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Irresponsible bosses

October 30th, 2011

I’m out of the country at the moment, and possibly missing some nuance. On the other hand, I’m old enough to remember the ill-will the unions built up in the 1970s, with snap stoppages designed to inflict maximum disruption on the public and thereby maximise pressure on employers to settle quickly and on the government to broker a solution. The announcement, without warning, of a lockout by Qantas seems to be straight out of the same disastrous playbook. Even if it works, it must surely kill off any political goodwill for Qantas in the future, or at least as long as the current management is in charge. That’s bound to be costly given the importance of political decisions on things like landing rights for airlines, and the favourable treatment Qantas has had in the past (partly a leftover of its days as a national flag carrier).

Can anyone make a case that Joyce’s action makes sense?

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  1. Dan
    November 1st, 2011 at 10:05 | #1

    Freelander@48 – thanks! I agree about the social cohesion thing (hence #OWS), but my chief point was actually to draw attention to the deleterous macroeconomic consequences of letting the markets rip.

  2. Tom
    November 1st, 2011 at 10:44 | #2

    @TerjeP

    I was replying to you blaming the government not for intervention but for an introduction of such a law to give more rights to workers which you believe is the cause of this industrial action. I was answering to that the regulations were much heavier back then in the 60s-80s and this is the first strike of the Qantas pilots after 45 years since 1966. The cause of this industrial action is not because of the Fair Work Act, it can’t possibly be the cause if it was simply a return to past labour market regulation and even softer than the past as in 1960s-80s. Hence arguing that this happened because the government did not withdraw from the market is plain nonsense; they haven’t withdrawn from the market back then and the strike didn’t happen, in fact this strike happened in a era where the labour market is less regulated than the past.

  3. Jarrah
    November 1st, 2011 at 11:02 | #3

    “because they need to work to survive in the modern world”

    I hate to break it to you, but work is required regardless of historical period or socio-economic system.

    “The cause of this industrial action is not because of the Fair Work Act”

    Maybe, maybe not. The FWA has certainly had an impact in regards to union power.

  4. Tom
    November 1st, 2011 at 11:15 | #4

    @Jarrah

    Yes, work is required throughout history. I’m using that phrase because I want to tell TerjeP the truth of the real world; no reasonable person will turn down a job if he/she is unemployed no matter how harsh the work condition is (unless life threatening, but even that people might still accept). The truth is the employers do have upper hand in negotiations between employer and employees, more so in a free market economy.

  5. Jarrah
    November 1st, 2011 at 13:09 | #5

    “no reasonable person will turn down a job if he/she is unemployed no matter how harsh the work condition is”

    That is demonstrably false. But I realise your actual point is:

    “The truth is the employers do have upper hand in negotiations between employer and employees, more so in a free market economy.”

    Don’t be so sure. Employers have power if they have many potential employees to choose from. That is normally the case, but not always. Employees have power if they have many potential employers to choose from. That is normally the case, but not always.

    In the ‘not always’ situations, the employee gets lower pay or conditions will be worse than otherwise, whereas the employer would have lower profits. Not much difference there. Of course, each might become unemployed or go out of business respectively, again much the same thing.

    In a free-market economy, all else being equal, there will be greater competition between employees *and* between employers (and less protection for both), so it doesn’t necessarily follow that things will be more skewed than they are already.

  6. Freelander
    November 1st, 2011 at 15:05 | #6

    Freelander :

    I wouldn’t be surprised if some in the opposition had been briefed before, or at least a former Liberal minister. The whole thing is as smelly as some of the activities in relation to the wharves under the previous government… …No wonder there is no respect for the status quo. Little wonder the British rioted or that there is the Occupy Wall Street movement.

    Now becoming clear that the Libs and Toxic Tony knew well before the ‘emergency’ Saturday board meeting, or even the AGM, and some journalists had clearly been briefed as well. The whole thing is increasingly taking on political overtones and rather than an action directed at the unions, the action now is appearing to have been directed at the government. Do we want a country ruled by the whims of CEOs and boards trying to blackmail the government and judiciary to get their way? Once again democracy is under act from big money and their ever will Liberal lackies.

  7. Freelander
    November 1st, 2011 at 15:09 | #7

    @Jarrah

    Like communism the “free” market you talk about has never and will never exist. Money will always conspire against the interests of the public. If you read Adam Smith you will find that is something he said way back in the 18th century!

  8. Koala
    November 1st, 2011 at 15:54 | #8

    @Freelander

    Money? conspire against the public? Adam Smith?

    Where?

  9. TerjeP
    November 1st, 2011 at 15:58 | #9

    @Freelander

    Sure but often enough we know when we are approaching it and when we are retreating from it. Lots of concepts (eg the perfect circle) can’t be realised in real world but they are still functional concepts.

  10. Dan
    November 1st, 2011 at 16:01 | #10

    Koala@7:

    ‘People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices.’ – Adam Smith, The Wealth of Nations. The man knew the score better than his acolytes.

  11. Jarrah
    November 1st, 2011 at 16:21 | #11

    @Freelander
    So you have no response to my characterisation of market power, and instead want to divert the conversation?

    “If you read Adam Smith you will find that is something he said way back in the 18th century!”

    Clearly you (and Dan) didn’t read past the famous quote, otherwise you would have seen that he went on to say:

    It is impossible indeed to prevent such meetings, by any law which either could be executed, or would be consistent with liberty and justice. But though the law cannot hinder people of the same trade from sometimes assembling together, it ought to do nothing to facilitate such assemblies; much less to render them necessary.

    Also… what Terje said.

  12. Dan
    November 1st, 2011 at 16:31 | #12

    *sigh* Yes, I’ve read that before, it wasn’t relevant to my response to Koala though.

  13. Freelander
    November 1st, 2011 at 16:59 | #13

    Here are a few others from Adam Smith:

    “As soon as the land of any country has all become private property, the landlords, like all other men, love to reap where they never sowed, and demand a rent even for its natural produce.”

    “No society can surely be flourishing and happy, of which the far greater part of the members are poor and miserable”

    “Virtue is more to be feared than vice, because its excesses are not subject to the regulation of conscience.”

    How about Benjamin Disraeli? “The world is governed by very different personages from what is imagined by those who are not behind the scenes.”

    Or Woodrow Wilson? “Since I entered politics, I have chiefly had men’s views confided to me privately. Some of the biggest men in the United States, in the field of commerce and manufacture, are afraid of something. They know that there is a power somewhere so organized, so subtle, so watchful, so interlocked, so complete, so pervasive, that they better not speak above their breath when they speak in condemnation of it.”

    Or Norman Mailer: “The right wing benefited so much from September 11 that, if I were still a conspiratorialist, I would believe they’d done it.”

    @Jarrah

    As for: “It is impossible indeed to prevent such meetings, by any law which either could be executed, or would be consistent with liberty and justice. But though the law cannot hinder people of the same trade from sometimes assembling together, it ought to do nothing to facilitate such assemblies; much less to render them necessary.”

    No one is suggesting that they be prevented from meeting. Nevertheless, as it happens, the government does “facilitate such assemblies”.

    Although meetings ought not to be illegal conspiracies on price and other harm against the public are illegal and so they should be. Not clear that their is an ‘point’ relevant to the discussion, certainly not a point that supports you Jarrah.

  14. Koala
    November 2nd, 2011 at 08:20 | #14

    @Dan

    OK – so Smith was a socialist?

  15. November 2nd, 2011 at 08:27 | #15

    @Koala

    a Christian

    you know – old values like we were taught as kids – until the 70′s when everything changed

    love your neighbour, turn the other cheek, care for others

    all that passée stuff nobody believes in any more

    pop

  16. Jill Rush
    November 2nd, 2011 at 09:05 | #16

    The title of this piece is irresponsible bosses. However an alternative would be untrutworthy bosses. Thre is little evidence that the statements being made by the CEO of Qantas are consistent or accurate. Tony Abbott has said that if it isn’t in writing then he can’t be believed either. His denial of knowing anything about the Lock Out are covered in spin such as “the first my office knew about it was….”. Joe Hockey has implied that he knew about this possibility some time ago. If that was the case then how responsible is the alternative government and where do their loyalties lie?
    I am not inclined to conspiracy theories because I know that there is more chance of a stuff up. However it is beginning to look as if there was a political collusion going on to try and embarass the government over its industrial relations policy with all of the travellers and their families as collateral damage.
    The Opposition has a greater responsibility to the Australian public than that. It looks as if Tony Abbott is not only negative but will happily wreck people’s lives to score a political point. When it comes to a character test then this is a serious concern.
    It is beginning to look as if there were three main goals in the action last Saturday. To break the unions; to make it easier to move operations offshore where it doesn’t matter what the domestic workforce thinks; and to undermine the government and particularly its Industrial Relations policy by working with the Opposition.

  17. Dan
    November 2nd, 2011 at 09:27 | #17

    Koala@13 – POP’s right.

    Smith was of course an advocate of the market, but saw it as deeply embedded in social structures and tempered by morality (in which the decidedly non-market value of empathy was underlined).

    In fact Smith assumed that people reading WoN would have already read his previous work, The Theory of Moral Sentiments.

    The interpretation of Smith we generally get now is debased, myopic, sociopathic and frankly dull in comparison to what the man actually believed and wrote.

  18. John Brookes
    November 2nd, 2011 at 13:51 | #18

    Qantas domestic pilots are not paid that much.

    I had coffee with a bloke whose brother is a Qantas pilot. He said it was the little things that were getting to the workforce. Like when they were told that they no longer had parking at the airport. And when they were told that there wasn’t room for staff lockers, so they had to go.

    Its hard for me to draw any other conclusion except that Qantas took such petty measures in the hope of causing industrial strife.

  19. Freelander
    November 2nd, 2011 at 14:49 | #19

    I thought it was clear that Qantas were trying to provoke the unions into industrial action and were hoping for a union overreaction to justify what they had planned all along. When the unions didn’t overreact Qantas management just stuck to its script and did a lockout anyway. I think the opposition has been up to its neck in the whole thing, and the whole thing is more political than anything else. The two main targets appear to be to undermine the government and to take Qantas off-shore. If they change the government the deal with Tony’s boys is probably sealed.

  20. Tom
    November 3rd, 2011 at 08:30 | #20

    @Freelander

    One thing I do not get is why does the conservatives think government owned airlines would have to be privatised. Obviously a lot of airlines including singapore airline is government owned (and yes they are one of the most profitable airline in the world). In government owned corporations in singapore produces about 60% of total GDP, obviously Lee Kuan Yew doesn’t see the need to privatise government owned corporations at all to remain competitive and profitable.

    Also anyone would know how much more expensive labour is in Singapore compare to Australia; and did “economic armageddon” happened in Singapore? Doesn’t seem like it happened to me.

  21. Freelander
    November 3rd, 2011 at 11:18 | #21

    @Tom

    Why do conservatives think airlines should be privatised? Its called ideology. “Private sector good; Government sector bad.” Worthy of Napoleon the Pig in Animal Farm, but, to be fair, the product of lower intellects.

  22. November 3rd, 2011 at 13:03 | #22

    Tom: You’re pulling our legs.

    Labour is much cheaper in Singapore than Australia. Nor do Singapore workers have an anti-business mentality. The regulatory regime in Singapore is (unlike Australia) unashamedly pro-business.
    Strikes are avoided (they’d all remember the outcome of the most recent industrial action by SIA staff). Competition with government owned businesses is not allowed, anyone who tries it finds themselves in a world of legal & regulatory pain.

  23. Freelander
    November 3rd, 2011 at 14:19 | #23

    @Steve at the Pub

    Yes. Singapore is a model of ‘freedom’ that libertarians would like to see introduced here. Except for the being public spirited. Where as the Singaporeans are nationalistic, those who would like to create an impoverished and compliant low-cost workforce here would sell out our country faster than you can flip a coin.

    The amusing thing about regulation and legal pain is that business, whenever it runs into the slightest problem, is the first squealing for big government to get out the pen and start writing legislation to help tip tax payer and consumer dollars into their pockets. Government bad, unless, or except when, it takes rights away from workers, with legislation like ‘Work Choices’. Napoleon the Pig, is a policy advisor for the Libs.

  24. Chris Warren
    November 3rd, 2011 at 14:24 | #24

    @Tom

    What point are you trying to make?

    Singapore “government’ ownership is a corrupt form of cronyism.

    Workers wages are around $S 1300 ($A 990) per month before tax and compulsory provident fund contrib.

    Singapore is not a good example of anything.

  25. Tom
    November 3rd, 2011 at 15:34 | #25

    @Chris Warren

    I must of been mistaken then, where did you get that figure of worker’s wage? I know a few people that works in Singapore and earn higher wages in their role compared to Australia. More so the 935 SIA Boeing 777 captains are paid higher (S$270,000) than an average 12th year captain in Qantas (higher than the 36 vice president of SIA of course unless they are entitled executive remuneration), unless the press release is all lie then it’s my bad (I couldn’t get the captain’s pay for other models of their aircraft so I’m not too sure about the average).

  26. Tom
    November 3rd, 2011 at 15:55 | #26

    @Chris Warren

    Actually I found it, your right it’s really low, what about SIA staff pays? I have been comparing them and found that it’s higher than Qantas, at least in press releases of staff salaries. Yes, the finance industries pay is quite screwed up compare to the low income workers I have found, I know a few people that gets paid 2-3 times more in the finance industry in the same role in Singapore than in Australia.

    I was checking up SIA in comparing why Alan Joyce said Qantas is paying too much, when SIA pays more than Qantas and apparently makes more than double the profit Qantas makes (I know they are government subsidied).

  27. Freelander
    November 3rd, 2011 at 16:08 | #27

    @Tom

    hc :
    …. Baggage handlers earn $80,000 per year (Ask school teachers what they think of that !) while some pilots are paid over $500,000. What on earth could Joyce do other than what he has done? … The pilots earn a packet and, let’s face it – they are not much more skilled these days than a bus driver. The technology does it. …

    Given that planes fly themselves nowadays and don’t apparently require any skill to fly, I am surprised they have pilots let alone pay them. Surely they are just getting a free seat up front and paid accommodation in exotic destinations?

    Or maybe the above claims are embarrassingly stupid and maybe the taxpayer ought not to be paying someone like “hc” who I would imagine could be in some nice cushy overpaid taxpayer funded job, with plenty of entitlements, high super, short hours, no real responsibilities, and no real performance requirements?

  28. Chris Warren
    November 3rd, 2011 at 16:23 | #28

    @Tom

    You should provide evidence for Boeing 777 Captains getting S$270,000 pa.

    But the cost structure of an airline consists of a lot of different labour inputs from cargo handlers, to cleaners to check-in staff etc.

    Singapore Airlines rates at 2007 are at:

    http://webcache.googleusercontent.com/search?q=cache:YJv8dgCtuaIJ:www.askcaptainlim.com/salary-propilot-78/307-singapore-airlines-pilots-salary.html

    I know of no other more recent source.

  29. Tom
    November 4th, 2011 at 08:22 | #29

    @Chris Warren

    I have looked at that rate, I’m just not sure about the recent rate because I couldn’t find it. The information that captains of Boeing 777 at mid-point income bracket gets paid S$270,000 compare to S$233,270 for a vice president is on an article in Straits Times in 2007. I know news does edit their article or intentionally don’t reveal the bonus that might be awarded to the vice presidents but I don’t think they made up the pay rate for Boeing 777 captains; anyway here’s the link to a web copy of the article (I couldn’t find the original article on the web):

    http://travel.asiaone.com/Travel/News/Story/A1Story20070609-13259.html

  30. Freelander
    November 4th, 2011 at 11:25 | #30

    Alan Joyce’s achievements indicate that he is a clever man, a man fully capable of answering simple questions with simple direct and unambiguously clear answers, to be sure. Instead, in interviews, press releases, and now in his ‘evidence’ before a senate committee he has engaged in nothing but obfuscation, misdirection, spin, weasel words, twisting and turning, doing everything to avoid giving even the barest semblance of a straight answer and carefully couching his answers in a way in which he seems to be trying to leave himself the option to claim, later, he really meant something different to what people might have interpreted him to mean. One clear admission was extracted in the senate hearings. He did not let the government or Fair Work Australia know that he was contemplating taking the industrial action he did, choosing to ground the airline and lock out his workforce. He did not give either the faintest inkling of his intentions. What is also clear from the senate session is that he did not need to ground the airline, lock out his staff, and disrupt the travel of 70,000 Qantas customers to get Fair Work Australia to make the decision it did. He could have put his intention to lockout his workforce to Fair Work Australia and argued his case before them to get the same outcome, the outcome that was ultimately obtained from Fair Work Australia. Given his wilful action which damaged the Qantas brand and was not in the interests of shareholders, lets hope at least some shareholders start a class action against Joyce and the Board of Qantas, for their precipitous, ill thought out and unnecessary action which was not in the interests of shareholders and which must have destroyed shareholder value. Lets hope there is a class action because that is the only way that Joyce and the board will be brought to account.

  31. November 4th, 2011 at 11:46 | #31

    @Freelander

    i guess that shows you do not track the markets much if at all

    QAN has been generally upwards recently – yes there were a lot who made a killing on the first effect of the grounding (allowing for conspiracy theory that that was the real intended outcome – insiders getting rich(er) by having bought before and/or sold at the top of the 7% gain). Some people did in fact take profits after the rise – but since then the share prices have continued to trend upwards – even bucking the trends of the rest of the sector and market

    on that basis i would imagine the shareholders – most of whom are actually banks after all – would be rather pleased about his actions

    you write as if you think shareholders are mom and pop types or other little folk investing their savings etc – the truth is way way different – go back and look at the post i made of the shareholding

    the banks own QAN – and the banks are only into owning things for a profit

    hence whatever he does he does to make shareholders happy – and i’d be pretty sure that QAN’s main profitability lies with becoming very competitive in price and very aggressive in marketing the combination of brand name and price

    if that means shedding staff, old aircraft, old contracts etc then that is what will happen

    or maybe, the goal is to force renationalisation of an albatross at “market” rates

    who knows what the full deck of tactics cards looks like or even what the main strategy is but whatever it is i can guarantee that 99% of shareholders are

    H H A PPPP PPPP Y Y
    H H A A P P P P Y Y
    HHHH AAAA PPPP PPPP Y
    H H A A P P Y
    H H A A P P Y

    pop

  32. Fran Barlow
    November 4th, 2011 at 13:41 | #32

    @Freelander

    I don’t know about the pilots but AIUI the baggage handlers are on a little over $37k … (that might be an after tax figure of course) Let’s say they are getting about 50k pre-tax. Not 80k …

  33. Freelander
    November 4th, 2011 at 14:43 | #33

    @Fran Barlow

    You mean that “hc”s figure of 80k was wrong. Gee. I’m surprised. Maybe his figure for the pilots of 500k is wrong as well? Maybe he was wrong about the planes flying themselves too?

    TPOP QAN isn’t doing well relative to Virgin over the last few months, but anyway, Joyce’s activities can’t have been great for Qantas. I would love to see him sued personally and lose some of that CEO salary. Some of the directors especially the ‘independent’ ones wouldn’t handle being sued very well. Have you looked at who is on the board of directors?
    If they were sued it would throw a real spanner in the works.

  34. Ron E Joggles
    November 4th, 2011 at 18:45 | #34

    My late father was a founding member of the first airline pilots union, the Australian Federation of Air Pilots. The owners of ANA told the the pilots (WW2-trained to a man and from both sides of the conflict) that they were just bus drivers and would be paid accordingly. Pilots responded by forming a professional association with a proud tradition of rigorously high standards, and we are all beneficiaries of that.

    The history of Australia’s LAMEs (licensed aircraft maintenance engineers) is similar.

    Australia’s relative isolation and dependence on international trade, especially tourism, demands that we have a national carrier that has the highest standards of safety, reliability and service – whether or not it operates at a profit should be secondary, and that is why QANTAS should not have been sold.

  35. Freelander
    November 4th, 2011 at 19:45 | #35

    @Ron E Joggles

    Apparently, or at least according to some, airline pilots aren’t even as meritorious as bus drivers. Aircraft fly themselves nowadays; Pilots are simply passengers with a forward seat.

  36. November 4th, 2011 at 20:27 | #36

    my son was trained as a pilot by Gordon Vette’s school – the premier commercial flight training school in NZ

    and i’m a programmer – technical, pretty good and very experienced

    so yes, aircraft will get to where they need nobody to fly them – nothing is more sure

    in the planes we have now if something happens, i’d want someone like Vette up front if at all possible else someone trained by someone like him

    and i’m happy to pay extra to have such a person up front

    but, like railroad engineers of the past who were the cream in their day, the days of highly trained and qualified pilots are numbered

    such is progress

    pop

    ps, Vette mentioned here

    http://airodyssey.net/1999/03/01/movie-flt771/

    http://en.wikipedia.org/wiki/Air_New_Zealand_Flight_901

  37. Ernestine Gross
    November 5th, 2011 at 09:03 | #37

    “Mr Joyce said his international plans were the only way the airline would survive and expand”

    Read more: http://www.smh.com.au/travel/travel-news/were-not-giving-up-say-qantas-unions-20111104-1n02h.html#ixzz1cmRlv5SF

    Alan Joyce’s statement is interesting in the sense that
    a) survival is compounded with expansion
    b) it seems to me his plan involves a change of the airline such that the existing airline ceases to exist.

    So, what is Alan Joyce saying?

  38. Jill Rush
    November 10th, 2011 at 08:53 | #38

    Alan Joyce has made much of the claim that he didn’t want the airline to die the death of a thousand cuts with proplonged union action. It is beginning to look as if he just wanted to deliver the one fatal blow as he now bribes people to fly Qantas free to a variety of destinations. It would have been cheaper to have negotiated with the unions in good faith. While the share price has risen as a result of Joyce’s actions it is still a sad affair when looked at long term. His leadership is not inspiring confidence overall.

  39. Jill Rush
    November 10th, 2011 at 08:54 | #39

    Proplonged – the prejet plane of choice

  40. November 10th, 2011 at 21:45 | #40

    How could he negotiate Jill? The unions demands were unconscionable. Furthermore the unions had made it very clear they would not negotiate. They were prepared to settle for nothing less than capituation.

    Joyce had 3 choices. Give in to the unions, allow the slow death of the airline to continue, or force the matter to a head.

    He did the right thing.

  41. rog
    November 10th, 2011 at 21:54 | #41

    @Steve at the Pub From what I have read he was negotiating and close to a deal, until the board directed the lockout.

    Anyway, the subsequent loss of face and costs associated have eaten into their 2010 profits significantly. Apparently all to no avail, they still have to negotiate and this time with less of a position to bargain from.

    I can’t see how this has been good for business as the brand has been badly damaged.

  42. Tom
    November 10th, 2011 at 23:01 | #42

    The cost associated with all these dispute can probably be recovered after a few years of operation more so with lower wage rises if the board wins the dispute. However, Qantas’ customer service will surely deteriorate as staff morale becomes worser. It’s probably the most suicidal attempt for a service intensive businesses (I know because I work in one). Once it reaches that stage I’m pretty sure Alan Joyce will start outsourcing air crews as well because the current wage level is quite high for other countries, not taking into account that he’ll pay them even less. When it goes that far it’s safe to say in their ads “We call Asia Home”.

  43. November 10th, 2011 at 23:47 | #43

    The brand damaged in the eyes of whom? The customers are thrilled at the airline’s actions (stopping the service uncertainty).

    Tom is bang on the button. Qantas is being expected to compete in a global marketplace, but to kowtow to Australian unions.

  44. Freelander
    November 11th, 2011 at 03:07 | #44

    @Steve at the Pub

    The brand’s damaged around the world. The service uncertainty has been about what that mad Irishman is going to do next, and because of the cost-cutting when one of the mechanical faults will finally be the one too many. Much as I dislike Virgin, and Branson, I don’t think I will be flying the flying Kangaroo anymore.

  45. Freelander
    November 11th, 2011 at 03:24 | #45

    @Ernestine Gross

    Yes. The story being peddled is a straight-out lie. Qantas has (or at least had) the whip hand in the domestic market because of the Qantas Club and better slots at the domestic airports, and the barriers to others coming in. As far as the domestic market goes the intention is to reduced costs to increase profits, not to improve services or lower prices. They are very profitable domestically already so here it is not a matter of survival. Internationally, allegedly they are losing money. That maybe so, but allegedly they have been loading a variety of other costs onto the International part that they wanted to make look unprofitable rather than allocating costs where they properly fell. Without an independent audit the truth would be extremely difficult to establish. What is clear is that Joyce is about the last person who ought to be believed. I wonder if they have a “contempt of Senate” in Aus. If they do they ought to consider throwing him in jail.

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