums. (For years, Mr. Lauder availed himself of a quirk in the tax code that allowed donors to take a deduction for donating a portion of an artwork, without actually turning over the art. That break, known as fractional donation, was eliminated in 2006.) The tax code also allows artwork in offices to be deducted as a business expense.

Unlike some wealthy collectors who are criticized for using tax breaks to underwrite private collections that offer little access to the public, Mr. Lauder is widely praised for making his artwork a community asset.

The Neue Galerie, created by Mr. Lauder and Serge Sabarsky, who died in 1996, in a mansion once owned by Cornelia Vanderbilt, offers public viewing of an exquisite collection, worth more than $200 million even before Mr. Lauder added dozens of pieces for its 10th anniversary.

Sheldon Cohen, a former I.R.S. commissioner, said that when used as intended, the tax code’s breaks for art collectors balance private interests with the public good.

“If an art collector makes significant contributions, and the public actually gets access to the works they are donating, then the major thing the collector gets is prestige and social status,” said Mr. Cohen, now a lawyer in Washington.

At times, Mr. Lauder’s efforts to enhance his art collection have coincided with tax avoidance techniques.

In 2006, three months after he agreed to pay $135 million, a record at the time, for the Klimt painting “Adele Bloch-Bauer I,” Mr. Lauder sold a $190 million stake in his broadcast network CME.

When asked about the sale, Mr. Lauder’s spokesman said the proceeds were taxable in the United States at the full capital gains rate. Even then, though, CME’s complex corporate structure — it operates in Central Europe, is organized as a Netherlands holding company, keeps its headquarters in Bermuda and routed the $190 million sale through two Cayman Island companies — allowed Mr. Lauder to minimize taxes in countries outside the United States where it does business.

Some tax reform advocates say that it is unfair that the wealthiest can subsidize their lifestyles using myriad offshore maneuvers and complex accounting strategies.

“It’s admirable when people back their charitable impulses up with donations,” said Scott Klinger, tax policy director of the group Business for Shared Prosperity. “But the tax code shouldn’t allow the wealthy the kind of loopholes that let them, essentially, force other taxpayers to underwrite donations to their pet causes.”

(David Kocieniewski, New York Times, 26 November 2011)

After Scott Ely and his father talked with salesmen from an energy company about signing the lease allowing gas drilling on their land in northeastern Pennsylvania, he said he felt certain it required the company to leave the property as good as new.

So Mr. Ely said he was surprised several years later when the drilling company, Cabot Oil and Gas, informed them that rather than draining and hauling away the toxic drilling sludge stored in large waste ponds on the property, it would leave the waste, cover it with dirt and seed the area with grass. He knew that waste pond liners can leak, seeping contaminated waste.

“I guess our terms should have been clearer” about requiring the company to remove the waste pits after drilling, said Mr. Ely, of Dimock, Pa., who sued Cabot after his drinking water from a separate property was contaminated. “We learned that the hard way.”

Americans have signed millions of leases allowing companies to drill for oil and natural gas on their land in recent years. But some of these landowners — often in rural areas, and eager for quick payouts — are finding out too late what is, and what is not, in the fine print.

Energy company officials say that standard leases include language that protects landowners. But a review of more than 111,000 leases, addenda and related documents by The New York Times suggests otherwise:

Fewer than half the leases require companies to compensate landowners for water contamination after drilling begins. And only about half the documents have language that lawyers suggest should be included to require payment for damages to livestock or crops.

Most leases grant gas companies broad rights to decide where they can cut down trees, store chemicals, build roads and drill. Companies are also permitted to operate generators and spotlights through the night near homes during drilling.

In the leases, drilling companies rarely describe to landowners the potential environmental and other risks that federal laws require them to disclose in filings to investors.

Most leases are for three or five years, but at least two-thirds of those reviewed by The Times allow extensions without additional approval from landowners. If landowners have second thoughts about drilling on their land or want to negotiate for more money, they may be out of luck.

The leases — obtained through open records requests — are mostly from gas-rich areas in Texas, but also in Maryland, New York, Ohio, Pennsylvania and West Virginia.

In Pennsylvania, Colorado and West Virginia, some landowners have had to spend hundreds of dollars a month to buy bottled water or maintain large tanks, known as water buffaloes, for drinking water in their front yards. They said they learned only after the fact that the leases did not require gas companies to pay for replacement drinking water if their wells were contaminated, and despite state regulations, not all costs were covered.

Thousands of landowners in Virginia, Pennsylvania and Texas have joined class action lawsuits claiming that they were paid less than they expected because gas companies deducted costs like hauling chemicals to the well site or transporting the gas to market.

Some industry officials say the criticism of their business practices is misguided. Asked about the waste pits on Mr. Ely’s land in Pennsylvania, for example, George Stark, a Cabot spokesman, said the company’s cleanup measures met or exceeded state requirements. And the door-to-door salesmen, commonly known as landmen, who pitch the leases on behalf of the drilling companies also dismiss similar complaints from landowners, and say they do not mislead anyone.

The Sales Pitch

“There are bad leases out there, and, as with any industry, there have also been some unscrupulous opportunists,” said Mike Knapp, president of Knapp Acquisitions and Production, a company in western Pennsylvania that brokers deals between landowners and drilling companies. “But everyone I know who does this work is on the up and up, and most of the bad actors that there may have been before are no longer in business.”

He said that his company’s leases ensure that landowners will get replacement water. The company also encourages landowners to visit an existing drilling site before signing a lease to get an idea of the potential noise and truck traffic. Some of the complaints about leases, he said, are just sour grapes from landowners who are envious about the amount of money they believe their neighbors are earning in bonuses and royalties.

To be sure, many landowners have earned small fortunes from drilling leases. Last year, natural gas companies paid more than $1.6 billion in lease and bonus payments to Pennsylvania landowners, according to a report commissioned by the Marcellus Shale Coalition, an industry trade group. Chesapeake Energy, one of the largest natural gas companies, has paid more than $183.8 million in royalties in Texas this year, according to its Web site.

Much of the money has gone to residents in rural areas where jobs are scarce and farmers and ranchers have struggled to stay afloat. Mr. Ely once worked for a company owned by Cabot on drilling sites in his area, until he was fired shortly after publicly complaining about Cabot’s drilling practices.

But many landowners and lawyers say that gas companies are intentionally vague in their contracts and use high-pressure sales tactics on landowners.

“If you’ve never seen a good lease, or any lease, how are you supposed to know what terms to try to get in yours?” said Ron Stamets, a drilling proponent and a Web site developer in Lakewood, Pa., who started a consumer protection Web site, PAGasLeases.com, in 2008 so that he could swap advice with his neighbors as he prepared to sign a gas lease. Others have also taken steps to better inform landowners about the details in leases. In the past several years, the attorneys general in New York, Ohio and Pennsylvania have published advisories about the pitfalls of leasing land for drilling.

State regulations also provide protections to landowners above and beyond what is in their leases.

At least eight states specifically require companies to compensate landowners for damage to their properties or to negotiate with them about where wells will be drilled, even if the lease does not provide those protections.

Asked about the leases, officials from Exxon Mobil, the largest natural gas producer in the United States, declined to comment.

Protecting Landowners

Jim Gipson, a spokesman for Chesapeake Energy, said any claims of damage can be investigated by the state and federal authorities and, he added, noise or other disturbances that may come with drilling tend to be brief.

“The most frequently asked question we receive from our mineral owners is, ‘When are you going to drill my well?’ ” he said.

Mr. Gipson said that most leased properties do not end up having a well placed on them, so those leases do not need added protections. But some consumer advocates and lawyers say that protections are needed for all leased properties, even those without wells, because drilling may occur underneath them. These advocates also say that landowners’ eagerness to start earning royalties has made them vulnerable to deceptive tactics by landmen.

“We’re in town until tomorrow,” the landmen typically say, according to interviews with more than two dozen landowners in Ohio, Texas and Pennsylvania. “We have already signed up all your neighbors.”

The landmen then claim that if you do not sign right away you will miss out on easy income because other drillers will simply pull the gas from under your property using a well nearby.

Some landmen show up in poorer areas shortly before the holidays, offering cash on the spot for signing a lease. They might offer thousands of dollars per acre as a bonus to be paid shortly after the lease is signed. Royalties, which usually run between 12.5 percent and 20 percent of what the companies make for selling the gas, can mean tens of thousands of dollars per year for landowners.

Jack Richards, president of the American Association of Professional Landmen, said his members follow a strict code of ethics. His organization also encourages landowners to ask questions before they sign leases, he said.

“We promote open and honest communication between the landman and landowner before signing the lease,” he said, adding that the standard lease forms are written with some protections for landowners.

Some leases, however, also include language that comes back to haunt landowners.

“I thought I knew what the sentence meant,” said Dave Beinlich, describing a section that said that “preparation” to drill was enough to allow Chief Oil and Gas to extend the duration of his lease.

In 2005, Mr. Beinlich and his wife, Karen, signed a lease for $2 an acre per year for five years on 117 acres in Sullivan County in north-central Pennsylvania. They soon realized they had gotten far less money than their neighbors, so they planned on negotiating a new lease when theirs expired in 2010.

A day before their lease term ended, no well had been drilled on their land, but the gas company parked a bulldozer nearby and started to survey an access road. A company official informed them that by moving equipment to the site, Chief Oil and Gas was preparing to drill and was therefore allowed to extend the lease indefinitely.

The Beinlichs have sued. Kristi Gittins, a vice president at Chief Oil and Gas, says that the company does not comment on pending litigation, but that its goal is to produce gas and it makes an honest attempt to develop the land it leases.

“Lease contracts work both ways,” she added. “Chief honors the terms of its lease contracts, and we expect the landowners who have signed the lease contract to honor the terms of the contract as well.”

But lawyers say that drilling leases are not like other contracts.

“You’re not buying a refrigerator or signing a car note,” said David McMahon, a lease lawyer in Charleston, W.Va., and co-founder of the West Virginia Surface Owners’ Rights Organization, adding that once a well is drilled, it can produce gas for decades, locking landowners into the lease terms.

“With a gas lease, you’re permitting industrial activity in your backyard, and you’re starting a relationship that will affect the quality of living for you and your grandchildren for decades,” he said.

Mr. McMahon and other lease lawyers say that unlike many contracts, oil and gas leases are covered by few consumer protection laws, in part because drilling has been most common in states with less regulation.

Clauses With Consequences

“When it comes to negotiation skills and understanding of lease terms, there is a gaping inequality between the average landman and the average citizen sitting across the table,” said Chris Csikszentmihalyi, a researcher at the Massachusetts Institute of Technology who created a Web site last year called the Landman Report Card that allows landowners to review landmen’s professionalism and tactics.

Some lawyers also say that there are major differences between what drilling companies tell landowners and what they must disclose to investors.

Under federal law, oil and gas companies must offer investors and federal regulators detailed descriptions of the most serious environmental and other risks related to drilling. But leases typically lack any mention of such risks.

In New York, the duration of leases has been an especially contentious issue.

As leases near expiration, some gas companies try to extend them, often by invoking “force majeure,” a legal term referring to an unforeseen event that prevents the two sides from fulfilling an agreement.

In these instances, gas companies say the unforeseen event is the state’s repeated delays in releasing environmental regulations and issuing drilling permits.

Force majeure clauses appear in as many as half the roughly 3,200 New York leases reviewed by The Times.

Another important lease term is the Pugh Clause, said Lance Astrella, a lease lawyer in Denver. It is named after Lawrence Pugh, a Louisiana lawyer who started adding it to leases in 1947 to ensure that they would not be extended indefinitely without wells being drilled.

Fewer than 20 percent of the more than 100,000 Texas leasing documents reviewed by The Times include such a clause, and very few of the leases from Maryland, New York, Ohio, Pennsylvania and West Virginia include the language. While the leases collected by The Times represent a small fraction of the more than 8 million oil and gas leases in the United States, experts said they illustrated issues that landowners need to understand.

Mr. Astrella said that leases also typically lacked a clause requiring drillers to pay for a test of the property’s well water before drilling started, and landowners often do not think to do the tests themselves. If drilling leads to problems with drinking wells, landowners have few options if they want to prove that their water was fine before drilling started.

For some landowners, it can be a costly mistake.

“It’s been one expense after another since our water went bad, and the company only has to cover part of it,” said Ronald Carter, 72, of Montrose, Pa. Mr. Carter and his wife, Jean, said they signed a lease in 2006 for a one-time fee of $25 per acre on their 75 acres and annual royalty payments of 12.5 percent.

The Carters live on $3,500 a month, including the $1,500 per month they average in gas royalties. But they had to spend $7,000 to install a water purifier when their drinking supply became contaminated in 2009 after drilling near their property.

The Carters joined a lawsuit with about a dozen neighbors, including Mr. Ely, accusing Cabot Oil and Gas of contaminating their drinking water.

Mr. Stark, the Cabot spokesman, said that his company was not responsible for any water contamination in the area and that Cabot’s studies showed that the gas seepage into the drinking water was occurring naturally.

“All the testing we have been able to conduct show the water meets federal safe drinking water standards,” Mr. Stark said.

In 2009, Pennsylvania ordered Cabot to provide the affected residents with water. For the Carters, the company has paid for bottled water and for the installation of a water buffalo next to their trailer. Mr. Stark added that his company had offered to pay for treatment systems to remove gas if it leaked into their drinking water.

Mr. Carter said that even though Cabot had paid to provide him with bottled water and a water buffalo, he can barely afford his electricity bill, which doubled because he has to heat the water buffalo to make sure it does not freeze.

Those expenses may soon go up.

On Wednesday, Cabot stopped delivering water to the Carters, the Elys and others in Dimock after state regulators said the company had satisfied requirements of a settlement agreement with the state.

“It’s a little late now,” Mr. Carter said. “But there are a lot things I’d like to have done different with that lease.”

(Ian Urbina and Jo Craven Mcginty, New York Times, 1 December 2011)

The euro is the common currency used by 17 of the 27 members states of the European Union. It was introduced as a so-called unit of account — i.e. currency used only in financial transactions on paper — in 1999 and as actual circulating banknotes and coins in January 2002.

Any country that enters the EU must commit to eventually adopting the euro once it is able to meet the necessary criteria. Only Denmark and the U.K. have been granted exemptions to this rule and have opted out of the euro completely. Sweden has committed to adopting the euro in the future, but it hasn’t yet made the necessary legislative changes and exchange rate adjustments required for entry into the “eurozone” — the countries using the euro.

Eurozone countries include: Germany, France, Italy, Spain, Portugal, Ireland, Austria, Finland, Netherlands, Greece, Belgium, Luxembourg, Slovenia, Cyprus, Malta, Estonia, Slovakia. The Eurozone population is 332 million, with a population of 503 million.

In the countries that make up the eurozone, the euro has replaced the national currency. Some national banks will allow you to exchange the old currency indefinitely, but others have set an expiration date on how long they will accept it. The Bank of France, for example, will exchange francs only up until Feb. 17, 2012.

Countries that don’t use the euro generally don’t accept it for regular cash transactions, although some large department stores and tourist-dependent businesses in the U.K., for example, have been accepting payment in euros.

How to join

There are five main criteria countries must meet to join the eurozone. These are often referred to as the Maastricht criteria after the Maastricht Treaty, the 1993 agreement that established the European Union, laid out its integrated structures and set a timetable for the adoption of a single currency.

Maastricht criteria

1.Inflation: the rate of inflation may not be more than 1.5 percentage points above the average rate of inflation of the three EU member states with the lowest inflation over the previous year.
2.Budget deficit: national budget deficits must be at or below three per cent of GDP.
3.Public debt: national public debt must not exceed 60 per cent of GDP. A country can still join if its debt exceeds this level provided it is falling steadily.
4.Interest rates: long-term interest rates must not vary by more than two percentage points from the average interest rates of the three EU member states with the lowest inflation over the previous year.
5.Exchange rates: exchange rates must remain within the accepted margin of fluctuation laid out in the Exchange Rate Mechanism (ERM) for two years prior to entry. (The ERM is the mechanism by which EU members linked their currencies in order to prevent large fluctuations prior to the adoption of the euro.)
The reality is that many current eurozone members do not meet all the Maastricht requirements, and many blame Europe’s current debt problems on a failure to take swift enough action against countries that failed to adhere to the debt and deficit ceilings.

The European Commission estimates that the average debt burden for the euro area will be 88 per cent of GDP in 2011 and 90.4 per cent in 2012 — far above the required 60 per cent cap. Germany, the largest euro economy, is forecast to have debt equivalent to 81.7 per cent of GDP in 2011 while Greece’s debt is expected to rise to 150.9 per cent of GDP. The average budget deficit for the euro area is expected to be 4.1 per cent of GDP in 2011 and as high as nine or 10 per cent in Greece.

Eurozone enforcers

There are several organizations in charge of keeping Europe’s unified currency and, more broadly, its integrated monetary policies on track.

The ECB is in charge issuing banknotes and setting monetary policy for the eurozone. Alex Domanski/ReutersEuropean Central Bank (ECB) — based in Frankfurt, it sets monetary policy for the eurozone, issues euro banknotes, sets interest rates, keeps inflation low.

European Council — made up of the heads of state of EU member states, it sets the EU’s main policy orientations.

Council of the EU (also known as the Council or the Council of Ministers) — part of the EU legislature, made up of one minister from each member state. There are 10 council configurations based on policy areas. The economic configuration co-ordinates EU economic policy and decides whether a member state may adopt the euro.

European Commission — it is the main body in charge of enforcing EU regulations and policies and also proposes legislation. It monitors eurozone members’ performance and compliance.

Eurogroup — an informal grouping of euro area finance ministers that co-ordinates and monitors economic and budgetary policies and represents the euro area at international forums.

EU member states also adopted a Stability and Growth Pact in 1997 intended to get countries to adhere to the Maastricht Treaty and maintain common EU-wide fiscal policies. It contains something called the excessive deficit procedure, or EDP, that kicks in once a member state exceeds the three per cent debt ceiling and establishes a deadline by which corrective action must be taken.

However, it also says that the procedure won’t be used if the excess deficit is temporary or exceptional and within range of the ceiling. The recent debt crisis has forced the eurozone to adjust the Maastricht criteria and set new debt targets for countries like Greece, whose revised budget deficit target, for example, was upped to 7.5 per cent of GDP.

Advantages and disadvantages of a common currency

Ensures low, stable inflation and low interest rates. Vast differences in economic performance between countries make it hard to implement one-size fits all fiscal policies. For example, the inflation level set by the European Central Bank may not work well for all eurozone counties. This also means that weaker economies can pull down stronger economies, as is the case in the current debt crisis, with heavily indebted countries like Greece negatively impacting the stronger economies of Germany and France.

Eliminates currency exchange costs and fluctuations. Cost of introducing the currency is significant.

Facilitates easier travel and trade between states.

Deficit limits restrict what fiscal tools governments can use to combat recession, unemployment and other economic problems that may be specific to their situation.

Increases price transparency — consumers can more easily compare prices across borders.

Has deflationary effects. Adhering to the strict deficit and inflation caps can force countries to deflate their economies. The spending cuts Estonia, which joined the eurozone in January 2011, had to make to meet the Maastricht criteria resulted in unemployment rising from 5.5 per cent in 2008 to 16.9 per cent in 2010.

A single regional currency gives EU greater weight on world stage.
Better protects against external economic shocks like oil price rises or upheaval in currency markets.

Attracts foreign investment and trade to the eurozone.

Common currency vs. common market

While not all countries in the European Union are part of the eurozone, they are all part of a common market, meaning they have abolished trade barriers, customs tariffs, border controls and other impediments to the free movement of goods, capital, labour and services across national borders.

In some areas, such as product regulation and consumer protection, the EU has adopted a policy of mutual recognition of national rules, meaning products legally sold in one country can be sold in any other member state.

The eyes of the world are on Angela Merkel, the chancellor of Germany, the eurozone’s strongest economy, as she struggles to solve the EU’s debt crisis. While not all EU members are part of the eurozone, they are all part of a heavily integrated common market. While European member states attempt to co-ordinate their broader economic policies, state governments retain control over taxes, government spending, labour, pensions and capital markets.

The raison d’être of the EU has always been some form of common market. The entity itself originated as the European Coal and Steel Community in 1951 as a way of creating a common market for coal and steel among Belgium, the Federal Republic of Germany, France, Italy, Luxembourg and the Netherlands. That evolved into the European Economic Community six years later, which expanded the common market to other goods and services, and by the 1960s, the six countries had abandoned customs duties and adopted common policies on trade, agriculture and in other areas.

It wasn’t until the 1970s that the union expanded beyond economic imperatives to include social and environmental policies and, in 1979, the first elected European Parliament. That year, it also adopted the European Monetary System, which aimed to keep currency fluctuations in check by pegging exchange rates to the European Currency Unit (ECU), a currency that existed only as an accounting unit and was based on a weighted average of the currencies of the by then nine countries that made up the European Economic Community.

Exchange rates had to be changed by mutual agreement and could fluctuate only within a narrow margin established under the Exchange Rate Mechanism the member states had created.

Today, the EU has common policies on everything from air pollution to immigration, but as the recent debt crisis has made all too clear, it still lives and dies on the basis of its economic integration.

(Kazi Stastna, CBC, 9 December 2011)

Last year, the Obama administration vowed to stop for-profit colleges from luring students with false promises. In an opening volley that shook the $30 billion industry, officials proposed new restrictions to cut off the huge flow of federal aid to unfit programs.

Cass R. Sunstein, the White House official who oversees rulemaking, described the industry’s aggressive efforts regarding for-profit schools as “extreme.”

But after a ferocious response that administration officials called one of the most intense they had seen, the Education Department produced a much-weakened final plan that almost certainly will have far less impact as it goes into effect next year.

The story of how the for-profit colleges survived the threat of a major federal crackdown offers a case study in Washington power brokering. Rattled by the administration’s tough talk, the colleges spent more than $16 million on an all-star list of prominent figures, particularly Democrats with close ties to the White House, to plot strategy, mend their battered image and plead their case.

Anita Dunn, a close friend of President Obama and his former White House communications director, worked with Kaplan University, one of the embattled school networks. Jamie Rubin, a major fund-raising bundler for the president’s re-election campaign, met with administration officials about ATI, a college network based in Dallas, in which Mr. Rubin’s private-equity firm has a stake.

A who’s who of Democratic lobbyists — including Richard A. Gephardt, the former House majority leader; John Breaux, the former Louisiana senator; and Tony Podesta, whose brother, John, ran Mr. Obama’s transition team — were hired to buttonhole officials.

And politically well-connected investors, including Donald E. Graham, chief executive of the Washington Post Company, which owns Kaplan, and John Sperling, founder of the University of Phoenix and a longtime friend of the House minority leader, Nancy Pelosi, made impassioned appeals.

In all, industry advocates met more than two dozen times with White House and Education Department officials, including senior officials like Education Secretary Arne Duncan, records show, even as Mr. Obama has vowed to reduce the “outsize” influence of lobbyists and special interests in Washington.

The result was a plan, completed in June, that imposes new regulations on for-profit schools to ensure they adequately train their students for work, but does so on a much less ambitious scale than the administration first intended, relaxing the initial standards for determining which schools would be stripped of federal financing.

“The haranguing had zero effect,” said Cass R. Sunstein, the White House official who oversees rule making. Rather, he and other administration officials said they listened to what they viewed as reasonable arguments and decided to narrow the scope of the original plan.

But Robert Shireman, a former Education Department official who helped shape that original plan, said the intense politics surrounding the issue played a part in “watering down” the final result.

“From early on, the industry was going to friends inside and out of the administration and saying, ‘They’re out to get us,’ and creating the impression that these regulations were unfair or irrational,” said Mr. Shireman, who left the department before the plan was finished.

“They decided to raise holy hell,” he said in an interview.

Many colleges saw the federal government’s attacks as “Armageddon for the industry,” said Avy Stein, a partner at a private equity fund that owns a network of schools called Education Corporation of America.

The industry was on the defensive after a series of federal investigations portrayed it as rife with abuse. They found that recruiters would lure students — often members of minorities, veterans, the homeless and low-income people — with promises of quick degrees and post-graduation jobs but often leave them poorly prepared and burdened with staggering federal loans.

In response to the rising concerns, 18 months ago the Obama administration proposed its tough restrictions linking tens of billions of dollars in federal student aid to formulas measuring students’ debt levels and income after graduation. Colleges whose students were not earning enough money to start paying back their loans would be in danger of losing federal aid altogether.

The proposal was aimed at ensuring that the for-profit schools were providing “gainful employment” in a wide range of vocational fields they taught, like medical testing, massage therapy, business management and cosmetology. The joke in Washington, however, was that the industry effort to defeat the plan mainly ensured “gainful employment” for the capital’s Democratic lobbyists and political consultants.

In a coordinated approach that also included Capitol Hill protests, petition drives, newspaper ads and more, industry advocates stressed that jobs that would be lost if the institutions were put out of business. They questioned why nonprofit schools were untouched. And they accused the administration of highlighting some abuses to stigmatize an industry that educates second-chance students shunned by traditional academia.

“It was a demonization of our sector,” said Penny Lee, who leads an industry coalition and has extensive ties to Democratic politics as a former senior aide to Senator Harry Reid of Nevada.

The industry’s mobilization helped produce a record 90,000 public comments to the Education Department — overwhelmingly negative — on the proposed changes.

The battle got so testy that Senator Tom Harkin, the Iowa Democrat who has led Congressional hearings into the colleges, got into a heated exchange with Mr. Stein, the Education Corporation investor.

The senator said that during a hallway conversation after lunch in the Senate dining room, Mr. Stein promised to “make life rough for me” if Mr. Harkin kept up his attacks.

“I took it as a threat — it was one of the most blatant comments ever made to me in my years in the Senate,” Mr. Harkin said.

Mr. Stein, a frequent Democratic donor who had bought the lunch with the senator at a charity auction, would not discuss the details of the conversation. But he said Mr. Harkin’s account was “totally incorrect,” adding: “Under no circumstances would I would ever threaten a U.S. senator.”

Officials at the White House and the Education Department described the industry’s aggressive efforts as unusual even by Washington standards. Mr. Sunstein, the White House official, characterized the intensity as “extreme.”

That response reflected the enormous financial stakes for an industry that has become big business in the last decade, with online schools and traditional campuses offering degrees to about three million students. Schools receive as much as 90 percent of their revenues from federal aid.

Once small, local operations, many of the colleges are now multistate networks owned by Wall Street firms looking for big profits. Consumer groups sought tougher restrictions, but found themselves outmatched. Pauline Abernathy, vice president with the nonprofit Institute for College Access and Success and an industry critic, said: “We always knew that we couldn’t compete with the colleges in terms of money or lobbyists, but we thought we had the facts on our side.”

The colleges pushed back at critics, finding errors, for instance, in conclusions from a Government Accountability Office investigation last year, forcing the office to revise some of its statements about industry practices.

Schools also questioned the motives of a key witness at Mr. Harkin’s hearings, the noted hedge-fund trader Steve Eisman, who blasted the colleges’ sky-high profit margins and likened them to subprime mortgage lenders. After Mr. Eisman acknowledged he held financial positions in the industry, the colleges charged that he stood to make millions by battering their reputations and short-selling their stocks.

Ms. Dunn, the former White House aide hired by Kaplan, played a key role in helping shape the colleges’ message.

In an interview, she said she worked to refute media reports casting the abuse problems as industrywide and to show they were limited to “a few bad actors.”

While some people in the industry pushed to see the regulations killed altogether, she said that most executives realized that there were going to be regulations they had to live with” and aimed to blunt the impact. While Ms. Dunn visited the White House about 80 times since leaving the administration, she said she was careful to avoid talking to former colleagues about the issue because she is not a lobbyist and such contact would violate the ethics policies put in place by Mr. Obama regarding lobbying by former advisers.

Tony Podesta, who met last May with White House officials and sent lobbyists at his firm to other meetings, faced no such restrictions. “The administration realized they had overdone it,” he said, “and, wisely in my view, they took a second look.”

In the end, Mr. Duncan and his department, after working for months with White House budget, economic and domestic policy officials, decided that the initial criteria for determining how effectively schools prepared students for jobs simply went too far.

The original framework “would have unnecessarily eliminated many, many good schools along with the bad,” said Justin Hamilton, an Education Department spokesman.

The final standards leave a maximum of 5 percent of schools facing financial sanctions at the start; the original plan would have meant penalties against an estimated 16 percent.

The rules also pushed back the penalties to 2015 from 2012, while requiring schools to disclose more data about loans, defaults and job placement.

Donald Heller, a Penn State education professor who studied the plan, said the industry did largely what it set out to do.

“This was the beachhead the colleges were going to defend, and they were somewhat successful in that they got the regulations weakened,” he said. “The Department of Education really bent to the lobbying push.”

(Eric Lichtblau, New York Times, 9 December 2011)

During the summer of 1913, in a field just south of Cairo on the eastern bank of the Nile, an American engineer called Frank Shuman stood before a gathering of Egypt’s colonial elite, including the British consul-general Lord Kitchener, and switched on his new invention. Gallons of water soon spilled from a pump, saturating the soil by his feet. Behind him stood row upon row of curved mirrors held aloft on metal cradles, each directed towards the fierce sun overhead. As the sun’s rays hit the mirrors, they were reflected towards a thin glass pipe containing water. The now super-heated water turned to steam, resulting in enough pressure to drive the pumps used to irrigate the surrounding fields where Egypt’s lucrative cotton crop was grown. It was an invention, claimed Shuman, which could help Egypt become far less reliant on the coal being imported at great expense from Britain’s mines.

“The human race must finally utilise direct sun power or revert to barbarism,” wrote Shuman in a letter to Scientific American magazine the following year. But the outbreak of the first world war just a few months later abruptly ended his dream and his solar troughs were soon broken up for scrap, with the metal being used for the war effort. Barbarism, it seemed, had prevailed.

Almost a century later, a convoy of air-conditioned coaches sweeps through the affluent suburb of Maadi – where Shuman had demonstrated his fledgling solar panels – continuing south for 90km towards Kuraymat, an area of flat, uninhabited desert near the city of Beni Suef. The high-level international delegation of CEOs, politicians, financiers and scientists has come to visit a brand new “hybrid” power station that uses both natural gas and solar panels to generate electricity. Before the coaches reach the facility’s security gates, its 6,000 parabolic troughs – each six metres tall with a combined surface area of 130,000sq metres – are already visible from the perimeter road. Even though the panels account for just one seventh of the power plant’s 150MW generating capacity, the Egyptian government, which has been pushing to develop the site since 1997, hopes to prove to the delegation that it is the desert sun – not fossil fuels, such as gas, coal and oil – that should be used not only to generate far more of the electricity across the Middle East and North Africa (Mena), but, crucially, for neighbouring Europe, too.

Gerhard Knies, a German particle physicist, was the first person to estimate how much solar energy was required to meet humanity’s demand for electricity. In 1986, in direct response to the Chernobyl nuclear accident, he scribbled down some figures and arrived at the following remarkable conclusion: in just six hours, the world’s deserts receive more energy from the sun than humans consume in a year. If even a tiny fraction of this energy could be harnessed – an area of Saharan desert the size of Wales could, in theory, power the whole of Europe – Knies believed we could move beyond dirty and dangerous fuels for ever. Echoing Schuman’s own frustrations, Knies later asked whether “we are really, as a species, so stupid” not to make better use of this resource. Over the next two decades, he worked – often alone – to drive this idea into public consciousness.

The culmination of his efforts is “Desertec”, a largely German-led initiative that aims to provide 15% of Europe’s electricity by 2050 through a vast network of solar and wind farms stretching right across the Mena region and connecting to continental Europe via special high voltage, direct current transmission cables, which lose only around 3% of the electricity they carry per 1,000km. The tentative total cost of building the project has been estimated at €400bn (£342bn).

Until now, Desertec has been seen by many observers as little more than a mirage in the sand; the fanciful plan of well-meaning dreamers. After all, the technical, political, security and financial hurdles can, each on their own, appear to be utterly insurmountable. But over the past two years, the initiative has received significant support from some of the biggest corporate names in Germany, a country that already leads Europe when it comes to adopting and developing renewable energy, particularly solar. In the autumn of 2009, an “international” consortium of companies formed the Desertec Industrial Initiative (Dii) with weighty companies, such as E.ON, Munich Re, Siemens and Deutsche Bank, all signing up as “shareholders”. Germany’s announcement earlier this year that, in the wake of the Fukushima disaster, it was to speed up its total phase-out of nuclear power suddenly pulled the Desertec idea into much sharper focus. Coupled with faltering international negotiations and increasingly dire warnings on climate change – just last month the International Energy Agency warned that the world is headed for irreversible climate change if it doesn’t start reducing carbon emissions within five years – it would seem the time is now right for an idea of such scale and ambition.

Last month, at its annual conference in Cairo, Dii confirmed to the world that the first phase of the Desertec plan is set to begin in Morocco next year with the construction of a 500MW solar farm near to the desert city of Ouarzazate. The 12sq km project would act as a “reference project” that, much like Egypt’s own project at Kuraymat, would help convince both investors and politicians that similar farms could be repeated across the Mena region in the coming years and decades.

“It’s all systems go in Morocco,” announced Paul van Son, Dii’s CEO, to the visiting delegates. Talks, he added, were – given their shared close proximity, along with Morocco, to western Europe’s grid – already under way with Tunisia and Algeria about joining the “first phase” of Desertec. Countries such as Egypt, Syria, Libya and Saudi Arabia would be expected to join in the “scale-up” phase from 2020 onwards, once extra transmission cables were laid across the Mediterranean and via Turkey, with the whole venture becoming financially self-sustaining by 2035.

Van Son swats away any talk that the Desertec project is built on a precarious foundation of presumption, naivety and hope. “Yes, the current global financial crisis has clearly not been very helpful, but everyone also realises that being dependent on fossil fuels creates vulnerability,” he says.

He also rejects any notion that Desertec carries with it even a whiff of neo-colonialism. Earlier this year such sentiments were raised by Daniel Ayuk Mbi Egbe of the African Network for Solar Energy. “Many Africans are sceptical [about Desertec],” he said. “[Europeans] make promises, but at the end of the day, they bring their engineers, they bring their equipment, and they go. It’s a new form of resource exploitation, just like in the past.” Other Mena-based speakers made similar points, not least that any electricity generated will first be desperately needed by local populations as they fight poverty.

“When the idea for Desertec was first announced there was anger and irritation from the Arab League,” admits Van Son. “They didn’t understand it at first, but we explained that it would benefit their members, too. We explained it would be a cooperative process and they became more relaxed. It’s a win-win for all, we stressed. The relationship is all positive now.”

Desertec should also be supported, argue its champions, because it will improve energy security by helping to diversify supply. At present, says Van Son, Europeans are vulnerable to the so-called “energy weapon”, namely, when an energy-rich country holds its neighbours to ransom by restricting or denying supply. Think Russia and its gas, he says. Or a terrorist attack on an oil pipeline. Desertec will help to dilute these threats.

He is bemused, though, that the current domination of Dii by German companies should rouse suspicion. (There was not a single political or corporate representative from the UK at the conference, yet at least half hailed from Germany.) “Yes, the initiative came from Germany. But there are 15 different nationalities involved, including companies such as HSBC and Morgan Stanley. This is just the start.”

A common question at the conference is: “Who is going to pay for Desertec?” There is talk of loans from development institutions such as the World Bank (the route being taken by Morocco). The presence of German banks suggests they are considering being key lenders, too. But there is also the implication that much of the burden will fall on the European taxpayer, either through EU subsidies, or tariffs added to their energy bills.

Angelika Niebler, a Christian Democrat MEP from Germany, travelled to Cairo as a member of the European parliament’s energy committee. She says it is “too early” to talk about EU financing but adds: “Energy is going to be a bigger priority for the EU in coming years than agriculture has been in the past and Desertec will surely feature.”

Hans Josef-Fell, a representative of Germany’s Green party, is also in Cairo for the conference. “There is a fear in Germany that paying for green electricity direct from North Africa will be too heavy a burden on our consumers,” he says. Germany already has among the highest electricity prices in Europe, in part because of a huge wave of renewable energy installations across the country.

Europe, particularly Germany, seems to increasingly know what it wants from Desertec. But what of its Mena partners? Obaïd Amrane, a board member of the Moroccan Agency for Solar Energy, the government body responsible for overseeing Desertec’s first plant, says his country has its own plans for the electricity generated at the facility – and for the other four that will follow by 2020 – and it doesn’t necessarily include selling it to Europe.

“By 2020, we are expecting a doubling of electricity consumption in Morocco, as the population and standard of living grow,” he says. “At the moment, we are 97% dependent on foreign energy which is becoming increasingly unsustainable. But we are now aiming to have 42% capacity of renewable electricity by 2020. We will build extra capacity beyond what Morocco needs if someone wants us to, but we will need a big share of the electricity produced by these projects.”

Such sentiments propose another challenge for Desertec: how will it guarantee that the electricity Europe needs is sent down the transmission cables and not just all consumed locally? And how will Mena countries justify selling the electricity to Europe – where the retail price of electricity can be up to 20 times more expensive – if the local population is, say, experiencing regular blackouts?

At the visitor centre at Kuraymat, bottles of chilled water are being distributed ahead of a tour of the parabolic troughs. The mid-morning November sun is already heating the engine oil-like fluid inside the troughs’ receiver tubes – a technology not that far removed from Shuman’s century-old design – up towards 400C.

The technical questions are coming thick and fast for Bodo Becker, the operations manager at Flagsol, the German company that specialises in building concentrated solar power (CSP) plants in the deserts of the US, Spain and now Egypt. The leading query is how the troughs perform in such harsh conditions.

“We only have one sandstorm, on average, pass through here each year,” he says, “but we tilt the troughs down and away from the wind whenever it gets up beyond 12 metres per second, as they act like giant sails.”

Keeping them clean is the main challenge, he adds. “Due to the dusty conditions, we are witnessing about 2% degradation every day in performance, so we need to clean them daily. We use about 39 cubic metres of demineralised water each day for cleaning across the whole site.”

This surprises many delegates, as they have previously been told at the conference that CSP troughs need cleaning weekly compared to photovoltaic panels which need cleaning monthly. Either way, it highlights yet another challenge for Desertec: can enough local water ever be secured for cleaning duties? The Nile is just a few miles from Kuraymat, but some countries aim to push much deeper into their deserts to build such facilities. “Dry cleaning” technologies are being developed, but they reduce the generating efficiency at the plant. Either way, the super-heated transfer fluid requires cooling before it can loop back to the troughs for re-use, and, as with cleaning, water is the cheapest and easiest way to do this. Until “dry cooling” technologies are further advanced, it could limit solar farms to the desert fringes close to large bodies of water.

Somewhat counter-intuitively, some countries, such as Jordan, now favour wind over solar as a source of desert energy, because it is currently more affordable and isn’t so water-intensive. But it is suspected that it will be many years before a single desert energy technology comes to dominate the market. Some within the industry advocate photovoltaic panels, but, currently, CSP is more popular. However, even within CSP, there are loyalists for parabolic troughs and others for “solar towers”, which rely on hundreds of pivoting mirrors laid out on the ground to track the sun and direct its rays towards one fixed point at the top of a giant tower.

Whichever technology succeeds, it is already clear which nation in particular will win out as Desertec develops in the coming decades. One member of the visiting delegation asks Becker where the troughs are made.

“The metal cradles were made here in Egypt, but the glass troughs were all made in Germany,” he says. “And only two companies in the world make the glass tube receivers, which is where the main intellectual property of this technology lays – Schott Solar and Siemens.” Both companies are German.

(Leo Hickman, Guardian, 11 December 2011)

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