Directors to pension funds with selected names (white background)Our Shadow Influ­ence Project has devel­oped a cutting-edge tool, the Influ­ence­Tracer, that dis­plays in vivid, mul­ti­di­men­sional detail how today’s top power bro­kers hold sway, cap­tur­ing the very build­ing blocks of influ­ence. We call these play­ers “shadow influ­encers,” with a hand in dis­as­ters like the global finan­cial cri­sis and our nation’s military-industrial-congressional-media con­glom­er­ate. But they are far more insid­i­ous and dif­fi­cult to detect than power bro­kers of the past. This project, which com­bines inves­tiga­tive report­ing, anthro­po­log­i­cal the­ory, and the power of com­pu­ta­tional social sci­ences to mine large data sets, aims to restore account­abil­ity by forc­ing stealth influ­encers of this new era out of the shadows.

We’ve started by exam­in­ing high-impact cases in the defense and finance sec­tors, with ben­e­fit of two unique data sets.  The Influ­ence­Tracer we cre­ated points us to trends in the data and gen­er­ates infor­ma­tion for fur­ther inves­ti­ga­tion.   Our next step is to develop inter­ac­tive online graph­ics for vis­i­tors to our web­site  to help the media and the pub­lic  to con­nect the dots and learn what dots to look for in the first place.

Defense:  The defense por­tion of the project has two com­po­nents. First, we have been ana­lyz­ing and adding to a data set of defense com­pa­nies and retired senior flag offi­cers (gen­er­als and admi­rals) kindly entrusted to us by the Boston Globe (com­piled under the direc­tion of jour­nal­ist Bryan Ben­der.)  Build­ing on the Globe’s orig­i­nal data set, we have com­piled a data­base of some 1,500 indi­vid­u­als, along with hun­dreds of their con­nec­tions to com­pa­nies, orga­ni­za­tions, spon­sors, and projects over time.  We can visu­ally illus­trate what The Globe  demon­strated: that today many of these retired senior mil­i­tary offi­cers pur­sue a multi-pronged strat­egy that affords them money and influ­ence, unlike, say, 15 years ago, when they stopped work­ing when they retired from mil­i­tary ser­vice. Many serve simul­ta­ne­ously as paid con­sul­tants to defense con­trac­tors, mem­bers of boards of such con­trac­tors, and mem­bers of gov­ern­ment advi­sory boards that afford them secu­rity clear­ances. The Influ­ence­Tracer enables us to spot trends, chart pat­terns of influ­ence, and uncover poten­tial cases that war­rant fur­ther investigation.

One exem­plary case we iden­ti­fied and are now inves­ti­gat­ing in-depth is that of the U.S. Army’s sig­na­ture pro­gram to cre­ate an inte­grated bat­tle sys­tem that could oper­ate in new and com­plex envi­ron­ments. (The name of the pro­gram must remain con­fi­den­tial until we release our work in the media and on our web­site.) This Army pro­gram per­sisted for 15 years and cost the tax­payer some $20 bil­lion, despite repeated test­ing fail­ures and a gen­eral con­sen­sus that the pro­gram didn’t and couldn’t work. Our goal is to iden­tify and illus­trate the net­works that explain why. Hav­ing already incor­po­rated infor­ma­tion about the net­works of retired offi­cers and com­pa­nies, we are now adding con­nec­tions to politi­cians, con­gres­sional staffers, and media to the data­base. We want to dis­cover the net­works link­ing these play­ers and enti­ties that enabled the pro­gram to last so long, in spite of rec­og­nized colos­sal fail­ure. Our pre­lim­i­nary find­ings show that: (1) about 75 per­cent of the com­pa­nies hired to work on the project retained retired gen­er­als and admi­rals who pre­vi­ously worked on the pro­gram in a gov­ern­men­tal capac­ity; (2) these retired offi­cers form dense net­works (cliques) that con­nect the com­pa­nies involved; and (3) such net­works are multi-generational and self-perpetuating.

Finance:  In the finance sec­tor we are ana­lyz­ing the net­work dynam­ics of hedge funds and their rela­tion­ships to insti­tu­tional investors.  The Foun­da­tion for Fund Gov­er­nance has given us priv­i­leged and full access to its unique data­base of 10,000+ hedge fund direc­tor­ship posi­tions, includ­ing the names of nearly 2,000 indi­vid­u­als, on the boards of 5,000 off­shore hedge funds (com­piled from SEC and other reg­u­la­tory fil­ings.) The Foun­da­tion also pro­vided us with the names of some insti­tu­tional investors in these funds (com­piled from Labor Depart­ment fil­ings). This list includes many state, city, county and cor­po­rate pen­sion funds, as well as uni­ver­sity endow­ments and foun­da­tions.  Our recent fea­tured piece in The Huff­in­g­ton Post, Cay­mans’ Folly: Do You Know Where Your Pen­sion Funds Are? con­veys some of our pre­lim­i­nary find­ings.  This work is poten­tially very high-impact because so many pen­sion funds, char­ity endow­ments, and mutual funds have invested in hedge funds because of their promise of high returns. Despite the increas­ing involve­ment of this middle-class money, lit­tle is known about hedge fund man­age­ment and the real risks that sur­round them.  The Influ­ence­Tracer tool enables us to exam­ine the back­grounds, expe­ri­ence, and net­works of inde­pen­dent direc­tors and to probe their abil­ity to make inde­pen­dent deci­sions. In par­tic­u­lar we are look­ing into the role that mul­ti­ple direc­tor­ships have on deci­sions made by hedge funds, the invest­ments of insti­tu­tional investors in hedge funds, and expo­sure to sys­temic risk. The impli­ca­tions of this work for the mil­lions of indi­vid­u­als around the world whose assets may be at risk  and for the free mar­ket are hard to overestimate.

We wel­come your feed­back, ideas, and sup­port of this project.  We can be con­tacted at jwedel@gmu.edu.  To donate, please click on http://shadowelite.net/donate.