Corporations Behaving Badly: The Ten Worst Corporations of 2001
Report from Doha: Intrigue at the WTO, as Developing Countries Try to Keep Their Heads Above Water
Corporations Behaving Badly: The Ten Worst Corporations of 2001
By Russell Mokhiber and Robert Weissman
The U.S. Supreme Court says a corporation is a person, or at least must be treated like one when it comes to most constitutional protections.
Like the right to speak. And the right to act in the political arena — giving campaign contributions, lobbying and advocating its agenda.
Now, if a corporation is in fact a person, with full constitutional rights, then it should act like a moral human person.
And what is the fundamental basis of morality? Caring about others. So, a corporation, to act like a moral human person, is going to have to care about others, not just about its own bottom line.
It is going to have to care about its human compatriots.
But the vast majority of major corporations do not give a damn about human persons. As such, they are immoral to the core. Or, maybe even worse, they are amoral.
We say, if you are not a human person, and you cannot act like a moral human person, then you should be stripped of your constitutional protections.
No right to speak, no Fifth Amendment rights, no right to participate in the political arena. You just produce your products, and go home.
It also makes sense to revisit the legal protections that facilitate corporate im- or a-morality, particularly the corporation’s defining characteristic — limited liability for shareholders.
Shareholders, the owners of a corporation, invest a certain amount of money in a company. Under the rules of limited liability, no matter how much harm the company does, or how much it owes creditors, shareholders cannot be required to pay more than the amount they already put in.
Lawrence Mitchell, a professor of law at George Washington University, believes that limited liability for shareholders leads shareholders — and therefore corporations — not to care. If your liability is limited, you will not care as much as if your liability is full.
“We call stockholders owners,” Mitchell says. “You can hardly be considered an owner if you don’t care, if you don’t act like it’s your property. Limited liability encourages stockholders not to care.”
Mitchell, who has written a book, Corporate Irresponsibility: America’s Newest Export, says that in the absence of limited liability, the corporation can always buy insurance.
“Insurance internalizes the cost of the risk,” Mitchell said. “The corporation has to pay based on the insurance company’s assessment of the risk, rather than some creditor getting stuck holding the bag if the corporation fails.”
So, yes, Mitchell would strip corporations of their limited liability protection. Let the chips fall where they may.
Admittedly, these ideas do not appear likely to be implemented soon. But there may be interim concepts to get us closer.
To determine whether a corporation is acting morally, we propose that Congress legislate a Corporate Character Commission (CCC). This would be a 10-person panel, with members chosen from the human person community. Ideal candidates would be ethicists, philosophers, corporate criminologists and the like.
The CCC would check on the criminal records, recidivism rates, acts of immorality and other wrongdoing of the largest corporations.
If the CCC were up and running now, we would propose that it take a close look at the Ten Worst Corporations of 2001. Clearly they do not care. They are not moral entities. They should be stripped of their constitutional protections. Their shareholders should be made fully liable.
There is a precedent for this kind of review at the federal level. The Federal Communications Commission reviews the character of applicants for federal broadcast licenses. The FCC does not do a very good job of it, obviously –– GE routinely gets renewed despite its recidivist record.
But just because the FCC cannot do it right, does not mean the CCC could not do it right. Let’s give it a try.
Earlier this year, TAP Pharmaceutical Products Inc., a major U.S. pharmaceutical manufacturer, was forced to pay $875 million to resolve criminal charges and civil liabilities in connection with its fraudulent drug pricing and marketing conduct with regard to Lupron, a drug sold by TAP primarily for treatment of advanced prostate cancer in men.
TAP is a joint venture started by Abbott Laboratories and Takeda Pharmaceuticals of Japan to market two particular drugs, one of which is Lupron. Lupron is designed for the control of prostate cancer. TAP is headquartered in the Chicago area.
The wrongdoing was brought to the attention of federal prosecutors by Douglas Durand, the former vice president of sales of TAP Pharmaceutical.
Under the federal False Claims Act, whistleblowers who file qui tam lawsuits against companies defrauding the government are entitled to 15 to 25 percent of whatever funds the government recovers in cases where the government joins the lawsuit.
Durand filed a False Claims Act lawsuit in May 1996. The government intervened, and earlier this year, Durand was awarded $77 million as his part in the recovery of the lawsuit.
Durand provided the government with information about free samples and the implicit encouragement to bill Medicare for free samples, about the company marketing the spread between Medicare reimbursement and the amount the doctors had to pay TAP for the product, about unrestricted educational grants and about extraordinarily lavish entertainment and trips that were given to doctors who were willing to prescribe Lupron in significant quantities.
He provided information on 2 percent management fees which were given to high-volume urology practices.
Another whistleblower added some spice to Durand’s case. Dr. Joseph Gerstein is a urologist at the Tufts Associated Health Maintenance Organization in Boston.
Gerstein alleged that he was offered a substantial “unrestricted educational grant” if he would change Tufts’ decision, which had been to provide patients with the cheaper alternative to TAP’s product, back to Lupron.
TAP made it fairly clear to Dr. Gerstein that he need not account for the $25,000 unrestricted educational grant, that there were few if any restrictions on how he used the money. But it was clearly tied to the decision by Tufts to go back to using Lupron as the treatment of choice for prostate cancer.
For a company compelled to enter into such a massive settlement, TAP was surprisingly belligerent. “We fundamentally disagree with many of the government’s allegations, but we resolved this matter to make clear our commitment to proper and ethical business practices, and to avoid protracted legal battles and ensure uninterrupted availability of Lupron for many thousands of patients who rely on it,” said TAP President Thomas Watkins in announcing the company’s plea. Watkins did admit that TAP provided free samples of Lupron to doctors with the knowledge that those physicians would seek and receive reimbursement for sales of the product. But he said that “we fundamentally disagree with government claims regarding TAP’s pricing and reimbursement policies. We believe we consistently complied with pricing laws and regulations.”
The TAP fiasco was only the tip of the proverbial iceberg for Abbott.
As the TAP case was being resolved in Boston, the Chicago Tribune reported that federal prosecutors were investigating whether a division of Abbott Laboratories and at least three other companies worked with medical-care providers to bilk government health insurance programs for the poor and elderly.
According to the report, at issue is whether the medical product manufacturers engaged in a kickback scheme to encourage hospitals, nursing homes or home-care providers to buy pumps and related supplies used to feed seriously ill people by giving the products away or selling them at a discount.
Some providers then allegedly billed the products at a higher price to either Medicare, the federal health insurance program for the elderly, or Medicaid, the federal-state health insurer for the poor.
Abbott wouldn’t elaborate on what investigators from the U.S. attorney’s office for the Southern District of Illinois are looking at, but said the North Chicago-based company isn’t the only target of the prosecutors’ probe, the Chicago Tribune reported.
“We are aware of the investigation, and the investigation is inclusive of the whole industry, which includes manufacturers, distributors and providers,” said Mary Beth Arensberg, a spokeswoman for Abbott’s Ross Products division, which makes the equipment.
And when they weren’t seeking to take what wasn’t theirs, Abbott was allegedly engaging in market practices that addicted patients to the powerful painkiller OxyContin, a prescription medication given to cancer patients and those suffering from chronic, moderate to severe pain.
Earlier this year, in an effort to stop the overly aggressive and deceptive marketing of OxyContin, West Virginia Attorney General Darrell V. McGraw, sued Abbott and Purdue Pharma, the manufacturers and chief promoters of the drug.
With oxycodone — a member of the same family of drugs as opium and heroin — as one of its main ingredients, OxyContin is also one of the most commonly abused prescription medications in the Appalachian region.
McGraw alleged that, though they knew the dangers posed by misuse of OxyContin, the defendants willingly marketed the product in a coercive and deceptive manner in hopes of achieving a greater margin of profit and eventually an illegal monopoly on the narcotic pain medication market.
Sometimes, at least, it turns out that corporate crime and law-breaking doesn’t pay.
Ask Argenbright, a leader in the privatized airport security business in the United States. Argenbright controls roughly 40 percent of the market. Its employees screen passengers and carry-on bags for the airlines, which have been delegated these responsibilities by the federal government.
Not for long.
In November, the U.S. Congress agreed on legislation that will federalize airport security operations. The workers doing security checks at airports will become federal employees, with higher wages and greater professional requirements. Working conditions should improve, and the extremely high worker turnover rate should plunge. And Argenbright should fade from the picture.
The move against the trend of privatization and contracting out of government-provided services was obviously spurred by the September 11 terrorist attacks. But it was Argenbright’s extraordinarily poor performance record that confronted Congress with an empirical reality that overcame ideological resistance to an expansion of government power and closure of a private market.
Owned by the British firm Securicor, Argenbright in May 2000 pled guilty to two counts of making false statements to federal regulators and paid $1.55 million in fines in connection with charges that it failed on a massive scale to do background checks on security screeners employed at Philadelphia International Airport, failed to provide them with required training, and then lied to federal authorities about it.
The government’s sentencing memorandum in the case summarizes the charges. “During the period January 1, 1995 through December 31, 1998 the Philadelphia district office of Argenbright Security, Inc. [ASI] hired more than 1,300 untrained pre-departure screeners to work at the security checkpoints at Philadelphia International Airport over a period of more than four years. Through its employees in Philadelphia, ASI caused dozens of criminals to be hired by not checking their backgrounds, but falsely certifying that the checks had been done. ASI’s district manager Steven Saffer encouraged and permitted test scores to be falsified and phony GEDs to be created.”
Federal prosecutors acknowledged going easy on Argenbright. Rather than piling on the charges, they put their faith in a compliance program and a three-year probationary period.
Those hopes turned out to be misplaced.
In October 2001, Argenbright agreed to a new plea agreement.
Government papers filed with the U.S. District Court for Eastern Pennsylvania in advance of the plea contained this amazing list of allegations: “The government’s investigation and review of Argenbright’s post-sentencing operation and compliance efforts demonstrates that Argenbright, in violation of its probation and the court-ordered compliance and audit plan: (1) has continued to hire pre-departure screeners at Philadelphia International Airport after the date of sentencing who have disqualifying criminal convictions; (2) has retained and continued to employ pre-departure screeners with criminal records after the date of sentencing even though it certified to the Court that it had re-checked and re-verified every employee’s background before the date of sentencing; (3) has made new false statements to the FAA [Federal Aviation Administration] regarding employee background verifications of a significant percentage (25%) of its Philadelphia employees whose files have been reviewed by agents of the U.S. Department of Transportation’s Office of Inspector General; (4) has engaged in many new FAA regulatory violations in Philadelphia (32% of files randomly reviewed by FAA evidence new violations and false statements); (5) has failed to conduct audits in accordance with the audit program that required Argenbright to obtain independent verifications from third party sources that employee backgrounds were properly verified in accordance with FAA regulations; (6) failed to convene a meeting of its compliance management committee until nine months after the date of sentencing; and (7) has engaged in many new FAA regulatory violations at the following 13 airports throughout the United States: Washington, D.C. (Dulles International and Reagan National), Boston (Logan International), New York (Laguardia), Los Angeles, Trenton, Phoenix, Las Vegas, Columbus, Dallas-Ft. Worth, Seattle and Cedar Rapids.”
The October 2001 plea extended Argenbright’s probationary period from three to five years, and required the company to do new background checks, including fingerprinting, of its employees.
Hopefully, Argenbright will never have a chance to fill out its probationary period. Its desperate and aggressive lobby campaign to keep the screening jobs in the private sector failed. There are small loopholes in the federal aviation security bill that could again give the company a foothold in the industry, but the company’s future prospects in the U.S. airline screening business are now very, very bleak.
How’s this for a scam?
Secure a government monopoly to sell your product. When a competitor challenges the monopoly grant, alleging it transgresses the rules by which the government awards monopolies, pay the competitor off. Then use your monopoly power to price gouge consumers. When a public emergency suddenly compels the government to purchase a huge supply of your product, use your government-granted monopoly to overcharge the government — and reap the tremendous publicity value surrounding emergency use of the product. When the public complains, drop the price, and bask in the positive publicity — even as you continue to reap windfall profits.
That pretty much sums up the Bayer/Cipro story.
According to the Prescription Access Litigation (PAL) project, a coalition of more than 60 organizations in 29 states, an agreement between Bayer, Barr Laboratories and two other generic drug companies is blocking access to adequate supplies and cheaper, generic versions of Cipro, one of the leading antibiotics used to treat anthrax. PAL has sued to undo the agreement. PAL charges that Bayer has unlawfully paid three of its competitors — Barr Laboratories, Rugby, and Hoechst-Marion Roussel — a total of $200 million to date to abandon efforts to bring cheaper generic versions of Cipro to the market.
Bayer denies that its patent is invalid. At the time it settled the generic manufacturer Barr’s challenge to its patent, according to Bayer, “Bayer was convinced of the validity of the Cipro patent, but — like any other party involved in complex litigation — could not completely rule out all uncertainties of litigation.”
The anthrax outbreak created a public relations bonanza for the company.
Secretary of Health and Human Services (HHS) Tommy Thompson announced that he wanted to stockpile a supply for 10 million people. When Senator Charles Schumer, D-New York, and consumer groups called for the government to purchase generic versions of Cipro, and when it became known that Indian companies could produce the drug for less than a twentieth of Bayer’s drugstore price and less than a ninth of its price to the government, Thompson and Bayer entered into furious negotiations. They agreed on a price of 95 cents a tablet.
Dr. Wolfgang Plischke, President of Bayer Corporation’s Pharmaceutical N.A. Division, said, “We are grateful that our researchers developed a product that is crucial in this hour of need. The people of Bayer are very motivated and dedicated to playing an important role in assuring that the American people have adequate quantities of Cipro, which we pray are never needed.”
The Washington Post reported soon after that HHS pays Bayer 45 cents per Cipro pill for purchases under a separate government program (still more than twice the Indian generic price).
While Cipro made news like no drug since Viagra, it wasn’t Bayer’s only controversy of 2001.
With mounting concern that widespread misuse of antibiotics is contributing to rapidly rising antibiotic-resistant bacteria, the U.S. Food and Drug Administration last year proposed a ban on use of a class of drugs, fluoroquinolones, for poultry. This proposal followed a Centers for Disease Control finding that its use in poultry was making human versions of the drugs — used to treat severe food poisoning due to salmonella, among other purposes — less effective.
Abbott Labs, one of two U.S. poultry fluoroquinolone producers in the United States, subsequently voluntarily withdrew its product.
But Bayer has refused, instead asking for hearings that could delay a ban for years.
“By the time the hearing process is complete, the ban may be a moot point,” says Karen Florini, senior attorney with Environmental Defense. “As rapidly as resistance to fluoroquinolones is growing, the drug may be ineffective in humans by the time the FDA is able to issue a final ban on the use of these drugs in poultry.”
Bayer has responded to pressure on the issue by establishing an initiative called Libra to address overuse of antibiotics in humans. But it is refusing to concede on the animal use dispute.
In August, the company was hit with yet another controversy, as it was forced to withdraw Baycol, a leading cholesterol-reducing drug, from the market. Especially in combination with another cholesterol-reducing drug, gemfibrozil (Lopid), Baycol leads to a high rate of rhabdomyolysis, a severe muscle-weakening disease that can be fatal. Dozens of reported deaths have been linked to Baycol.
Upon withdrawing Baycol, Bayer said it would have to review its long-term commitment to remaining in the pharmaceutical business. It also is a world leader in agrichemicals (and its proposed purchase of Aventis Cropscience is now drawing U.S. and European Union antitrust scrutiny), chemicals and polymers.
Perhaps understandably, a company as bruised as Bayer is sensitive to criticism. But Bayer’s response has been to inappropriately and aggressively seek to stifle effective criticism. It brought suit against the German watchdog group, Coalition against Bayer Dangers, for maintaining a BayerWatch.com website. Although the group should have been able to successfully defend against Bayer’s trademark claim, it did not have enough money to litigate the issue.
It is going to take a lot more than legal intimidation tactics to rescue this company’s reputation, however.
Coke. Where do we begin?
Let’s start with Harry Potter.
Earlier this year, Coca-Cola reportedly paid Warner Brothers (a unit of AOL Time Warner) $150 million for the exclusive global marketing rights to the first Harry Potter movie and possibly the sequels. “Harry Potter and the Sorcerer’s Stone” opened worldwide in November.
Coca-Cola is aggressively marketing to children by featuring Harry Potter imagery on packages and in advertising for its carbonated (Coca-Cola, Minute Maid, and other brands) and noncarbonated (Hi-C, Minute Maid) soft drinks.
Coke’s Potter promotion, called “Live The Magic,” also uses contests, games and a web site to entice kids to drink more soft drinks.
“Children and adults worldwide are outraged that their beloved Harry Potter is being used to market ‘liquid candy’ to kids,” says Michael F. Jacobson, executive director of the Center for Science in the Public Interest. “Over-consumption of Coca-Cola and other sugar-laden soft drinks contributes to obesity and diabetes, reduced nutrient intake and tooth decay.”
The movie won’t include product placements and Coca-Cola says that its marketing program includes a literacy campaign. But, “the bottom line is that an adored literary phenomenon is being put to work to sell more junk food,” says SaveHarry.com organizer Jacobson.
“It is outrageous that Coca-Cola is using the magic of Harry Potter to lure kids to drink more soda pop. Consumption of soft drinks has soared over the past two decades, contributing to the doubling in the percentage of obese teenagers,” says Dr. Patience White, professor of medicine and pediatrics at George Washington University Medical Center. “That obesity epidemic is fueling a diabetes epidemic.”
According to U.S. Department of Agriculture (USDA) surveys, 20 years ago teenagers drank almost twice as much milk as soda pop. Today they drink twice as much soda pop as milk.
A recent study done at the Harvard School of Public Health found that increased soft-drink consumption was associated with increased obesity in sixth- and seventh-grade students.
How about race discrimination?
Late last year, Coke agreed to pay $192.5 million to resolve a federal lawsuit filed in April 1999 by African-American employees of the Coca-Cola Company.
The settlement requires Coca-Cola to pay the class $58.7 million in compensatory damages, $24.1 million in back pay, $10 million for promotional bonuses and $43.5 in pay equity adjustments, as well as make sweeping programmatic reforms costing another $36 million.
It also grants broad monitoring powers to a panel of outside experts jointly appointed by Coke and the plaintiffs’ lawyers — an extraordinary accomplishment.
Complicity with death squads?
Earlier this year, in Miami, the United Steel Workers Union and the International Labor Rights Fund filed a lawsuit against Coke and Panamerican Beverages, Inc., the primary bottler of Coke products in Latin America and owners of a bottling plant in Colombia where trade union leaders have been murdered.
The case was initiated by Sinaltrainal, the trade union that represents workers at the Coke facilities in Colombia. Sinaltrainal has long maintained that Coke maintains open relations with murderous death squads as part of a program to intimidate trade union leaders.
Union officials said that Colombia holds the “terrible distinction of being ranked number one in the world for the number of trade union leaders murdered each year, and that Coke plays a key role in maintaining that distinction.”
Other plaintiffs include the estate of Isidro Segundo Gil, a trade union leader who was murdered while working at the Coke bottling plant in Carepa, Colombia. The plaintiffs charge that the manager of that facility, owned by an American, Richard Kirby, who is also a defendant in this case, specifically threatened to kill the leaders of the union if they continued their union activities.
The other plaintiffs are Luis Eduardo Garcia, Alvaro Gonzalez, Jose Domingo Flores, Jorge Humberto Leal and Juan Carlos Galvis. All are leaders of Sinaltrainal. All, while employed by Coke, were subjected to torture, kidnapping, and/or unlawful detention in order to encourage them to cease their trade union activities.
The lawsuit alleges that Coke employees either ordered the violence directly, or delegated the job to paramilitary death squads that were acting as agents for Coke.
“This case is extremely important for trade union and human rights,” says Daniel Kovalik, assistant general counsel of the Steelworkers and co-counsel for the plaintiffs. “If we cannot get Coke, one of the most well known companies in the world, to protect the lives and human rights of the workers at its world-wide bottling facilities, then we certainly have a long way to go in making the global economy safe for trade unionists.”
“There is no question that Coke knew about and benefited from the systematic repression of trade union rights at its bottling plants in Colombia, and this case will make the company accountable,” says Terry Collingsworth, who is co-counsel on the case and general counsel of the Washington, D.C.-based International Labor Rights Fund.
A spokesperson for Coke at its headquarters in Atlanta referred Multinational Monitor to the company’s spokesperson in Colombia.
“We vigorously deny any wrongdoing regarding human rights violations in Colombia and are deeply concerned by these allegations against our company,” says Pablo Largacha, spokesperson for Coca-Cola de Colombia. “We have been and continue to be assured by our bottlers that behavior such as that depicted in the claim has in no way been instigated, carried out or condoned by these bottling companies.”
So your company’s stock goes from $90 to less than a $1 over the course of a year, and then your company plunges into bankruptcy.
And all of your fans desert you.
Even your old buddy, President Bush, won't acknowledge your problems. No bailout for your company, buddy.
On the other hand, things aren’t so bad, at least not for you. You did pull off one of the historic scams in major corporate history: your company has acknowledged overstating its earnings over the years, huge sums were spent on shady insider deals, and your puffing of company stock at one time had your company ranked among the 10 largest in the United States. And now that it has all crumbled, your lawyers are looking to protect you, so you do not have to pay one cent.
You got your multi-million dollar bonus. You are rich. If your workers lost their life savings, that’s no skin off your back.
You are an executive of the now-bankrupt Enron. Sitting pretty, looking for another gig on Wall Street.
Yes, the lawyers for the workers want to freeze your assets, alleging you made them on illegal insider deals.
They say that you reaped your huge profits during the past three years through a scheme that artificially inflated the price of Enron’s stock. They say you falsified the company's financial condition. But that’s what they always say.
One of the lawyers seeking to seize your assets called your company “a grotesque fraud — a financial monstrosity of manipulation and falsification.”
Amalgamated Bank, the trustee of equity and bond funds that invest the retirement savings of union employees, suffered losses of $10.3 million, part of a $20 billion loss for public investors.
The lawyer for the bank said that Enron cheated millions of investors out of billions of dollars. Countless lives and retirements have been destroyed.
“While lining their own pockets and setting themselves up financially for life, Enron insiders misled many investors who represent working men and women,” said an Amalgamated vice president. “It’s our intention to retrieve the ill-gotten gains of the Enron insiders and return it to the people who were ripped off.”
No one got hit harder than Enron employees. Enron used stock rather than cash to match employee contributions to their 401(k) retirement fund. And many of the employees, believing the company’s hype about its prospects, chose to put even more of their money into company stock. Sixty-two percent of the assets in the 401(k) were invested in Enron stock. Then, in October, following the company’s announcement that it was taking more than a billion dollars in charges to offset bad investments connected to insider deals — at the exact moment that Enron began to unravel –– the company “locked down” the pension plan so that employees could not sell off their Enron stock. The lockdown supposedly occurred because Enron was changing plan administrators. Trading at $33.84 when the lockdown went into effect, the stocks were worth less than $10 a share a month later, when employees were again permitted to sell the stock. In the process, many lost their life savings.
Enron says it does not comment on pending litigation.
Meanwhile, Enron board chairman Kenneth Lay, reported cashing in more than $200 million worth of stock options in the last several years — before share values started dropping like a stone. Lou Pai, chairman of Enron unit Enron Accelerator, sold stock in excess of $353 million.
Even Wendy Gramm, the wife of former U.S. Senator Phil Gramm, is reported to have sold $297,912 in stocks. She served, believe it or not, on Enron’s audit committee.
What were they doing at audit committee meetings, drinking coffee and eating donuts?
Anyway, these lawyers alleged that you guys set up limited partnerships that were used as strawmen for keeping debt off Enron’s books.
And your buddies at Arthur Andersen, who oversaw the bookkeeping procedures, are under the spotlight. Representative John Dingell, D-Michigan, and the lawyers want to know — what did Arthur Anderson know and when did they know it?
“How am I going to retire now?” Gary Kemper, 57, of Banks, Oregon, a maintenance foreman with an Enron affiliate, asked USA Today. “Everything I’ve worked for for the past 25 years has been wiped out. Meanwhile, the executives got out while the getting was good.”
You know a company is behaving badly when it starts getting cuffed around by the public relations industry. That’s why it was so notable in May when O’Dwyer’s, the leading rag of the PR industry, criticized “ExxonMobil’s stubborn refusal to acknowledge the fact that burning fossil fuels has a role in global warming.”
Climate change, now accepted by scientific consensus as fact and acknowledged by virtually all reputable scientists to be underway, poses enormous environmental, human health and economic threats in coming decades. Among other consequences: rising tides due to polar icecap melting are expected to submerge entire island nations and vast swaths of coastal lands; changing temperatures are expected to contribute to the spread of deadly tropical diseases; extreme weather events are expected to become much more frequent; and countless species are facing endangerment due to rapid shifts in local weather patterns. Emissions of carbon dioxide from the burning of fossil fuels such as oil are a leading contributor to the problem of climate change.
ExxonMobil, the gargantuan of the oil industry, is the world’s leading obstacle to remotely sensible approaches to address global warming.
It was the largest oil company contributor to George W. Bush’s presidential campaign/Republican Party — and has seen its investment pay off in the Bush administration’s resolute failure to sign the Kyoto Protocol, a global treaty committing countries to binding (though inadequate) reductions in greenhouse gas emissions, or to take any serious steps to combat climate change.
The company continues to fund public relations and lobby campaigns denying the reality and dangers of global warming. It continues to tout the greenhouse denialists — the handful of industry-backed scientists who have gained notoriety by their dissent from the consensus statements of more than 1,800 leading climate scientists on the risks of global warming.
ExxonMobil is discernibly worse on the global warming issue than other oil companies. BP/Amoco and Shell have been the most concessionary in the industry, acknowledging the seriousness of the issue, ending their hard-line resistance to Kyoto and other measures to address climate change, and beginning to invest in renewable energy technologies. The other leading company, ChevronTexaco, is more recalcitrant, but can’t match ExxonMobil.
Here’s the current ExxonMobil line, delivered by company CEO Lee Raymond.
Part One: We believe there could conceivably be a global warming problem: “We agree that the potential for climate change caused by increases in carbon dioxide and other greenhouse gases may pose a legitimate long-term risk.”
Part Two: But we don’t know enough yet to take action: “However, we do not now have a sufficient scientific understanding of climate change to make reasonable predictions and/or justify drastic measures. Some reports in the media link climate change to extreme weather and harm to human health. Yet experts [he goes on to cite James Hansen, one of the handful of greenhouse denialists] see no such pattern. ... Although the science of climate change is uncertain, there’s no doubt about the considerable economic harm to society that would result from reducing fuel availability to consumers by adopting the Kyoto Protocol or other mandatory measures that would significantly increase the cost of energy.”
Part Three: So we should study more and rely on voluntary action. “This does not mean we favor doing nothing. We have redoubled our efforts in energy conservation at our own operations around the world” and are investing in fuel cells.
Meanwhile, while obstructing appropriate action on global warming, ExxonMobil continues with its plunder around the world. What is consistent is its reckless behavior and efforts to evade the consequences of its actions.
We’ve changed. That’s the line from Philip Morris.
And evidence abounds.
The company is changing the name of its parent operation from Philip Morris to Altria.
The tobacco giant says it is spending $100 million in the United States to reduce youth smoking.
Go to the company’s web site and read this: “We agree with the overwhelming medical and scientific consensus that cigarette smoking causes lung cancer, heart disease, emphysema and other serious diseases in smokers. Smokers are far more likely to develop serious diseases, like lung cancer, than non-smokers. There is no ‘safe’ cigarette. … We agree with the overwhelming medical and scientific consensus that cigarette smoking is addictive.”
Ask company representatives about the efforts to negotiate an international treaty on tobacco control, the Framework Convention on Tobacco Control (FCTC). Here’s what David Greenberg, senior vice president for corporate affairs of Philip Morris International told us: “It is time for regulation,” he said. Around the world, he said, the company is ready to embrace regulation whether by international institutions and/or at the national level. “We’d like to see a convention have as broad a reach” as possible, Greenberg said, “so we know what the rules are.”
The only problem: It is all a sham. Public health experts agree the company’s youth smoking prevention advertisements and programs are either worthless or harmful, because they portray smoking as an adult activity and thus make it more desirable to kids.
Despite the company’s new acknowledgement that the product it hawks is deadly and addictive, it continues to pioneer new ways of marketing cigarettes.
At the negotiations of the Framework Convention for Tobacco Control, Philip Morris is working hand-in-glove with the Bush administration to obstruct a strong, enforceable treaty. In a November letter to the White House, Representative Henry Waxman, D-California, wrote that “my staff has identified 11 specific instances where Philip Morris recommended deleting provisions of the draft text. In 10 of the 11 instances, your negotiators proposed or prepared amendments advocating exactly what Philip Morris urged.”
These amendments included proposals to: lessen tobacco taxes; permit tobacco companies to use terms like “light” and “low-tar” that public health experts say are misleading; preserve duty-free sales of cigarettes; and impede the World Health Organization from developing standards for testing, measuring, designing, manufacturing and processing tobacco products.
More revealing than Philip Morris’s “we’ve changed” public relations line was a company-commissioned study from the Arthur D. Little consulting firm. Prepared in November 2000 and made public in the Wall Street Journal in July, the study argued that smoking saved the Czech Republic government money by contributing to the “early mortality of smokers.” When smokers die, society saves costs on healthcare, housing and pensions for the elderly, the report ghoulishly argued.
(But even this conclusion was deceptive, points out Clive Bates of Action on Smoking and Health (ASH) UK — the acknowledged costs of smoking in the study (including health care costs and lost income to society from early mortality) are about 13 times higher than the purported savings.)
The real difference between the new and old Philip Morris? Where the company would once have belligerently defended the study, the new company — once caught — is sophisticated enough to be contrite.
“The funding and public release of this study which, among other things, detailed purported cost savings to the Czech Republic due to premature deaths of smokers, exhibited terrible judgment as well as a complete and unacceptable disregard of basic human values,” the company said in an apologetic statement. “We will continue our efforts to do the right thing in all our businesses, acknowledging mistakes when we make them and learning from them as we go forward.”
Empty words from the global leader in an industry whose products are taking 4.2 million lives this year alone.
Perhaps no prosecution in the history of corporate criminality can compare in its duplicity to the prosecution in the Ball Park franks fiasco.
Bil Mar Foods is a unit of the Chicago-based giant Sara Lee Corporation, the maker of pound cakes, cheesecakes, pies, muffins, L’Eggs, Hanes, Playtex and Wonderbra products — your typical food and underwear conglomerate.
Bil Mar makes hot dogs — Ball Park Franks hot dogs.
In July, Sara Lee pled guilty to two misdemeanor counts in connection with a listeriosis outbreak that led to the deaths of at least 21 consumers who ate Ball Park Franks hot dogs and other meat products. One hundred people were seriously injured. The company paid a $200,000 fine.
According to Kenneth Moll, a Chicago attorney representing the families of the victims, this is what happened:
Bil Mar has a hot dog facility in Zeeland, Michigan. The company shut down the facility over the July 4th weekend of 1998 to replace a refrigeration unit that was above the hot dog processing facility. The hot dogs are heated at one end and sent down a conveyer belt to the other. Moll’s theory is that the removal of the air conditioning unit and its replacement dislodged some dangerous bacteria in the ceiling. When the plant reopened, steam from the passing hot dogs went up to the ceiling, condensed and dripped back down with the dangerous bacteria onto the hot dogs.
In November 1998, Paul Mead from the Centers for Disease Control (CDC) in Atlanta started receiving calls from the state health departments around the country that had isolated strains of a deadly bacteria, Listeria monocytogenes.
Mead looked at the bacteria and found that they were the same strain. He sent out questionnaires and discovered there was an open package of hot dogs in the home of one of the people who died. The CDC tested the hot dogs and isolated the same bacterial strain — a DNA fingerprint of the type of bacteria.
According to Moll, Mead went to the Bil Mar plant in Zeeland, Michigan, tested unopened packages of hot dogs and was able to isolate the same DNA fingerprint bacteria. In December 1998, Sara Lee ordered a recall of millions of pounds of hot dogs and deli meats.
According to a series of reports in the Detroit Free Press, plant workers were regularly testing work surfaces for the presence of cold-loving bacteria — a class of bacteria that includes the deadly Listeria monocytogenes as well as some harmless bacteria.
According to the Free Press, beginning in July 1998, after the replacement of the old refrigeration unit, workers recorded a sharp increase in the presence of cold-loving bacteria. The number of positive samples remained high until the company stopped performing tests in November 1998 — a month before the Sara Lee recall.
“Sara Lee was doing testing of the environment in the plant for cold-loving bacteria,” says Caroline Smith DeWaal of the Center for Science in the Public Interest. “Then their tests started coming up positive, so they stopped testing. They knew they had a problem with bacteria in the plant. But instead of solving it, they chose to ignore it.”
This is crucial, because if the company knew that it had a Listeria monocytogenes problem and ignored it, it could be hit with a felony conviction. And felony convictions have all kinds of collateral consequences, including possible loss of federal contracts — Sara Lee had a big hot dog contract with the Department of Defense.
In an interview, U.S. Attorney Phillip Green said there was insufficient evidence to bring a felony charge.
“There was simply no evidence that Sara Lee Bil Mar knew that the food product that they were producing and shipping out was adulterated with Listeria monocytogenes,” Green says.
When asked about the allegations raised by the Free Press that the company was testing for cold-loving bacteria, Green told us, “the testing that you are referring to is known as Low Temperature Pathogens testing — that is a very general test that does not necessarily indicate the presence of Listeria monocytogenes.”
“The USDA regulations don’t require a plant to conduct testing on finished products for the presence of deadly pathogens such as Listeria monocytogenes,” Green said. “And Bil Mar was following accepted industry practices in conducting general testing for the low temperature pathogens.”
But Green refused to answer specific questions about evidence concerning a possible felony violation.
Moll — the attorney representing the victims — says that the evidence “does necessarily indicate the presence of Listeria monocytogenes.” The CDC’s Mead found studies showing that, had Sara Lee done further testing for the deadly strain of listeria, almost half of the cold-loving bacteria could have tested positive for Listeria monocytogenes.
But U.S. Attorney Green never read Mead’s report. He never called on Mead, perhaps the crucial expert in this case, to testify before the grand jury.
In fact, it is apparent that federal prosecutors were overpowered by Sara Lee’s outside lawyers in this case — the Chicago firm of Jenner & Block, led by former Chicago U.S. Attorney Anton Valukas.
Valukas refused, on advice of his client, to comment.
But the extraordinary degree of the collaboration between Sara Lee and the federal prosecutors in this case can be seen on Sara Lee’s web site where it has posted a “joint press release.”
No, that’s not a typo. The U.S. Attorney and Sara Lee issued a joint press release announcing the plea agreement in which no mention is made of Ball Park Franks hot dogs.
The issuance of a joint press release is an extraordinary event. U.S. Attorney Green can’t name another case where the prosecutor and convict issued a joint press release announcing their plea agreement. Neither can the current chief of the Criminal Division at the Department of Justice, Michael Chertoff. He calls it “unusual.”
In a number of ways, the Sara Lee prosecution brings home the double standards in the criminal justice system.
A company pleads guilty to a crime that leads to the death of 21 human beings. The company pleads to two misdemeanors. The company is fined $200,000. Think about that.
One of the dumber provisions in U.S. environmental law is the “grandfather clause” in the Clean Air Act. This provision exempts power plants built before 1970 from Clean Air Act standards. At the time of adoption, it was viewed simply as a transition mechanism, with utilities arguing that old, grandfathered plants would rapidly be replaced. That hasn’t happened.
Instead, utilities like Southern Company — the largest in the United States — continue to rely on grandfathered facilities, especially dirty coal plants, to generate substantial portions of their electricity. According to the U.S. Public Interest Research Group (PIRG), grandfathered plants represent approximately 40 percent of Southern’s generating capacity.
By now, three decades after passage of the Clean Air Act, the grandfather clause is a major loophole in the U.S. clean air rules. Its persistence in the U.S. code is a prime example of the nexus between dirty money and dirty air. And Southern is at the center of this morass.
Southern was the most polluting utility in the United States in 1999, according to U.S. PIRG, emitting more sulfur dioxide, more nitrogen oxides and more carbon dioxide than any other power company. Sulfur dioxide and nitrogen oxides cause or exacerbate an array of respiratory ailments such as asthma and are associated with tens of thousands of deaths in the United States annually, and are the principle components of acid rain. Carbon dioxide is the most significant greenhouse gas.
Southern is the largest utility polluter not just because it is the largest company. It pollutes at higher rate than other utilities. For example, according to U.S. PIRG, it emits sulfur dioxide at a rate nearly 50 percent higher than the national average for utilities, and more than 400 percent higher than it would with new facilities. The company itself reports that it has the seventh highest sulfur dioxide emission rate in the country.
The company says it is doing everything it reasonably can to reduce emissions, alleging it has spent $4 billion on environmental improvements in the last decade. It says it is gradually shifting to natural gas and de-emphasizing coal. It brags that it has reduced sulfur dioxide emissions by a third and nitrogen oxides by more than 20 percent since 1990. (It admits major increases in carbon dioxide emissions, and even an increase in its carbon dioxide emission rate.) It says it is taking steps to reduce emissions in the future. And it touts its support for various environmental initiatives, notably sponsorship of the Nature Conservancy’s 2001 annual meeting, marking the group’s fiftieth anniversary.
(What is the president of the Nature Conservancy doing praising Southern Company’s “commitment to environmental stewardship”?)
It does not just happen that Southern can get away with polluting the U.S. skies and the atmosphere so badly. It takes a lot of work, and money.
Southern dumps more money into the political process than any utility, according to U.S. PIRG. In the first six months of the 2002 election cycle, according to U.S. PIRG, Southern has outdistanced every energy company in the United States, including the profligate political spenders in the oil and gas industry. The company spends millions on lobbyists, and employs nearly a dozen outside lobby firms. It runs a network of political action committees to funnel money to candidates, and is a major donor to political parties. Its campaign cash targets key members of energy and environment committees, who work hard to deliver the goods.
Using the leverage gained from its political investments, Southern has enmeshed itself in an array of legislative and administrative battles over air pollution rules. When it has faced enforcement actions for clean air violations, it has sought to change the clean air rules. When legislators have sought to tighten pollution rules and to eliminate the grandfather clause to protect public health and the environment, Southern has reliably been in opposition. It has fought against a global warming treaty and restrictions on mercury emissions.
Place Southern on the 10 Worst list for the swirl of campaign cash and toxic ash surrounding the company.
We have never understood why Wal-Mart was a darling of the socially responsible investment community.
Thankfully, this distasteful romance appears to be over. In February, KLD Research & Analytics, which maintains the Domini 400 Social Index — one of, or perhaps the, leading indices of supposedly socially responsible firms — ejected Wal-Mart from its list.
KLD focused on Wal-Mart’s hawking of sweatshop-made clothing, handbags and other products, and its refusal to take steps to ensure its contractors were sweatshop free. Following reports from the National Labor Committee, Business Week, the Interfaith Center for Corporate Responsibility and others, KLD reviewed Wal-Mart’s vendor contracting policies and practices.
KLD determined that Wal-Mart came up woefully short. “The company’s code of conduct for vendors does not stipulate that its vendors permit workers to bargain collectively, nor does it require them to pay laborers a sustainable living wage,” KLD concluded. “The company does not issue any public reports on the working conditions at its vendors’ factories. Other companies that have been similarly exposed to sweatshop and Myanmar [i.e., were found to be purchasing products made in Burma, despite calls from the country’s democratic forces for a boycott of such products] controversies, including The Gap, Liz Claiborne, Nike, Timberland and Reebok, have taken steps to improve their records on these issues. In contrast, Wal-Mart’s progress has been minimal.”
Here’s the Wal-Mart line on sweatshops: “Wal-Mart strives to do business only with factories run legally and ethically. We continue to commit extensive resources to making the Wal-Mart system one of the very best. We require suppliers to ensure that every factory conforms to local workplace laws and that there is no illegal child labor or forced labor. Wal-Mart also works with independent monitoring firms to randomly inspect these factories to help ensure compliance. In fact, we conduct more than 200 factory inspections each week to ensure these facilities are being run legally and ethically.”
In announcing that it was dumping Wal-Mart from the Domini 400, KLD emphasized that it preferred to negotiate with companies rather than remove them from the list. “However, Wal-Mart’s sub-par vendor contracting policies and practices and its unresponsiveness to calls for change, amplified by its role as the retail industry’s market leader,” convinced the socially responsible investment firm that further dialogue with the company offered few prospects for achieving change.
Of course, one does not need to look overseas to find fault with Wal-Mart (though sadly, as the company increasingly opens outlets in foreign markets, the harms it has caused in the United States are increasingly being replicated in other countries).
The nation’s leading retailer has certainly innovated an effective distribution and sales system. But its untrammeled expansion is leading to the homogenization of culture and the obliteration of small business competitors, and contributing to the sprawl that is a blight on the U.S. landscape and undermining the quality of life of millions.
And Wal-Mart’s tolerance of sweatshops abroad is matched by its vicious anti-unionism in its home country. The largest employer in the United States, Wal-Mart is completely union free.
That does not come just from the company’s warm relations with its “associates.”
“Wal-Mart is opposed to unionization of its associates,” reads a 1991 “Labor Relations and You” guide for company supervisors acquired and made public by the United Food and Commercial Workers (UFCW) union. “You, as a manager,” the guidebook instructs, “are expected to support the company’s position and you may be asked to be a campaigner for your company. This may mean walking a tightrope between legitimate campaigning and improper conduct.”
Often, the company falls on the side of improper conduct. With UFCW efforts to unionize Wal-Mart facilities ramping up, the company has intensified its anti-union campaigns. Since Labor Day, the National Labor Relations Board has slapped the company with more than a dozen complaints, in connection with allegations of illegal firings, illegal surveillance of workers, and illegal threats to fire union supporters.
“It is a pattern of contempt for this nation’s labor laws that shows how low Wal-Mart will stoop to keep its workers from exercising their right to have a union,” says UFCW Executive Vice President Michael Leonard.
Leonard says Wal-Mart follows a two-track approach to block unionization efforts.
First, according to Leonard, is a “velvet glove” meeting with the workers to unlawfully try to find out why they want a union.
Then representatives from the company’s Arkansas headquarters try to explain why workers should oppose a union. If that approach is unsuccessful, he says, management resorts to the “iron fist.” The company identifies leaders in the organizing drive and, he says, seeks to bribe them with pay raises or promotions, or moves to fire them.