DECEMBER 1995 · VOLUME 16 · NUMBER 12
1 9 9 5 ' S T E N W O R S T C O R P O R A T I O N S
JOHNSON & JOHNSON
by Russell Mokhiber and Andrew Wheat
THE CORPORATE CRIME LOBBY rioted in Washington, D.C. this year, putting the torch to law-and-order restrictions on corporate America. Big corporations with recidivist crime records marched arm-in-arm with accountants and lawyers, swarming the marbled corridors of power, demanding protection for corporate and white-collar criminals caught stealing from investors, polluting the environment or injuring consumers.
When anyone dares challenge these corporate decriminalization and furlough proposals, their shameless proponents lash out with moral indignation.
At a press conference earlier this year, Corporate lobby poster boy House Speaker Newt Gingrich was asked why his "Contract with America" addressed street crime, while ignoring the more damaging corporate crime and violence. Gingrich said that probably 90 percent of the U.S. population is more fearful of being "blown away walking into a Seven-Eleven" than of dying from an occupational disease. "If I go around the country and say, 'vote for us and there will be no more white-collar fraud,' the average voter would say, 'I don't think he gets it.'"
This public perception is shaped by corporate media and tabloid television trash, which focus overwhelmingly on street crime. If these media devoted proportional time to the corporate muggings and homicides that are carried out through fraud, unsafe products, pollution and occupational accidents and disease, public perceptions would shift to more accurately reflect reality.
The Federal Bureau of Investigation (FBI) reports that burglary and robbery combined cost the United States approximately $4 billion a year. In contrast, white-collar fraud, generally committed by intelligent people of means, costs 50 times as much -- or $200 billion a year, according to W. Steve Albrecht, a Brigham Young University accounting professor and co-author of the book Fraud:Bringing Light to the Dark Side of Business.
The FBI reports approximately 24,000 street crime homicides a year. More than twice that number -- 56,000 Americans -- die each year on the job or from occupational diseases such as job-related cancers and brown and black lung disease. This does not include the health costs to the general public of corporate pollution.
In their relentless search for campaign funds, Gingrich and many of his bi-partisan cronies overlook the need to deter crime by enforcing the law against society's most powerful lawbreakers. Yet, respect for legal authority is like a fish -- it rots from the head down. Why should street criminals respect the law when members of Congress give the green light to corporate America to plunder?
Gingrich says that the time has come to "reestablish shame as means of enforcing proper behavior." To help balance Gingrich's targeting of shame on the poor, Multinational Monitor presents the 10 worst corporations of 1995, to "reestablish shame as a means of enforcing proper behavior" -- in the boardroom.
Shell Executes A Business Plan
Nigeria's military dictatorship hanged nine political dissidents, including playwright and environmentalist Ken Saro-Wiwa, in November 1995.
The dictatorship was roundly condemned for the executions by human rights groups and government leaders from around the world -- as was, to a lesser extent, its business partner Royal Dutch Shell. Saro-Wiwa led a campaign in Nigeria that accused Royal Dutch Shell of profiting off 500,000 Ogoni people and polluting their homeland.
In Nigeria, which accounts for 14 percent of Shell's worldwide oil production, Shell seems to have made its deal with the devil. As Steve Kretzmann pointed out ["Nigeria's Drilling Fields," Multinational Monitor, January/February 1995], "oil is the single most important commodity in Nigeria, and Shell is the backbone of the oil market."
Multinationals that find themselves forming close partnerships with unsavory regimes often explain failures to cut these profitable ties by arguing that they are pursuing a "constructive engagement" policy that benefits the downtrodden and sets a sterling example for the tyrants. Such a case is difficult to make when a corporation's behavior has been less than noble and when the downtrodden are determined to throw the company out.
Shell's deteriorating pipeline infrastructure has spilled oil on Ogoni land with such regularity that it is difficult to characterize the spills as accidents. The company's Nigerian operations spilled an estimated 1.6 million gallons in 27 incidents from 1982 to 1992. The company says half of the spills in 1992 resulted from sabotage designed to extort compensation from the company. Ogoni leaders say sabotage is a factor in very few spills.
Eric Nickson, head of public affairs for Shell International in London, has visited the company's operations in Nigeria. He acknowledges that "there are [environmental] problems,"but says, "We're addressing these."
Since a huge anti-Shell rally on Ogoni land in January 1993 that congregated thousands of people, hundreds of Ogonis have been killed. Saro-Wiwa was arrested four times between the 1993 rally and his execution.
But in the brutal clash between the Nigeria's dictatorship and people, Shell often comes off looking like an ally of the repressive state. After soldiers opened fire on a peaceful demonstration against a contractor laying Shell pipes on Ogoni farm land in April 1993 -- killing one person and wounding 10 -- the general manager of Shell's Nigeria subsidiary wrote the Governor of Rivers State (himself a former Shell employee) asking for more pipeline security.
A May 1994 Nigerian military memo noted, "Shell operations still impossible unless ruthless military operations are undertaken for smooth economic activities to commence."
Four days after this memo was written, four traditional Ogoni leaders were murdered by a mob at a rally. Saro-Wiwa was in military custody at the time, but nine months later he was charged with inciting the riot.
After Saro-Wiwa was executed in November 1995, calls intensified for Shell to abandon a large liquefied natural-gas project in Nigeria. If we pull out now, "the project will collapse. Maybe forever. So, let's be clear who gets hurt if the project is canceled," Shell said in full-page ads in leading Western papers. "A cancellation would certainly hurt the thousands of Nigerians who will be working on the project."
While using a constructive engagement argument to defend its economic collaboration with Nigeria's dictatorship, Shell advanced a disengagement policy toward political repression. "There are now demands that Shell should intervene and use its perceived 'influence' to have the [Saro-Wiwa] judgment overturned,"says a November 2, 1995 Shell release. "This would be dangerous and wrong. Ken Saro-Wiwa and his co-defendants were accused of a criminal offense. A commercial organization like Shell cannot and must never interfere with the legal process of a sovereign state."
A subsequent Shell release urging Nigeria to grant clemency to the nine men headed for the gallows came as too little too late.
Shell also made headlines in 1995 when it became the first oil company to try to dispose of an obsolete off-shore oil platform by a burial at sea. Shell wanted to sink the 460-foot Brent Spar platform west of Scotland, but was disabused of plans to convert the Atlantic into a corporate dump, thanks in large part to a campaign led by Greenpeace [see "Sparring with Shell," Multinational Monitor, July/August 1995].
An analysis done by Norway-based consulting firm Det Norske Veritas revealed in October 1995 that Greenpeace and Shell had both misrepresented the Brent Spar's toxicity. A sampling error convinced Greenpeace that the rig carried 5,500 tons of oil and oily wax when there was, at most, 103 tons aboard. Shell estimated that there were fewer than 20 grams of highly toxic polychlorinated biphenyls (PCBs) aboard; the new estimate is eight kilograms.
BHP Wants to Be Above the Law
A 70-kilometer stretch of the Ok Tedi River in Papua New Guinea (PNG) is "biologically dead." The weapon of its destruction is the daily dose of more than 80,000 tons of toxic mining waste that Australian mining giant BHP has been dumping in the river.
While the destruction of rivers by mining companies is all too commonplace, what is unusual is the lengths to which BHP, which has operational control over Ok Tedi Mining Ltd. (OTML), went to try to immunize itself from resulting legal claims. For generations, the families of villagers represented in the suit have relied on the river system for food, water, transportation and recreation, a way of life that they contend has been harmed by OTML.
The PNG government originally conditioned OTML's permits upon the company building a dam to contain the crushed rock, cyanide and heavy metal wastes that the mine was expected to discard at a rate of 80,000 tons a day over its 30-year life span.
After a landslide destroyed a tailings dam that OTML was building, however, the mine decided to abandon this environmental safeguard. Exercising the clout that comes with being the source of 30 percent of PNG federal revenues, OTML got permission to operate without the dam. By 1991, the Australian Conservation Foundation (ACF) concluded that the Ok Tedi River system, upon which thousands of people depend, was "biologically dead."
The Melbourne, Australia law firm of Slater & Gordon filed a lawsuit in Australia in 1994 against OTML on behalf of land owners downstream from the mine. The plaintiffs are seeking damages estimated at $1.5 billion to $2.2 billion, half in compensation for environmental damage to the river system and the other half in punitive damages to punish the defendants for alleged deliberate destruction of property down river.
BHP lawyers responded in August 1995 by helping to draft legislation for the PNG Parliament that would make it a criminal offense to sue BHP. In September 1995, the Victoria State Supreme Court found BHP in contempt of court for its part in drafting the legislation.
In early December 1995, the PNG Parliament approved legislation that would block any future OTML liability and set up a $81,323,000 compensation fund for landowners harmed by OTML's operations. The legislation would give plaintiffs six months to opt out of the Australia suit and to seek a settlement under this fund. "The compensation fund goes nowhere in terms of the damages," says Slater & Gordon Solicitor John Tuck. This money would be doled out over 15 years by the provincial government in PNG, "which doesn't exactly have a great reputation in financial matters," Tuck says.
BHPacknowledges in a company statement that "fish numbers have decreased" in the river waters "immediately below the Ok Tedi junction." But the statement says that the fish "remain plentiful and variety is undiminished" elsewhere in the river system.
"The government of Papua New Guinea enacts laws as to how the Ok Tedi mine operates," says BHP spokesperson Stedman Ellis. "We have complied with these laws. This has been recognized by the government of Papua New Guinea."
ADM: Food Stamp King
How does "America's supermarket to the world," which is fighting allegations of large-scale international price-fixing by a former executive, preserve its position as the biggest U.S. corporate welfare recipient even as Congress is removing millions of citizens from social welfare rolls?
What Decatur, Illinois-based ADM has that less fortunate welfare recipients lack is the money and savvy to buy political and media influence. There is no good policy reason to preserve the best-fed U.S. welfare recipient's place at the public trough. This is the conclusion of many welfare experts, including James Bovard, a fellow of the libertarian Cato Institute in Washington, D.C. Bovard's 1995 report, "Archer Daniels Midland: A Case Study in Corporate Welfare," found that ADM leads the corporate welfare pack.
"ADM and its chairman, Dwayne Andreas, have lavishly fertilized both political parties with millions of dollars in handouts and in return have reaped billion-dollar windfalls from taxpayers and consumers," Bovard wrote. "Thanks to federal protection of the domestic sugar industry, ethanol subsidies, subsidized grain exports, and various other programs, ADM has cost the American economy billions of dollars since 1980 and higher prices and higher taxes over that same period."
The Cato report also found that: every $1 of profits ADM earns on ethanol sales costs taxpayers $30; every $1 of profits ADM earns on corn sweetener costs consumers $10; the grain-export subsidies that line ADM's pockets in the name of alleviating Third World hunger have devastated the economies of recipient nations; and taken together, the agricultural welfare programs championed by ADM have cost the U.S. economy at least $40 billion over the past 15 years.
Andreas and ADM do not defend themselves on free-market terms. "There isn't one grain of anything in the world that is sold in a free market," Andreas recently told Mother Jones magazine. "Not one! The only place you see a free market is in the speeches of politicians. People who are not from the Midwest do not understand that this is a socialist country." ADM did not return calls from Multinational Monitor.
In a celebrated whistle-blower case this year, former ADM executive Mark Whitacre alleged that, having helped itself to a huge slab of the corporate welfare pie, ADM got greedy and participated in a global conspiracy involving corporate espionage, technology theft and price fixing. ADM fired Whitacre in August 1995, accusing him of "the theft of at least $2.5 million from the company," allegations Whitacre denies.
Whitacre, a Ph.D. in nutritional biochemistry, joined ADM in 1989 to run a biochemical division producing lysine, an amino acid supplement for animal feed. After ADM made a large investment in the product, lysine prices plummeted. Whitacre alleges that ADM responded by getting the world's leading lysine makers to fix higher prices.
ADM denies the charges.
Chiquita's Top Banana
Carl Lindner and his companies are a Political Action Committee (PAC) piggy bank. The Cincinnati, Ohio billionaire is Chief Executive Officer (CEO) of Chiquita Brands International and CEO of American Financial Corp. (AFC), Chiquita's parent corporation.
In 1994, AFC, its subsidiaries and their executives made $580,000 in so-called "soft money" political contributions, including $275,000 to the Democrats, $250,000 to the Republicans, and $55,000 to the GOP Action Committee (GOPAC) that was then run by current Speaker Newt Gingrich, R-Georgia [see "Gingrich's GOPAC Patrons Take Out A Contract on America," Multinational Monitor, March 1995].
U.S. law imposes limits on the amount of "hard money" that can be contributed directly to the campaigns of individual candidates. But there is no limit on the flow of "soft money" to general party coffers or to political foundations such as GOPAC.
Around the time of AFC-affiliated soft-money contributions, Chiquita received major market assistance from leaders of both parties.
In the late 1980s, Chiquita gambled that, with the unification of Europe's market, the European Union (EU) would terminate banana preferences for former European colonies, says Chris Parlin, counsel at Washington, D.C.-based Winthrop, Stimson, Putnam & Roberts, which represented the Caribbean Banana Exporters Association until recently. Chiquita phased out its Caribbean production on this mistaken assumption, says Parlin.
As major banana exporters and signatories of the General Agreement on Tariffs and Trade (GATT), Costa Rica and Colombia successfully challenged the EU quota as discriminatory under GATT. But during Uruguay Round GATT tariff negotiations in December 1993, Colombia and Costa Rica agreed to drop this dispute. Through a "framework agreement,"the EUplacated the complaining countries by giving them control of licenses that provide preferential access to part of the EU banana market. This pacified the trade war with everyone but Chiquita.
Chiquita pushed the United States to file a dispute against Lomé preferences under GATT's new offspring, the World Trade Organization (WTO). But the U.S. case is weaker than the earlier one because the WTO has some limited recognition that developing countries are entitled to certain preferences. More importantly, WTO dispute procedures require a country with a grievance to have a significant commercial interest in the matter. "There is no appreciable banana production in the United States, and relatively few U.S. jobs depend on bananas," says a March 1995 letter to U.S. Trade Representative Mickey Kantor from Belize's Prime Minister Manuel Esquivel on behalf of the Caribbean Common Market. In contrast, "The loss of our traditional European banana markets would be catastrophic" for Caribbean nations, Esquivel wrote.
Going beyond the WTO, Chiquita's political friends brandished unilateral U.S. trade weapons and tried to torpedo the EU framework agreement with Colombia and Costa Rica. In August 1994, 12 senators, including Majority Leader Robert Dole, R-Kansas, petitioned Kantor to investigate EU banana policies. Two months later, U.S. trade officials announced an investigation under Section 301 of the Trade Act of 1974. Kantor issued a preliminary decision that EU banana quotas were discriminatory in January 1995 and began compiling a "retaliation list" of European imports for possible sanctions.
But Kantor has not moved fast enough for some recipients of Chiquita cash. In October 1995, the Journal of Commerce reported that Senator Dole told Senate Finance Committee Republicans that legislation to open up the EU banana market was his "top priority" for the sweeping budget reconciliation bill. Despite Dole's efforts, the banana legislation -- which strips Colombia and Costa Rica of U.S. trade preferences unless they scuttle the EU framework agreement -- was deleted from the budget bill.
Why did a U.S. presidential candidate try to make bananas the "top priority" of a huge bill with controversial Medicaid cuts? One Dole-banana link is a $100,000 Lindner gift to Dole's now-defunct Better America Foundation.
Another explanation emanates from Dole's office. "Senator Dole has taken this position because it is right for America," says a December 5 statement from his office. "To suggest any other reason is totally absurd." Chiquita did not return Multinational Monitor calls.
Like Shell and Dow Chemical, Chiquita's 10-Worst case is bolstered by its defendant status in lawsuits related to production and use of the pesticide DBCP, which has been linked to widespread sterilization of banana workers.
Between 1965 and 1990, DBCP was produced by Shell, Dow and Occidental Chemical and widely applied by Chiquita, Standard Fruit and Dole Foods. These companies have been named in DBCP class action suits on behalf of more than 10,000 banana workers in 11 developing countries.
The banana worker suits allege that as early as 1961, research by Dow and the University of California indicated that DBCP is highly toxic and that its vapors alone can do damage to sperm cells, livers and kidneys.
"This pesticide was used by virtually every banana worker in the world for a period of 10 to 15 years,"says Austin, Texas-based lawyer Scott Hendler, who represents about 3,500 DBCP plaintiffs. Dallas lawyer Charles Siegel represents approximately 7,000 more workers.
In 1977, the United States banned domestic use of this highly toxic pesticide -- though not domestic production for export. As a result, foreign workers continued to inject the pesticide in the ground with a special tank. In unscrewing it to refill it, they were exposed to splashes and fumes.
The defendants "may dispute that these guys have been injured, but they do not dispute that these chemicals can cause these kinds of [sterilization] injuries,"Hendler says.
Enron's Political Profit Pipeline
In early 1995, the world's biggest natural gas company began clearing ground 100 miles south of Bombay, India for a $2.8 billion, gas-fired power plant -- the largest single foreign investment in India.
Villagers claimed that the power plant was overpriced and that its effluent would destroy their fisheries and coconut and mango trees. One villager opposing Enron put it succinctly, "Why not remove them before they remove us?"
As Pratap Chatterjee reported ["Enron Deal Blows a Fuse," Multinational Monitor, July/August 1995], hundreds of villagers stormed the site that was being prepared for Enron's 2,015-megawatt plant in May 1995, injuring numerous construction workers and three foreign advisers.
After winning Maharashtra state elections, the conservative nationalistic Bharatiya Janata Party canceled the deal, sending shock waves through Western businesses with investments in India.
Maharashtra officials said they acted to prevent the Houston, Texas-based company from making huge profits off "the backs of India's poor." New Delhi's Hindustan Times editorialized in June 1995, "It is time the West realized that India is not a banana republic which has to dance to the tune of multinationals."
Enron officials are not so sure. Hoping to convert the cancellation into a temporary setback, the company launched an all-out campaign to get the deal back on track. In late November 1995, the campaign was showing signs of success, although progress was taking a toll on the handsome rate of return that Enron landed in the first deal. In India, Enron is now being scrutinized by the public, which is demanding contracts reflecting market rates. But it's a big world.
In November 1995, the company announced that it has signed a $700 million deal to build a gas pipeline from Mozambique to South Africa. The pipeline will service Mozambique's Pande gas field, which will produce an estimated two trillion cubic feet of gas.
The deal, in which Enron beat out South Africa's state petroleum company Sasol, sparked controversy in Africa following reports that the Clinton administration, including the U.S. Agency for International Development, the U.S. Embassy and even National Security adviser Anthony Lake, lobbied Mozambique on behalf of Enron.
"There were outright threats to withhold development funds if we didn't sign, and sign soon," John Kachamila, Mozambique's natural resources minister, told the Houston Chronicle. Enron spokesperson Diane Bazelides declined to comment on the these allegations, but said that the U.S. government had been "helpful as it always is with American companies." Spokesperson Carol Hensley declined to respond to a hypothetical question about whether or not Enron would approve of U.S. government threats to cut off aid to a developing nation if the country did not sign an Enron deal.
Enron has been repeatedly criticized for relying on political clout rather than low bids to win contracts. Political heavyweights that Enron has engaged on its behalf include former U.S. Secretary of State James Baker, former U.S. Commerce Secretary Robert Mosbacher and retired General Thomas Kelly, U.S. chief of operations in the 1990 Gulf War. Enron's Board includes former Commodities Futures Trading Commission Chair Wendy Gramm (wife of presidential hopeful Senator Phil Gramm, R-Texas), former U.S. Deputy Treasury Secretary Charles Walker and John Wakeham, leader of the House of Lords and former U.K. Energy Secretary.
Dow Chemical's Implant Liability
John E. Swanson thought Dow Corning Corp. was at the head of the class in corporate ethics -- until his wife, Colleen, decided that her silicone breast implants, which were marketed without disclosure of significant health risks, were the cause of her persistent illness.
Although thousands of women have complained of a variety of implant problems, including auto-immune disease, hardening of the skin, joint swelling and chronic fatigue, the Swanson case is different because John Swanson was a Dow Corning ethics officer who helped design an ethics program that was hailed as a corporate model. Now, Swanson, who worked at Dow Corning for 27 years, says that Dow Corning's handling of the implants controversy was unethical.
The Swanson story is told in the 1995 book Informed Consent: A Story of Personal Tragedy and Corporate Betrayal -- Inside the Silicone Breast Implant Crisis by John Byrne. Dow Corning denounces the book as skewed, saying John Swanson's involvement in it "precludes the possibility of a fair, accurate and objective evaluation of the controversy." The company also says that Swanson solicited money in exchange for a pledge not to write an exposé, a charge Swanson denies.
According to Informed Consent, Swanson received a memo in December 1990 that alleged that two company officials were trying to destroy internal reports showing much higher implant complication rates than had been acknowledged. The author of the memo, company Medical Director Dr. Charles Dillon, alleged that a senior Dow Corning attorney asked a company scientist to destroy all copies of a memo on her research, which found that 30 percent of women with implants experience problems. Dillon asked the company's business conduct committee, on which Swanson served, to investigate "a violation of corporate, professional and commonly accepted business ethics."
Dow Corning was the leading maker of breast implants and silicone gel. Having already spent $1 billion defending itself from implant claims, and with more than 8,000 lawsuits pending against the company, Dow Corning declared bankruptcy in May 1995 to try to escape liability. Dow Chemical is a 50 percent owner of Dow Corning.
Many legal experts considered Dow Chemical untouchable in these lawsuits because it never manufactured breast implants. But in October 1995, a Nevada jury hit Dow Chemical with a $10 million punitive damage judgment in an implant case. The jury also awarded $4.1 million in compensatory damages to Charlotte Mahlum, who claimed that her implants caused severe neurological illnesses.
Mahlum's lawyer, Fred Ellis, a partner in the Boston law firm of Gilman, McLaughlin & Hanrahan, says that evidence showed that, "Dow Chemical knew early on about the dangers of liquid silicone and concealed them from the public."
Dow Chemical has asked the court to set aside the verdict on the grounds that the evidence did not support the jury's decision. "The jury was inflamed by plaintiffs' counsels' prejudices, distortions and exploitation of their emotions," said Dow Chemical General Counsel John Scriven following the verdict. "We understand that Charlotte Mahlum and women like her are unwell, but the facts argue against laying the blame at the door of Dow Chemical," Scriven said. "We never were in the silicone business. And based on the overwhelming strength of the scientific and medical evidence, we know silicone breast implants don't cause disease of any type."
Ellis charges, however, that the two main epidemiological studies Dow Chemical relied on, the Harvard Nursing Study and a study by the Mayo Clinic, "do not look at the atypical diseases that these women have."
Ellis also argued that the studies were tainted by conflicts of interest. "The Mayo study discloses on the front page that it was funded by the Plastic Surgery Educational Foundation (PSEF)," Ellis says. Two of the authors of the Harvard Nurses Study "had either agreed to act as a consultant expert for the defendant manufacturers, or were actually on the payroll of the manufacturers while they were conducting the study," Ellis says. During the study, Dow Corning contributed million of dollars to Brigham and Women's Hospital, the institution conducting the study.
Terri Hornbach-Torres, a Brigham spokesperson, says the hospital received $7 million from Dow Corning and that the hospital is investigating two doctors involved in the study. "The inquiry is looking at the potential conflict of interest on the part of the doctors and at their roles as experts for private attorneys representing silicone breast implant manufacturers and as researchers involved in research supported by Dow Corning," Hornbach-Torres says.
Silicone breast implants are not the only product linked to Dow Chemical that can be hazardous to your health. In September 1995, Greenpeace reported that chlorine-based Dow Chemical products -- including pesticides, solvents and PVC plastics -- constitute the world's single largest source of dioxins.
Dioxins have been linked to a range of health problems, including cancers, endometriosis, declining fertility, immune system suppression and birth defects.
Joe Stearns, Dow's director of environmental affairs for chemicals dismissed as "totally inaccurate" the claim that Dow is the world's leading producer of dioxins. "The Environmental Protection Agency, in their dioxin reassessment indicated that municipal and hospital waste is the largest [dioxin] source," he says.
Johnson & Johnson Obstructs Justice
Prosecuting corporate crimes is a time-consuming process that relies heavily on corporate paper trails. Too often, corporate wrongdoers attempt to hide evidence of one crime by committing another -- destroying evidence.
Image-conscious Johnson & Johnson Company (J&J), maker of age-of-innocence products such as J&J baby powder and shampoo, lost its innocence in January 1995, when a company subsidiary pled guilty to destroying documents.
Ortho Pharmaceutical Corp., a wholly-owned J&J subsidiary, was fined $5 million and ordered to pay $2.5 million in restitution after pleading guilty to one count of conspiracy to obstruct justice, one count of obstruction of justice and eight counts of corruptly persuading employees to destroy documents.
Ortho employees started destroying documents on the heels of a Food and Drug Administration (FDA), Department of Justice and grand jury investigation into a 1985 to 1988 public relations campaign promoting the use of Ortho's Retin-A to treat sun-wrinkled or "photoaged" skin. The FDA approved Retin-A in 1971 as an acne treatment but never approved it to treat "photoaging." Thousands of documents showing how Ortho coordinated the Retin-A campaign work of outside public relations firms were destroyed.
"The destruction of documents by a major corporation to thwart a federal investigation is outrageous misconduct that simply will not be tolerated," says Frank Hunger, head of the Justice Department's civil division.
"The company does not believe it violated FDA regulations or guidelines relating to promotional activities," a J&J statement says. But J&J Chair and CEO Ralph Larsen says, "The document destruction was absolutely wrong," adding, it "must never happen again."
In an unrelated incident in October 1995, J&J Consumer Products division settled Federal Trade Commission charges that it had made false advertising claims that exaggerated the failure rate of condoms. The ads promoted the company's spermidical jelly, K-Y PLUS Nonoxynol-9. "There was no intent to imply condoms are defective,"a company statement says.
Asked if the Retin-A and condom incidents suggest a wider company problem with product misrepresentation, Vice President for External Communications F. Robert Kniffin says J&J has 160 companies worldwide advertising all kinds of health-care products. "So, to reach a conclusion that ... there is some trend or pattern is an impossible stretch,"Kniffin says.
3M: Skipping a Beat?
Earlier this year, 3M claimed a place in the annals of corporate violence.
In Deadly Medicine: Why Tens of Thousands of Heart Patients Died in America's Worst Drug Disaster, author Thomas J. Moore argues that popular heart drugs produced by 3M and other pharmaceutical companies resulted in the deaths of an estimated 50,000 patients. Tambocor had the biggest share of the market for this class of drugs.
Deadly Medicine documents how St. Paul, Minnesota-based 3M, anxious to expand a small foothold in the lucrative pharmaceutical business, introduced its first major new drug, Tambocor, in 1985. Within two years, pharmacists were filling thousands of Tambocor prescriptions a month to treat irregular heartbeats.
In 1989, National Institutes of Health (NIH) clinical trials indicated that the drug, far from saving heart patients, finished them off, writes Moore, a senior fellow at George Washington University's Center for Health Policy Research.
Deadly Medicine argues that the drug industry persuaded thousands of doctors to prescribe expensive drugs based on the unproved theory that suppressing mild premature heartbeats would prevent lethal cardiac arrests. The book also charges that 3M, outside medical experts and some Food and Drug Administration (FDA) officials knew Tambocor could kill patients.
Moore says the FDA knowingly allowed expert advisers who had tested the drugs for the pharmaceutical industry to judge the merits of the same drugs for the FDA. Two of the FDA's eight outside judges of Tambocor's safety had worked on the drug for the industry, Moore says.
3M successfully waged a high-pressure campaign to persuade the FDA to relax safety restrictions on the Tambocor label, despite growing evidence about the dangers of antiarrhythmic drugs, Moore says.
Asked why these drugs have not spawned a slew of product liability suits, Moore says it would be difficult to sort out in court which heart patient died of a heart condition and which died as a result of a prescription for that condition.
This same class of drugs is still prescribed widely. Moore cites a physician survey released in March 1995 at the American College of Cardiology in New Orleans that shows that physicians are ignoring FDA warnings and the results of a National Heart, Lung and Blood Institute study. The survey suggests that 30 percent of general practitioners prescribe this family of drugs for patients with a mild heart rhythm disturbance called non-sustained ventricular tachycardia.
Marcia Arko, a 3M spokesperson, told Multinational Monitor that no "knowledgeable" 3M representative was available to discuss Moore's findings. A prepared company statement says the allegations "have no scientific merit whatsoever -- they're just plain wrong."
"Tambocor is a highly effective medicine that dramatically improves the lives of thousands of people," the statement says. "Tambocor has been thoroughly studied and tested since the mid-1970s by hundreds of leading heart specialists and 3M scientists. It is approved for use in more than 50 countries, some for over a decade."
DuPont's Goa Constrictor
What did DuPont see in Goa, India? As Gary Cohen and Satinath Sarangi reported earlier this year ["DuPont: Spinning Its Wheels in India," Multinational Monitor, March 1995], DuPont hooked up with the Indian company Thapar in 1985 to build a $217 million factory to make nylon 6,6 -- a tire ingredient -- in Goa's jungle highlands.
This venture, which was designed to supply Asia's booming tire market, set out on the wrong foot where community relations were concerned. The investors had the state Economic Development Corporation take over the factory site from a cooperative and then lease it to Thapar-DuPont Ltd. (TDL) in exchange for a state stake in the enterprise.
To address industrial chemical concerns that have been heightened in India since Union Carbide's Bhopal disaster, TDL made squeaky-clean claims. A full page ad in a Goa newspaper, for example, proclaimed, "We will not handle, use, sell, transport, or dispose of a product unless we can do it in an environmentally sound manner." What the ads did not say was that DuPont's contract with TDL exempts the U.S.-based parent company from liability for environmental claims or a Bhopal-style industrial accident.
Local activists organized the Anti-Nylon 6,6 Citizen's Committee to take another look at the plant. Activists with the environmentalist Goa Foundation intercepted an electronic message from DuPont to Goan project manager Sam Singh that acknowledged that the company had not taken appropriate measures to ensure four critical types of pollution control for the plant: groundwater protection, waste water treatment, solid waste recycling and air pollution control.
Indian activists also acquired information from their U.S. counterparts about the hazardous chemicals that TDL was planning to use at the Goa facility and about DuPont's toxic track record in the United States.
After taking a hard look at DuPont, Goans decided that they did not want the company as a neighbor. They first stormed the construction site in October 1994. Despite police repression, protests continued into January 1995, when a bus load of U.S. DuPont officials were met by protesters, who refused to allow the bus onto the factory site. Police responded to this confrontation by opening fire, killing 25 year-old Nilesh Naik. Naik's funeral was held at the factory site. Before his funeral pyre was lit, someone blew up the factory's electricity generator.
Finally getting the message, TDL began negotiating to reopen the factory elsewhere. In June 1995, TDL signed a memorandum of understanding with the state of Tamil Nadu to relocate the factory near Madras. Plant director S.N. Krishnan told the Indian paper Frontline that the new plant would "ensure that 95 percent of the effluents will be recycled for use by the plant," compared to 70 percent at the other plant.
Opposition in Tamil Nadu is focusing on environmental concerns as well as the incentives the state offered the company, including: 150 acres of land, electricity at one-third the usual industrial rate, a commitment of one million gallons of water a day and other subsidies and tax concessions.
In both Tamil Nadu and Goa, opponents of the nylon plant latched onto DuPont's miserable environmental health and safety record, which continues to worsen.
In April 1995, the U.S. Occupational Safety and Health Administration (OSHA) fined DuPont's oil subsidiary, Conoco Inc., $1.6 million after an investigation of an October 1994 explosion at its Westlake, Louisiana refinery that killed one worker and hospitalized another. OSHAalleged that the company failed to:provide required employee safety training; perform required equipment tests and inspections; and correct equipment deficiencies. "Although we disagree with the citation and findings, it is best to put this behind us and move forward," Refinery Manager Jim Leigh said in a prepared statement. "We want to learn from this tragic event ... so that events of this type never happen again."
DuPont is currently facing litigation in connection with company fungicides that have been alleged to have damaged crops and caused babies to be born blind.
A case involving a U.S. family that claims that spraying of the DuPont fungicide Benlate near their home caused their son to be born without eyes is expected to begin in April 1996. In October 1995, U.S. lawyers announced that they would bring suit in federal court in Florida on behalf of families in Scotland who have made similar allegations involving DuPont fungicides Benomyl and Carbendazim.
DuPont did not respond to Multinational Monitor requests for comment.
DuPont got into trouble this year over a 1993 Benlate case that the company had settled with growers who alleged that the product killed their ornamental plants. In August 1995, a U.S. federal district judge found that DuPont had withheld relevant soil test data from the plaintiffs.
The judge fined DuPont $115 million. In doing so he said, "Put in layperson's terms, DuPont cheated. And it cheated consciously, deliberately and with purpose." A DuPont statement said, "Neither DuPont, its attorney nor anyone affiliated with DuPont has engaged in improper conduct."
Warner-Lambert's Guilty Plea
Fortune 500 Warner-Lambert Company pled guilty in November 1995 to a felony count and was sentenced to pay a $10 million criminal fine for fraudulently failing to notify the federal government about persistent problems that it had with certain drugs maintaining stable dosages.
Warner-Lambert pled guilty in U.S. District Court in Baltimore, Maryland to a felony under the Food, Drug, and Cosmetic Act. Federal officials charged that the company fraudulently failed to report drug stability failures of the prescription drug Dilantin to the Food and Drug Administration (FDA).
Diantin is a widely used anti-epileptic medication. The government alleged that similar violations occurred with the prescription drugs Parsidol, an anti-Parkinsonism drug, and Euthroid and Proloid, both thyroid medications.
A grand jury in Baltimore indicted Warner-Lambert's former vice-president for quality assurance, Allan Doane, on charges of conspiracy, for having shipped adulterated Dilantin and obstructing FDA proceedings. If convicted on all charges, Doane faces a maximum sentence of 19 years imprisonment and a $1.25 million fine.
Federal officials alleged that prior to 1991, Warner-Lambert had trouble meeting FDA-approved dissolution specifications for Dilanton. By October 1991, stability test failures had occurred on two different dosages of Dilantin and company employees met to discuss the test failures. They determined that the FDA should be notified, but that decision was reversed by Warner-Lambert executives.
During several discussions with FDA about these other drugs, Warner-Lambert officials concealed the Dilantin failures. The FDA did not learn of the Dilantin stability failures until the middle of 1992, when FDA inspectors uncovered them during inspections of manufacturing facilities.
As a result of the FDA investigation, in 1993 Warner-Lambert agreed to a court-ordered injunction regulating the company's testing and reporting practices. Under terms of the injunction, Warner-Lambert continues to manufacture Dilantin. The company has discontinued production of Parsidol, Euthroid and Proloid.
Warner-Lambert spokesperson Jennifer Mann said "no consumer was injured" by the crime and the guilty plea represents Warner Lambert's first criminal conviction.
Watching the Watchdogs
THE 10 WORST CORPORATIONS OF 1995 are audited by the "Big Six"
accounting firms (Arthur Andersen, Coopers & Lybrand, Deloitte &
Touche, Ernst & Young, KPMG Peat Marwick, and Price Waterhouse), which
generate more than $30 billion in worldwide annual revenues. These firms roam
the globe selling their signatures, which are supposed to provide evidence of
an extensive, independent audit of a company's books.|
According to the profession's own rules, auditors are expected to withdraw -- and indicate the reasons for withdrawal in writing -- if corporate clients do not disclose sufficient data about illegal acts.
Often, however, auditors engage in questionable practices of their own. [See "A Worldwide Trail of Failures," Multinational Monitor, December 1994].
In November 1995, Mitsubishi reported that it had caught Coopers and Lybrand altering work papers after the fact from an audit of Value Rent-A-Car, a company it just purchased. Value Rent-A-Car's audited financial statements showed a negative $5.9 million net worth; in truth, the net worth was negative $10 million. Coopers & Lybrand doesn't deny the revisionism, but called the changes "inconsequential." A Mitsubishi spokes-person said, "If we'd only seen the changed work papers first, we might never have purchased Value."
Rather than cleaning up their acts, the Big Six firms have teamed up worldwide to try to limit the ability of the victims of failed audits to sue the auditors or collect settlements. In the United Kingdom, for example, the Big Six signed a letter to the government in April 1994 demanding the right to cap their liability for audit work.
The American Institute of Certified Public Accountants spent more than $1.7 million in political contributions to U.S. federal candidates during the 1993-1994 election cycle, up more than 686 percent since 1985, to pass so-called securities litigation reform. The "Securities Litigation Reform Act" actually limits the ability of innocent victims to sue and receive compensation from corporations and their professional advisers when they make misleading financial statements.
The U.S. Congress overwhelmingly approved the legislation in early December 1995, without President Bill Clinton indicating whether or not he would sign the bill into law.
-- Janice Shields