of you that are not lawyers and is up in court years ago, basically said there were general principles and the administrative wall and they pertain to the tax world. ..

is critically important. will talk about what the tax code provides. but there are a couple of markers. one time and the agency rewrite the statute. i heard this morning about the 80%, 50%. that would have to be done legislatively. that cannot be done through regulation. you can stretch out the statutes. you can elaborate on the statute and filling gaps. you can't rewrite it. that's kind of a given. another consideration is you can change your mind. the agency might've said yes, yes, yes. and now saying no. it's okay. you're allowed to change her mind. you have to explain why you are changing your mind. you have to provide information that justifies the change in

position. but changing minds does not disqualify any kind of regulatory action. in the third marker that i want to lay down just because you have the authority doesn't mean you have to use it. and one of the issues that is discussed continuously within the executive branch is yes, you can do it. do you want to? what are the consequences? what are the intended consequences and the unintended consequences? forgive me, but where the cost as well as the benefit of preceding? i say forgive me because they come from a background where is the administrator at the opposite regulatory affairs and we routinely would think the cost-benefit analysis. so i slipped in the jargon from time to time. one of the interesting issues on

process is the tax regulations do not go through because that is also a departure from the typical administrative practices. >> all right, great. so within that broad context of administrative law, steve rosenthal, c. shea has written articles that suggest and he gave us a preview of the treasury has authority and i think some of the conclusions there has been contested by sun. the first, one that you describe what those are? >> i be happy to do that. can i slipped a quick question to sally. secretary lew told us he thought any legislation tackling the regime should be retroactive to early may. was that a sufficient pronouncement that the secretary that if you wanted to issue regulations to take the juice out of inversion that he could

yet write regulations retroactive today? was that clear enough in terms of the information provided for us has still to be determined? >> not willing to give a legal opinion here, but i would say specification of the date without the accompanying what it is that he wants to be made richer active would somehow fail to be sufficient notice. but i didn't say that. yes. >> to talk about what treasury can do once they are ready to do some name. as sarah mentioned, professor shea wrote a nice article about a month ago on this topic. if you forgive me, i am reminded of the any whole movie in which he is standing in a theater line describing and listening to someone pontificate about what

the director might have intended i am going did make a few observations about perfect their shea's article. so professor shea highlighted for us a couple of key problems, stresses on the tax system than inversions present. after an inversion, an inverted company has been documented to increase the leverage that it has looting up with dad so that there is in effect many more interest deductions out of the u.s. tax base, what is known as earnings stripping, sort of like if you take your left hand and pay your right hand, deducting payments on the left-hand image

is your right hand happens to be across the border i'm excluding interest income. so that is one key problem professor shea highlighted. the second problem was the whole notion of companies fleeing america before they patriot to your names that occurred offshore. again, sort of like you contributing to your ira and before you start withdrawing funds from your ira and including those funds as income communist to bermuda or came in as a caution. you cannot do that as an individual. corporations can do that. most directly, tackling this economic aspects of inversion era couple easy tools he might yet use out of the tax code. i work for the joint committee on taxation for six years. we regularly granted authority

to treasury to write the regulations sometimes to interpret a word. sometimes to prevent abuse. sometimes to fill legislative gaffe because the few treasury the great expertise it has in the process they have available for themselves noticed in a transparent fashion as a useful tool to develop legislation. that's been going on for the 100 years the code has been in place. there's over 500 specific grants of the floridian one general grant of authority. let me just mention, too, that professor shea noted in his article that addressed most directly the article here. first, what can be done about this loading up the debt that u.s. companies undertake once they've created a foreign parent for which they can borrow money.

well, professor shea observed and i think correctly that there is a code section enacted by congress in 1969 so i'll sneak in the site, section 385. at the time, congress thought about heavily distinguished from equity, debt from stocks? because in mergers and takeovers situations, companies were often loading up with dad, deducting a lot of interest in reducing corporate taxes. so congress enacted section mickey treasury extensive authority to write regulations as treasury deems necessary or appropriate to determine whether an interest should be treated as debt with payments deductible. congress has revisited that code section three or four times since the original enactment and

never once had this reduced or taken back in the authority that is granted. the section is rather unique. it's only purpose was to grant a 30 to treasury to think about when an instrument should be allowed as an instrument to facilitate deductions, including factors treasury can think about but need not think about come the one of which was whether the payments, debt instrument parallels, the instruments paralleled the stock and things of that sort that can do the kinds of circumstances we have here. perfect day, another piece of authority that professor shea highlighted in his article was sent a notice code section 956, which has professor shea described, when these earnings accrue overseas and are used in the u.s., sort of akin to withdrawing from your ira,

whether they are paid back to the u.s. company or the u.s. shareholders, whether they are loaned back to the u.s. company for a number of different other circumstances, guaranteed death and the like. those trigger a current inclusion of the income that's allowed to accrue tax-free, just like your ira is allowed to accrue tax-free. in code section 956, congress authorized treasury to write regulations to prevent the avoidance of the provisions of this section to be organizations or otherwise. again, treasury is given authority under the code section to tackle the kinds of problems economic challenges of the inversion phenomena exist. sn mentioned, there were 500 specific risk of authority. i am only highlighting to hear.

i could speak to many more, but i'll let the discussion continue. >> i'm going to return back to steve again and ask if there's any others you want to add to that list and then we'll spend a few minutes talking about the impact of using those tools effectively how we think the wisdom of doing this. >> i wanted to mention that one of the two of the nations he always had his enforcement of the law as it is. my article was directed at expanding regulations to address issues that might not be able to reach than the current law. but i didn't discuss in that article and anti-abuse regulation. under section 956 as i read it on his terms and because this peculiar definitional aspects

that are quite expansive could actually be used to treat what is called a hopscotched mud from a controlled foreign subsidiary. if we have the picture back up, i do know that's possible, at the new foreign parent as in many cases. not every case, but many cases as a deep dividend to the u.s. conflict. the real need for regulation in my view is cases where that regulation with respect to using the offshore earnings would be cases that regulation would not reach for the irs, which has great discretion of the regulation chooses not to apply it and in particular cases for their supposed aversion planning that would without triggering the u.s. tax allow those old earnings to no longer be subject to u.s. tax jurisdiction. i can call professor today.

i've spent 30 plus years that rising multinational companies. so my dna is much more than a tax planner mode than it is in the process oreo mode for what that's worth. i see lots of tax planning opportunities. as to any of the transactions out there that have been proposed, i would be happy to discuss things i would do with a tax planner that would allow post conversion effective tax rate of those companies to be reduced. that is why we're talking about the sections. >> it appears having a bowtie is not an indication of professorial stature, but instead tax planning advice. i didn't realize they came without inscription. so back to the comments he made earlier. he started off by talking about the fact in your view, does that was a symptom of a larger set of

drivers in the corporate tax structure and ultimately and i think you wouldn't get any disagreement, we need to be addressing the larger. in the current debate, first of all can i ask you, with the measures that stephen steve has put on the table be affect did and then we can go on not to say should treasury take care? >> so the answer is i don't think so. but there's an overarching point before i get back into the weeds, which is why are we trying to raise the bar so be harder for companies to leave the united states? why are we trying to do something to make it more attractive for them to stay here? we are really losing our focus. coming back to whether there should be targeted regulatory action, the first suggestions steve made is to use the code

section called 385 characterize that as equity to limit the ability of these companies to reduce the tax. that is why companies are doing incursions. but if you look at the administration's proposal, they can't proposal, senator boxer's proposal, they'll propose to tighten 163 jay, the targeted section limiting interest adaptability so companies can know this is likely to happen. so they are going to make a big deal planning into what is likely coming down the pipe. more importantly we will get into whether treasury should. i think that the legislative authority under 385. isle of man is that the treasury put out the first reedy firebreaks which will be withdrawn. there's nothing in the statute or legislative history that says you can target 385 to a subclass of transactions involving

foreign lenders and borrowers. what we put out the rates, we were true they apply to foreign transactions. when you read the preamble, they did not apply to foreign transactions because there is no application. treasury will consider this. i was 34 years ago, nate tdd. a lot of time has gone by. we obviously haven't not up until now they should use this tool. >> i want to get you to your second point. >> been a stop on that point to make an observation. it strikes me the plain reading of the statute of this code section 385 is so directive and so broad that read the legislative history of 385. i've gone through everything for the last 40 years. i think this is an easy question

but of course treasury has authority here. here's the question of whether to post to sally in 1969, there is no notion of inversions. and when congress delegated broad authority to tackle one shouldn't students be treated as dead subpoenas are deductible, congress cs did not have inversions in mind. let me ask you, sally, what happens in these circumstances? does congress need to have a crystal ball when of rights authorizing legislation so it needs to expressly anticipate market development and what happens with other agencies? this can't be any to treasury. >> is to make it easier for side to answer the question. the mac it's really easy right now. i'll speak first. why should i let you do that to

me? the answer is no, congress does not do have a crystal ball if i can refer to climate change, for example. when they wrote the clean air act, they weren't thinking greenhouse gases and at the supreme court has said there is the authority they are. things will change in one of the markers i laid down earlier in my overview, my two minute overview of administrative law it is an industry can change its mind. it can save 35 years ago. we are not sure this covers foreign corporation and now we can be sure it does. he can change his mind and i won't impair his credibility and won't come into the amount of difference that might receive. i don't know what happened in this particular instance because the tax mavens know the code, not me. as a general proposition , the answer would be no. >> i i think we have an

incomplete record because 385 was enacted in 1969. in 1989, congress enacted a specific section and have related dashboard related to limit interest reduction, very targeted to this particular perceived abuse. not companies, but across the board. treasury i did a study in 2007 by g, 153 jay is not enough on the bird accompanies that recommended there for the last two budgets the administration has recommended legislation be enacted to restrict interest of stability by inverted companies and on the weeds here, the treasury explanation say it is necessary to amend section 163 jay to fix this problem and this

quarter revenue of $4.6 billion, which i think the convention is you can't raise revenue unless you are changing current. so against a record of treasury saying we need to ask congress twice and though we need to change the law to address interest stripping on inverted parties. how can they then go back and say i didn't really need to change the law. i could've done all along easy 385. there's a recent case, the most recent case striking down an irs regulation d.c. circuit said the administration can always change his mind if it goes a very long time and indicates it is not the authority of office that decides it does. >> you'll get another shot, but john had a second point on the question to get past all of the statutory interpretation so we come back. >> a larger point here is i

doubt they will get into whether treasury should. i don't think the authority exists. most tax lawyers inc. to redefine what they meant something different. if treasury wanted to put out a broad 385 rule i'm all related parties, not just foreign, but all commented maybe. but not a targeted subclass. >> you had one other question and then we will get seated. >> i don't go to work because i don't think it is what is driving these transactions because companies are counting on this and if they go forward. >> steve. >> it to react to threats and i want to stick with the authority thread so we finish that. i'm happy to defer to steve first. >> short point. one of the interesting things is administrative law is quite settled in a specially now with imported sally into the tax world, we have got it made.

the male case that it didn't matter how long the statute it out there. treasury can issue regulation. it can change its mind. so the point is really irrelevant. second, yes there is a specific regime to address earnings stripping by foreign countries generally and there's a specific regime to address a variety of issues dealing with u.s. companies that invert. but the 385 dead regime was left in place throughout. in 1989 when the regime was added for interest or thing, also amended 385 and left in place the full authority. indeed if you look to the legislative history of 163, they actually allude to make red treasury authority to address their teeth at as a means of a u.s. company withdrawing foreign

earnings, they say in passing of course we are not changing treasury's authority to figure out what is debt and equity. i will leave it at that. john and i will disagree. >> you think treasury was wrong in its budget proposal saying it is necessary to amend section 153 to address earnings stripping by inverted companies? that is the language. >> if you classify that as equity under 385, you are not doing what 163 j does. by the extent you are classifying it should be treated as equity for purposes of the code. one effect of the is to transform a payment on that instrument from interest or dividends to the extent of profit or the other outcomes of payment on stock.

the other is withholding taxes under treaties. yet there is its treated differently under the nondiscrimination article of treaties. the whole argument made so far that congress spoke to 163 j, therefore you can't use 385. first, congress didn't say that when they enacted 163 j. we can turn what that might be without getting into the tax fees. second, there's evidence the peasant used to evidence the peasant used and referred to on his blog at the legislative history suggests they didn't intend to restrict treasury's ability to use 385. third, 385 is different. it does different things. in some respects it's actually a better tool than 163 j and in some respects it is less flexible. in terms of authority, to my mind there is no doubt infer

that i turn to the statute itself, which in 385 piece says among the factors taken into account in determining with respect to a particular factual situation whether it got better credit relationship exists come a particular factual situation gives treasury the clear authority to distinguish inverted from non-inverted cases. having said that, john and i actually agree on something. in addition to the bowties. i think if we get equity rules with respect to inverted companies, the better answer over time and i said this in my article as they should apply to all foreign controlled companies. here's the problem. when the patient is leaving, they put on a tourniquet. then you have to have time to come back. now is the tax is still growing

apart because of the versions? no. it is risking an irreversible decrease by reasonable companies taking on sets out from the reach of the corporate tax base if they both in for and then control the foreign corporations and take assets that have been earned while in the u.s. corporate tax base as to which the united states reasonably was expecting to be paid ultimately antennae and that ultimate conclusion. that is not acting now is important. it is important to the tax base and the things i suggested i would argue are consistent with good policy and future tax reform. >> so. >> select the move country and use that as a way to get the audience in here in a few minutes. let me use that to move to a line that i heard in the treasury secretary's remarks. he said i thought clearly when i'm trying to find back with my

notes, but he said we wanted to act in a way that was clearly within around a disputable authority department. i apologize that's not a direct quote, but that was clearly saying the difference is easier as to what we don't know for sure how treasury will interpret its own authority. he has said he wants to take an action that he thinks will be carefully within -- indisputably within treasury. so let's take that as an assumption for a moment. whatever actions you take would be one he feels and perhaps even john will feel is consistent. the question is if that is one that is sufficient due to the level of economic incentives, perhaps can prevent them certainly and i don't think they would want to to make you less

economically attractive to do this for purposes of reducing their u.s. tax burden. is that a good policy to take? this is what i think, steve, you are starting to get at. in an ideal world we would have a tax law that is not designed to be aimed particularly at this transaction. we would have interest provisions universally applicable. he said we all think we should be dealing with the incentives issue, not the deterrent punishment issue for people who receive. but congress does not seem likely to do comprehensive tax reforms in the near term. each of you if you would only give me your views on the merits, the policy merits of acting out and let me just ask the second question to you can choose which one you want to answer. is moving forward with a provision to address and version now make it more or less likely

to change everyone up here believes is a good idea, which is to do a comprehensive business tax reform is more or less likely to happen if the administration is the executive authority in this way. we will go down the road. >> u.s.a. number question air. the answer is i do not think regulations would be affect this, which is really important because the transactions would just morph into another form. i think they would make tax reform -- i am more optimistic than you and comprehensive tax reform sooner rather than later. i think in the next two years the administration wants to do it. i know the republicans in the house want to do it and i am sure that ron wyden i know wants to do it and certainly orrin hatch. and the business community is very clear i'm not. so i'm not a pessimist.

i am a not to miss. ..

hall

>> >> is john is right not doing any of the end things the was adjusted to decrease the amount of conversions was no affect then the regulations would not have any benefit but some transaction cost with the analysis they would say don't go ahead i don't know it would not work but that is the issue to be addressed to. but the issuance of the

regulations antagonizing the congress that love to work hand in glove and looking at that degree in their work of greenhouse gases such and climate change they begged congress to enact climate change legislation. they said on tax reform is much better if congress does it and if we are to do it. but in any event it has to

go ahead to alienate the congress. i would submit know even if you have gone ahead but what it does show so you know, the other marker so this is what is likely to occupy the field that helps to analyze whether or not you want to go ahead. in terms of the authority for executive action, as speaker boehner has authorized a lawsuit for using undue executive action in the field of health care of you could substitute immigration reform or climate change.

looking this large any area where congress not asking has led to the executive branch i don't think some -- further antagonism of congress is something is remarkable. finally you talk about damage to the tax policy i cannot talk about that even though i am a tax lawyer but i do believe that government is doing the right thing and are committed public servants. tax policy does have a reputation. even as a home for such high integrity. but your assumption is they are not. >> i never said that.

i said they are being urged. >> very different circumstances. secretary louis -- lew shows the consequences to the tax base which that careful awful rational examination of the data could leave one independent to do so that this is the right thing to do. you were not selling also use a little bit of hyperbole. >> i want to get the audience is this weekend.

>> but some deals will still go forward in my judgment to the extent they were good business deals. that is part of the careful and thoughtful process. blasted this tax reform my judgment for some companies to put themselves in in a position of the other companies some where the dividing lines are with the approach of the business community to allow this to happen. i don't know if there will

be a tax reform. but then you take regulatory action over the next few years you could correct any errors made then you stop the bleeding. if you thank you could come up with the rule. >> then i turn to the audience. >> the secretary said he has felt that the pace is

accelerating. at the way the accelerations this corporate tax rates were is the search of urgency from? then we will turn to the audience. >> is the headline the very significant shift. >> it to can be but that corporate tax base is only 10 percent with the total federal revenues it is a but americans seem taxpayers do

things they cannot do it is the integrity of the tax system as a whole. more specific this is the pfizer deal that did not go forward. their reach over $50 billion the last two announced deals. when i looked at walgreen's that did not go forward talk about $980 million per year of tax savings not all of which survive the proposals that are being reduced. real money even for a the federal government.

>> the joint committee that is the arbiter answers that question. the administration and has a proposal to address the legislative proposal but said the proposal has been enacted would raise $20 million over 10 years. that sounds like a lot of money and it is that not in the context of the projected tax receipts over the next 10 years. one-half of 1% congress has time to do with this. there is the revenue estimate that will raise over 10 years that is less than one-tenth of 1% i am

not defending inversion for these to run helter-skelter their symptoms the of the fundamental that needs to be fixed this is not the emergency. now i a greek that is for the general public that is terrible and we need to address that but the short-term ad hoc measures will not stop them. >> you can answer the question as part of a comments.

major hand and ask your question and give your name and where you are from. >> when i served at treasury 2001 through 2003 we described in congressional testimony as america's berlin wall and the only way if it is in their economic interests to leave is to tear down the wall to go to a territory that still raise 10 percent of the revenue from the corporate base and nobody would have to leave. any comments on that? >> i could address that. >> i don't think shifting to the territorial system the to problem somewhat -- the

two prongs we have violated our earnings to bid -- stripping and those earnings of the corporation's. shifting to the territorial system not taxed on foreign income for multinationals to strip the income and shifter broad. >> [inaudible] >> let me finish my answer made to address those earnings striplings issue he once treasury to pull into regulation and too full of that and.

a large stock of the accumulated earnings offshore with huge i.r.a. not subject to u.s. tax the problem of converted companies is serious. there is a $2 trillion stock of deferred earnings abroad. whether it goes territorial that system today and then to pay tax on the world wide income. and then granted one holiday 2004 we have to deal with that issue.

but then let's leave the best for later. >> if it is offshore and stays offshore. >> i will try to respond. waiting for the issue of transition of the territorial system and then japan and the u.k. with a note told george. it imposes the toll charge of 5% or 8%. it is still a u.s. company

those are still subject to the test that is a red herring. there is no panacea put to exacerbate the earnings if it does we should address that directly with the rest of the world has moved to a territorial system. with those problems we conjure up today. but we can deal with that. >> i am not recalling what you said in the article but if a company is under a u.s.

company those still remain subject to the taxes. i said that before. to control the company in a range of circumstances but those are no longer acceptable but we can talk about them later. to avoid the tell a statutory interpretation i do have some terrific comments here after the panel will let me just mention to questions but

there is the general confusion it conversion is with shifting. and then also of the decision made when they chose not to. and they said if they chose to be subject to intense scrutiny from the irs for the years to come. it deters them from inverting that never attracted controversy with the irs and would complicate and impede with the threat maybe there were those that

were not undertake those. >> the answer is can you put the chart back up? the u.s. company after the transaction is known to the imf warned company no real assets all that has happened is the shareholders former companies are shareholders capital is not leaving the united states is actually coming back to the united states as capital with judge territoriality u.s. company

is larger than the foreign company but the management of the combined company does that mean they have to move overseas? no. they could be witted never city they are in the the board meeting is hardly a loss of jobs or space that is infused with these transactions. >> but when the company get from treasury. >> all of the acquired 55% of the targets if an

activist investor said turn the rest of your act division into conversion in a way that would have raised a number of issues that would have attracted scrutiny. it is a special case. and this treasury or the irs , how incredibly important the integrity is to our government and that the irs plays it straight looking for were there is a tax issues of the potential adjustment. it depends on how you do it would issues could be raised and also depending on the

facts of the transition. >> we're waiting for a microphone to get to you. >> i am with brown advisory. get to the point when the capital comes this way and jobs day here i worry about the point that speaks to the integrity and then the walgreen's story the

spokesman for walgreen's talks about route -- a refers to earnings. >> can i respond? >> i do not think nothing happened with each transaction that does weld think of as an inversion. exit is in its own subsidiary. congress did not like that in 2004 but they won its legitimate mergers to continue it is when the of foreign company was worth

25% so was a legitimate transaction companies by and large we don't take your company to merge it with another that is 25% your size you find a real business company that is the parent. >> the plaintiff is that the acquired company it is they call it the address there. >> then change that it is now combined with a foreign business. i don't want to defend these transactions but people change the tax code so they don't have to i cannot

believe you think for companies to keep cash outside the united states? >> folks to do acquisitions look at that county cash flow. part of that depending line your measurement contemplating the inversion in very substantial amount to a situation with pretax economics one reason i am

more sanguine about putting regulation because that transaction will go forward but since 2007 in the treasurer's report issued are not working that is why budget proposals now pay that cost of doing nothing. >> but i have not heard you address that fact to amend this section and 163j. bet is congress's decision.

>> there is the subtle difference and secretary lew says that. now you said the word necessary that they are otherwise important? i am not sure that necessarily follows. they implicitly say i don't have the authority with those issued before the of fight -- pfizer deal there is a saying you should change your thinking. what we heard from secretary

lew this morning the change because of those developments. that is perfectly fine idea agree with the secretary these are important to change the opinion but for make it much more important. >> that does not mean he asked to use it i disagree with your reading it says that he can't but they have the authority.

>> i with tax analysts as part of my questions professor at maybe you could clarify what you were saying so i think that it adjust to those that had expatriates' to put that down? >> what i said good policy would cover all and authority from the statute to take gone from factual cases and to recommend only

the heighten the standards and mentioned in the footnotes to reduce the earl obvious -- the lobbyist to get that done. >> my question is the regulatory authority of the due process absence of the

administration makes a unilateral changes in that the professor talks about 385 to make them are richer a. i am carious how was that carried out in a matter of weeks? >> to process is normally in rulemaking through common claus it takes more than a few weeks i will grant you that but it can be done in a fairly quick timeframe i am reminded of a regulation by the department of treasury that had to do with car seats in the front because the air bag was exploding

and smothering children and women of short stature. so to stop that said dot put out a notice and they could turn that around in about five days but it can be done. is a sunny day and i cannot speak to that with the tourniquet issue. this sounds like most of you with the proposed rule making is are in issue you could get that very quickly. the treasury people could review them or the irs as a final rule that is due

process. >> and then pulling down a section numbers. and to in addition there is a provision in the congressional review act to set aside emotion if they both signed off on that motion if it happened during the administration even if both houses of congress

disapprove but that enables the congress to lift that the clause act if there were a republican in 2016 and both houses held by the republicans they could clawback may or june. that should set treasury thinking we don't have until next november or the following year. there is the timeframe to get those regulations finished so they cannot be clawed back. and go back to june or july. very rare but it is up there

as part of to process -- due process. >> i am okay. but we will let him have it but we have time then we will close panel for a short comment. >> gone this issue to wait for tax reform would congress of greater ability for the industry did setting? >> not looking at all the tax code provisions that i haven't seen to have

authority here they should make the laws. that is their job and it was less contested but treasury does have some authority here. i cannot opine on the relative merits. >> thank you. i will also say those who were thoughtful but also precise and we encourage you to follow-up by e-mail if you have questions. please join me in people will find the questions in front of them.

and helping all of us to get a flavor of what that is. thank you. [applause] [inaudible conversations]

>> welcome to the national press club of a light to give a special welcome to

you for go i am president and national press club the first as we always do your few guidelines after the speaker of opened the floor for questions from credentialed media and club members if you are recognized identify yourself and your organization before asking your question no speeches. just a question. our guest today "new york times" reporter matthew rosenberg was expelled by the government of karzai last week approved candidates in the rare display of unity to allow back into afghanistan the government treated the expulsion through an article he had written reporting higher level government officials were discussing a

possible solution to the country's current crisis that would amount to a coup. mr. rosenberg will discuss his own situation, the outlook for afghanistan based on the ears from reporting for the country. since 2008 as the south asian correspondent them for a "the new york times". also low did a stint in 2002 when he was a reporter for the associated press based in nairobi. the national press club issued statements to criticize expulsion to welcome the statements by the presidential candidates. i hope you had a chance to

get over your jet lag. the floor is yours. >>. >> i apologize in advance for any income parents. trying to track down days villagers that was taking forever. but to have them dump their phones to track down these very specific people. some of them we could go to they would just sit there for hours at our house. and then that expression that i believe if means

another how are you if you run out of things to say then you keep going. and afghans are pretty good to talk and negotiate and to keep things basically okay. but then to see the breakdown of the process. and then to say go home and the commission will continue this without you but it is beginning to feel where do they go from here? karzai says he is leaving next week and who knows?

and you are in a situation that is approaching the worst case scenario for afghanistan. i don't say that lightly i know a lot of the western press is perceived to be unduly pessimistic but i think in this case personally we have tried to take it at face value with each round of the election and people are voting but what country doesn't? now it seems to have broken down in a way that you can walk giveback -- walk it back with those imposed deadlines set by president karzai himself and we have 2014 coming in nato to get the deals done what do you

do? there is no precedent as karzai does not want to spend it and that is where my story comes as things have not looked to be on a good trajectory people within the government people who were close to karzai or have been around for years think we need another option or plan me because they are married to this political deal the candidates cannot compromise so what will be do we get to september and there is no compromise? that discussion began right after the election and it intensified with the afghan election commission gave

though a substantial lead. by most accounts and let's get all those that the massive amount of protesters but those actors to operate north of kabul but people said maybe they're 24 or 48 hours from taking action that they walk into a ministries and to darr those security forces to shoot us. maybe they're not walking or shooting but back with some

serious weapons that always seems like chicken little scenario. the civil war will start again. but then to walk fatback to create the ideal but within a few days it is already falling apart and incredibly complex process as they try touse been off and it will be released for what they want to hear this site they talk about to a totally different deals. so given that environment as an attempt to take by force

with the election there was a number of senior officials whose stayed out publicly although they have their likes and dislikes way indeed up plan b. we have done well over the last 13 years and nobody wanted world war i but it still happened. but it was not the big secret. the political elite in and those to said they did not support it were happy to tell us who was happy.

so i think whenever you work abroad it is very easy to be alarmist so they were careful. we've tried to be as metric as possible and the first option was to have them make a deal then@=?

>> >> to of them kept leaving the room to consult with day confidential source it is hard not to know the irony they will adjust to give sources but they're talking with the confidential source we were not to fight -- free to leave then we have to

come back tomorrow with a lawyer. the next morning we were not sure did not really know fearing arrest be sent to them a letter to say we do want to come back and cooperate but we want to have our lawyer there we have right to a lawyer. i realized my jet lag is kicking in and i missed the point. after left the attorney general's office they did not say i could not leave the country, and no charges, don't worry we get back to a the bureau writing up a memo and we see of it tweet that the attorney general says i cannot leave the country. they did not tell us that then they got from calls

that they had stopped me from leaving the country the obviously sent the letter the next day but they never told us anything we had to find out on her own. -- on our own. i will go on a tangent but one of the problems with the election or the state created it had a lot of lives from afghans that made them very well paid in the west but they're not respected very often. if you want to draw investigative reporter you have to serve notice to the reporter the commission can

recommend it then under afghan criminal investigation and they have to send me a letter three times. . . they tell me to show up. the attorney general on his own cannot do that. but in this case president karzai wanted action taken so it was. you have of process and says the level of transparency there and makes the u.s. election look corrupt and they have to respect and you had a very senior member of the election commission cut

all -- caught on tape. to help support the candidate as well. but the winner ultimately has control. with those objections for the players with a centralized government with the president that has dictatorial powers hires and fires schoolteachers to the administers because he is in charge of this so completely winner-take-all because everybody who's supported the loser during the

election, a job, as security , physical safety of your own family is dependent on the man being in power. budget is not a tragedy that you cannot recover from that is then illustration how powerful that executive is 13 years after be set up democracy on paper should work. you wanted me how to. i am gone. the laws were not the issue. they tried to stop it will let this reflect but then to get the estimate to

prosecute we have over 2300 soldiers or servicemen tens of thousands and at the end you find yourselves before the mission is supposed to end. and a democracy is is in shambles and then the thing at the right time. the going for word what role can afghans play to move past this?

>> there is so much from various government officials like the fallibility that per-capita it was four or five times i was then callable 2002 jiving a rhine -- driving around. but now the lady who does our laundry everybody has the cellphone. there is tremendous progress but it hinges on a stable central government and that looks incredibly weak right now even if they can get a compromise and everyone hopes they will be enormity

of the problem tackled within that government it seems impossible when that mandate will be weak.

you have the taliban which have been quiet all year, and making you had first down south, wide parted of the south, and the north and central afghanistan

and eastern afghanistan, and the afghan security forces are finding themselves hard pressed. they're dean, and they have gotten a lot better, but they need western help. they can't function on their own yet. and even if they could, they still need a massive amount of money. and they can't -- that's not money afghanistan has. so if the west stunt stay ingages they'll followed, and i don't know if there's any debate about that. on top of this, what little money afghanistan has is being drained by this election. the election -- the vast uncertainty -- this year was going to be uncertain enough for most afghans. a great worry, everything is disengaging, western combat troops are going home. that was driving the economy down already and this has just destroyed it. the tax revenue and customs revenue collected be the government is down so sharply they're probably month or two away from being able to pay civil servant salaries. some embe as are running out

of -- embassies are running out of money to pay rent, specially in towns like new york where residences cost a lot of money. this happened last year as well. they got help from the commune. i don't know if they'll get it this time. so into that whole mess, you know, it all comes down to basically two men who today are back at it. they're both pretty reasonable people, and i'd be the first to thank them both for saying they'd let me back in. i'm eager to go back and want to go back there and keep reporting. it's a fascinating place. they unfortunately have supporters on either side who are far less than reasonable, and in a lot of places you have perfect parallel conflicts so take the example of northern afghanistan. on the one hand the vice president running mate --

mr. dostum, a war lord, for lack of a better word, a cia proxy. has been put out to pasture a bit, but still has armed men by most accounts. and he has kind of been in his area up north the last few years, not doing wonderfully well, not doing terrible but just there. and then on the abdul would side you have the governor of the province right in the same area as dostum, and they're doing phenomenally well. she's governor of one of the richest areas of the country, very powerful. now, dostum want the action. atta doesn't want to get it up. he makes it clear he will fire atta if he ones, dostum is eager to see that hope. those two alone are pushing

their own guys, don't compromise. the zero sum game. you have these scenarios around the country where you have supporters of each divided, up against each other, looking to step on each. it's business or whatever you want to call it. how do you get these guys to compromise? so many of their supporters are saying, don't compromise. we need to keep our position, our power, our businesses. and i guess that's -- i guess i should be happy i don't have to make these decisions. don't know what i'd tell us. if the white house called me and said, what would you do? i have no idea. it's a really difficult situation, and one of the effects of writing news stories, the act of observing something changes it, and by all accounts, what i've been told is after the story i got thrown out over came

out, president car -- karzai toll everybody to stop talking, shut up, and i don't want to hear another line of this interim government nonsense. and so now, with those people still planning to make a move, they're being awfully quiet about it. but i'm over here in washington, not in kabul. and i think it's added more uncertainty to the situation because the plan b now is just is not there. the plan b carried a lot of risks. everybody two takes power says they're doing it to save democracy but we have seen time and again that's not always the case. and so where we are now is you have two candidates who won't compromise, a government that says it's leaving power next week, as president karzai said. the u.s., which insists this setup of doing an audit and a political deal the candidates simply both dropped -- can't make work, as the only way

forward, and amid all of this, you've got 13 years in, a country with nearly 30 million people, and a lot of them have dreams of what a better life could be, but they're not there yet, and if this doesn't work, if we're at that point, they're not going to get there. there's just no way to make it work. even with this work it's going to be incredibly difficult. the country is poor, lacunes significant resources that can enrich it quickly. if something isn't sorted out soon there, some compromise isn't reached to go forward, it does -- you do get dangerously close to the point where 1 years worth of work is -- 13 years worth of work is at stake and very much at risk of disappearing. i think on that note i'll stop blackwaterring on and open it up to questions.

>> know we like to report news, not to make it, and my 40 yearses a a foreign correspondent, i greatly respect how you-under handling the public side of your work, even though you much prefer to be behind the computer. we used to say behind the typewriter. but thank you for come.com -- coming, and the floor is open, identify yourself and your organization and ask your question. >> yes, please. one minute. i know we have a good setup here. i was looking for the hand hell -- jurick i'm from georgetown university, also in afghanistan for 16 months. i appreciate the fact that even though you painted a grim picture of what is happening in afghanistan, but there's a lot of progress, like you just

mentioned. that's going on. my question to you is, even let's say the scenario, the situation becomes unstable, but don't you think afghan people are different now because the young people, there's a media there, free press now, young people who are very educated and going toward a democratic transition? so it's going to be different. they're going to stand up for themselves. i'd like to get your view on that. >> that's a very good opinion, and in the cities that's absolutely true and that's the promise of this election, this year, is you're giving people the space. young people, when win say young, we talking people in their 20s in and 30s in who want to build a better country, and even the campaigns reflected that. these guys i've known for years are operating like you imagine an american political operative to operate. that's an awesome ring tone.

and even to the opinion where you're getting on airplanes to fly off with candidates, hope you're not going to write about this. trying to spin you on what you should and shouldn't write about. then the person they don't want you to write about sits next to you on the plane and talks to you for a while. they're not that great at managing it. but you have this young generation, but that is really an urban phenomenon, and that hopefully would go and change as the cultures and societies change, but right now it's pretty small, and if you have a situation that is destabilized where you have armed groups on either side of the political divide, plus the taliban coming in, i don't know if the critical mass behind the people is there to say, we don't want to do this. they'd try to say it but in afghanistan you dent have that set of young people yet. you're not there yet where you've got villagers who know

much more than what they've got on their back. their peasants in the truest skins of the word. people without disposable income, without much education. you have whole provinces literacy rates in the teens or low single digits. that's not an environment that will engender mon racing. if you get to that opinion where you have a confrontation between opposing political factions within the government, plus the taliban, obviously. so i think that's partly why i'd be so desperate to avoid it, including the actors in the confrontation. they have to know that, look around, the people who would be creating any kind of fight are wealthy. they have had a great 13 years. they've got houses in dubai. great fighting dogs and horses and teams. they've done well. so, any kind of conflict will be destroying what they have. it's going to kill their source

of wealth and power. so, i think they're desperate to avoid it, but they're also aware if they're guy loses, they might lose this anyway so why not fight for it. that's a dangerous equation to be in, dangerous situation to be in, and i think -- that's the hardest thing about afghanistan right now, and observing it for -- and writing about it for foreigners and the rest of the world, is that you do have that split between a scenario that is pretty optimistic, a scenario that could go pretty well, and one that is fairly pessimistic and grim, and there's not a whole lot of middle ground. it's hard to explain to people, go this way, not bad. go that way, terrible. not sort of bad or sort of terrible in the middle. >> do you view -- after what happened to you and the reaction we have gotten here in the u.s. and the around the world, do you

view your situation as exceptional or do you think this is precedent for what is likely to happen to reporters in the future? not only foreign reporters but treatment of press within afghanistan. itself. i. >> i think given the evidence we have to view it's exceptional right now. if past performance is best indicator of future performance, the respect for the freedom of press in the government has been tremendous. one of the real achievements. i think its more than 120 newspapers, and 37 television channels, a diversity of opinions, and but more important, you have government officials who are willing to shut down the really nasty parted of the free press. for example, when a very nationalist tv station had a pashtun general come on and saying the pashtun should be

ruling here, karzai fired the gay. he say you can say that on tv but you're not going to keep your job. i know that a tv channel, who was trying to recruit both staff and advertisers from one of its rival by claiming its rivals were funds by jews and the head of the intelligence service and information minister said we want a cam -- competitive press but not this, so cult it out. so that's positive government intervention and then you have what happened to me. i want to see it as exceptional as well because this isn't the first time we have had runins with the palace. we have had -- written a lot of stories they didn't like even before the election. president karzai is good at handling the press. i remember about a year and a half ago we did a story on the slush fund the cia had been paying for, drops off bags of cash at the palace for must both a decade now, and that money was used to pay off areas,

parliamentaries and warlords, walking around change, and karzai didn't deny it, and he had a press conference about -- he was away when it came out. i had a great english exchange with him, let's do this on the books and he smiled and laughed and said that's for the state department. this story when i look back, it highlighted 0 power struggle within the inner circle. it's been hard to come down on people you trusted for years. i provided an external target to direct all that anger, and so they threw me out. i think that the danger here is

that once you kind of get a sense of how weak the class of people are, you realize, we can do more of this. that the safety and kind of our ability to do our jobs defends on the willingness of people in power to play along with that. to bow to public opinion or pressure. but when they don't want us to do it we don't have a lot of options. we're not going to -- even i. we wanted to fight to defend ourselves, there aren't that many of us, a few dozen at most. so we could put up a fight. we'd last about ten minutes. and we're not in such great shape. and so that is the danger here, the government -- whoever takes power next, they'll be really nice to the press for a little while. it's an easy gimme, makes everybody look democratic but when they start getting stories about things they've done wrong or things that people in government are doing wrong, they've seen how easy it is just

to get rid of somebody, and for the foreign press they've seen -- it always struck me as odd you would want to keep me to question me because there will be a story every day. throw me outing you get a few days of bad press and it's done. i think they've seep that now and that's a risk going forwardment we'll have to see what happens. i think they're committed to the idea of free press. >> martin weaver. maybe this is a completely naive question, but if you found out that you were being expelled by the news media, why didn't you just ignore them? >> we absolutely were going to ignore them. we were thinking about it. we had a long debate into that night. at first we didn't know. so it was, what do we do? i'll start packing just in case. on top of that we had a senior editor visiting. we were supposed to interview the president on friday.

we haven't interviewed him in seven years. actually never met the guy. this would be the first time we interviewed him in years and he finally said okay. that obviously got cancelled and this poor senior editor came from new york, was getting on the plane -- actually coming from d.c. -- getting on the plane when the whole thing brogue and i wasn't allowed to leave he country. by the time she lands i was being thrown out of the country, and when the she got kabul, they cancelled the interview on her. so it was a waste for her. so we debated, what do we do? and we were having a dinner with ambassadors and senior official sod we're trying to organize a dinner party and manage possibly being thrown out of the country, and are they going to arrest you? and then in the mid of the dinner party two pickup trucks of police show up with civilian official ted front door, and so, i run into the house to try to stay low in case they're there

to arrest me. my colleague goes outside. they give this expulsion order. they couldn't even spell my name right. and i don't read pashtun but it was full of mistakes, and it was from the attorney general's office. we thought, okay, this is by everybody bit of afghan law and our own lawyers there advised us, totally illegal expulsion order. nothing lawful. so maybe we should just ignore it. stay, see what happens. one of the good things about the story is we have good source's in government and had senior western officials at dinner with us there, who advised us that if you do stay, we are -- our understanding is they're going to throw you in jail and try you on national security laws, and given how casually the government and the attorney general had just kind of broken the law, their own laws, to try

and issue this expulsion order we figured it was best not to risk going to court or trial in a situation where we're dealing with the administration that at this opinion didn't seem willing to respect its own laws, better to fight from the outside. >> retired from georgetown university. i want to know, over the years of reporting in afghanistan, was there a point when it was more hopeful, more quote-unquote progressive than it's been moving downward again? >> absolutely. i mean, especially in 2002, i got there a few months after -- the taliban were mostly being wrapped up and pushed out. it was incredibly hopeful. there was a point where the sound of an american bomber overhead was good thing. they were chasing people away who were making your life

miserable. and that went on for a while. even as late as 2008, township, people were optimistic. groups of them. and i think even now, as another member of the audience pointed out, there's still a tremendous amount of optimism kind of built up there. people who want something better and who think the possibility of something better could happen. but on top of that, from 2009 on, as the summer -- surge came in, you had tremendous spikes in violence brought on by fighting, basically, where before maybe the taliban were in control and there wasn't that much violence. now you had it contested by the coalition and afghan forces. so there was a tremendous rise in violence and casualties, on top of which the other part of the surge was to clean up the government. and one the byproducts of trying to clean up the government you start looking into all dysfunction and corruption in the government, and then people

like me find out about it. we heard about it but don't have the tools to investigate an entire government. suddenly when the drug importancement agency and the fbi are training afghan ewans to dig, people talk about us and we found out things we didn't know. and that created a perception among afghans that things aren't really good, things are bad. our government is totally corrupt. they knew that but didn't really know the details, and now they had the details. and so i think you've gone -- i don't -- maybe it's a schizophrenic approach, a lot of people of two minds, both hopeful for the future and think good things can happen, you can live in a moderate country where people are free to do as they please as long as they don't inflict that on others, but at the same time a country where people look around and see a lot of violence, where everybody has been touched by this war, and

jobs are drying up, there is a massive economic -- you're essentially 13 years of massive stimulus spending that has gone away and there's a lot of apprehension for the future because of that. on top of that, this goes back to the question also about young people and kind of forward thinking -- is you have had this greeted is in of people this great edifice of people pushing forward women's rights and civil rights. the eddie is in that supported that, the western community is being pulled back because as the west pulls back, people get build back. is that massive afghans afghansn sustain this push? i don't know. you have the old guard inside the government pushing back, saying, some of these rights maybe aren't that great. are women going to be able to keep doing what they've done in big cities? go to work? it will depend partly on where

you are in afghanistan. you go to northern afghanistan, or western afghanistan, and women had a job, they're out getting ice cream, family outs at night. totally fine. go goh to kandahar you barely see women on the streets and if you do, and they're in burqas. so a left to optimism probably depends on where you are in afghanistan. >> i wanted to ask you about both candidates and you really think they are going to fake a final result and if there is still opportunity there of kind of coup d'etat, and also about you, what's next for you, and if you could come back to afghanistan to report or what?

>> i don't know if they would be willing to accept a final result that doesn't have them winning, each side. throughout this process, a lot of the western and afghan officials involved said, you know, when the candidates talk about legitimate outcomes, they seem to mean, me winning. each side seems to think the only legitimate outcome is their victory, and that's a dangerous place to be in. and i'm not quite sure. the abdullah guys made it clear they think it's not valid, they're pulling out and saying they're not going back into it. so, if they don't win, are they going to accept it? i don't know. gani camp has been the programmed winner for so long they haven't had to state anything but they -- you get the impression if something were reversed they would see it as the international community

robbing them of the election. no matter what happens the u.s. and the u.n. will get blamed for this by the people who are unhappy, which is almost everyone. i think a lot of the urn people will admit part of their job was to take the shots. but given the level of international commitment that's going to be there for a while, it's not a great thing. look, the foreigner screwed this up. foreigners have not helped, but everybody has created problems there. it's not a unique one set of actors that has messed the whole thing up. as for me, we're hoping the candidates were being straightforward, when they said they would let me become in, and we'd go back there and see what happens. i had a colleague who was thrown out of pakistan last year, and i was chased out of there a few years ago when i was with the journal, but less officially, and my colleague who was thrown out of pakistan, one thing that makes it hard there is the level of mistrust and conspiracy

theory among the pakistani public that, when the news media or government officials call you a spy, it can be very hard to recover from that and work safely in pakistan again. in afghanistan that hasn't been the case. the palace -- they called us evil. the evil "new york times." called me a spy, i engaged in espionage, and the reaction as far as we can tell is mostly scorn. even on social media where you split between the crazies on either side, you have 98% of the people mocking the palace and two% repeating it. so that's a good sign. probably work there safely again. i'd love to go back. after six years there to be missing kind of final event, drives you nuts. but we'll see what happens, and i think i'll take the candidate at their word now. >> any regrets you wrote the article? >> no. not at all.

not one bit. it's a bit of a bummer to get thrown out of a country for a story that ran only page a-7, but it happens. >> matthew, we are very grateful for you taking the time, you could well be resting at home with your family but you chose to come down here. we're very appreciative. we have a there tradition where we present to honored guests the national press club mug, i believe president karzai spoke here some years ago. i think if you go into his office, maybe there's one there. but if not, you have this one on your own and we thank you so much, and we wish you all the very best for the future. [applause] >> i would like to be able to rate saw this in president karzai0s office but they cancelled that on it but i will definitely bring it to "the new york times" bureau if i go back. thank you very much.

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