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10/29/14

Anglo American and Galbraith's bezzle


"At any given time there exists an inventory of undiscovered embezzlement in — or more precisely not in — the country’s businesses and banks. This inventory — it should perhaps be called the bezzle — amounts at any moment to many millions of dollars. It also varies in size with the business cycle. In good times people are relaxed, trusting, and money is plentiful. But even though money is plentiful, there are always many people who need more. Under these circumstances the rate of embezzlement grows, the rate of discovery falls off, and the bezzle increases rapidly. In depression all this is reversed. Money is watched with a narrow, suspicious eye. The man who handles it is assumed to be dishonest until he proves himself otherwise. Audits are penetrating and meticulous. Commercial morality is enormously improved. The bezzle shrinks."
John Kenneth Galbraith's famous definition of what he called 'the bezzle' springs to mind on reading the fun and games that have been going on at Los Bronces, Anglo American's big copper mine in Chile (50.1% Anglo, minority ownership Mitsubishi and Codelco). I'm a little late to this story as it was broken by Chile's superlative website The Clinic on October 24th and I only read about it today, but the nub of the matter is that Anglo American has filed suit against one of the firms it contracts at the mine to the tune of $1.2Bn dollars.

Yes, that's a B. It's one point two billion dollars. Check The Clinic on that above link for the full story but in essence the suit has been brought because Anglo's beaks have finally discovered, after years of being unknowing victims, that the contractor has been clocking its vehicles, i.e. fiddling with the gauges that note how long the machines have been working (they're called "horometros" in Spanish, I think the correct term in English is tachymeters but I'm not sure and anyway, you guys are smart enough to get what we're talking about here). The fiddle is known as "chicken pecking" in local slang and from the way it's apparently universally accepted by workers at the mine and part of the day-to-day language, Anglo now strongly suspects it's been ripped by other contractors it has at the mine. Maybe in other places, too. 

As for this case the contractor now being sued, named Tranex, has been working at the mine since 1992, which basically means Anglo's management has had their collective crania up their collective recta for over 20 years. Nice job, guys.

And thus another bezzle is discovered.