The Ten Worst Corporations of 2004
Offshoring: The Evolving Global Profile of Corporate Restructuring
Blowing the Whistle on the FDA
The Ten Worst Corporations of 2004
It is never easy choosing the 10 Worst Corporations of the Year — there are always more deserving nominees than we can possibly recognize.
One of the greatest challenges facing the Multinational Monitor judges is the directive not to select repeat recipients of the 10 Worst designation.
There’s no way we could keep off companies that have ever appeared on the 10 Worst list — what is one to do with the likes of ExxonMobil, Philip Morris or General Electric? — but we do try to stick to the rule of not naming companies to the list who appeared on the previous year’s list.
That’s not so easy.
Last year, for example, Bayer appeared on the list, for, among other things, bilking Medicaid of hundreds of millions of dollars, paying students to consume pesticides as a test, keeping its anti-cholesterol drug Baycol on the market despite reportedly possessing evidence of its hazards, and dumping tainted blood-clotting medicines in developing country markets. This year, as the German group Coalition against Bayer Dangers relentlessly documents, Bayer’s wrongdoing continues: Bayer agreed to pay $66 million to U.S. authorities to settle price-fixing charges related to chemicals used to make rubber, faced demands for compensation from the families of two dozen Peruvian children accidentally poisoned and killed in 1999 by a Bayer pesticide, pushed for import of genetically modified rice into the European Union, polluted water in a South African town with the carcinogen hexavalent chromium, suffered from new accusations and evidence that it concealed dangers of Baycol, and was hit with evidence that its pain medication Aleve (naproxen) increases the risk of heart attack.
Boeing made the 10 worst list in 2003 for the tanker plane scandal — the $27 billion contract it obtained from the Pentagon to lease unneeded 767s that refuel fighter planes in mid-air. In a brazen maneuver, Boeing hired Darleen Druyan — the procurement official who gave the contract to the company — shortly after the deal was consummated. This year, as Druyan pled guilty to conspiring to defraud the federal government — and then supplemented her initial plea with one apparently more truthful — it emerged that the tanker scandal was even worse than it originally appeared. In her supplemental plea, Druyan admitted doing a variety of “favors” for Boeing. In the tanker negotiations, she admitted that she “agreed to a higher price for the aircraft than she believed was appropriate.” This was as a “parting gift” to Boeing, she told government prosecutors. She also provided to Boeing proprietary information from another aircraft manufacturer.
In 2003, we recognized Clear Channel, the radio behemoth, for concentrating private control over the public airwaves and for repeated lawbreaking, including misleading the public and deceptive advertising. This year, Clear Channel managed to stoop to new lows with a “Breast Christmas Ever” contest. Clear Channel stations promised to pay for breast implants for a dozen contest “winners.” Contestants were required to submit essays explaining why they wanted larger breasts. They also, as the National Organization of Women pointed out, were required to “sign a liability release absolving the radio station, plastic surgeon and Clear Channel from any responsibility should they have problems with their implants or require additional medical treatment — problems which, not incidentally, are frequently necessary and very expensive.”
And then there’s Halliburton. Dick Cheney’s former company made the 10 worst list in 2003 for a long list of government contracting scandals. It’s hard to believe things could get worse with Halliburton, but they have. In just the last quarter of 2004:
And that’s just a partial list of the troubles in which Halliburton was embroiled in the last few months of 2004.
But the no-repeat rule forbids these otherwise-deserving companies from returning to the 10 Worst list in 2004.
Although the judges cringe at being denied the opportunity to put these companies back on 10 Worst list, it does at least help shrink the pool of eligible contenders.
Of the remaining pool of price gougers, polluters, union-busters, dictator-coddlers, fraudsters, poisoners, deceivers and general miscreants, we chose the following — presented in alphabetical order — as the 10 Worst Corporations of 2004:
ABBOTT LABORATORIES: DRUG PRICING CHUTZPAH
Webster’s defines the Yiddish term now incorporated into English slang as: 1. unmitigated effrontery or impudence; gall. 2. audacity; nerve.
In the next edition, they may want to add: 3. See Abbott.
In December 2003, the company raised the U.S. price of its anti-AIDS drug Norvir (generic name ritanovir) by 400 percent. That is, unless the product is used in conjunction with other Abbott products — in which case the price increase is zero.
Norvir has become an increasingly important treatment in recent years. Scientists have discovered that while Norvir is generally too toxic for safe use as a protease inhibitor (one category of anti-AIDS drugs), in lower doses it works well as a booster to increase the efficacy of other protease inhibitors. As a result, Norvir is frequently prescribed along with other protease inhibitors.
The Norvir price increase does not apply when the product is used as a booster with another Abbott protease inhibitor (in the combined product Kaletra). Thus the impact of the Norvir price increase is to make Kaletra far cheaper than rival combinations of Norvir and non-Abbott protease inhibitors.
Norvir is especially important for patients in need of a “salvage therapy” of new and powerful treatments because their virus has become resistant to other medicines.
Lynda Dee, co-chair of the Aids Treatment Activists Coalition’s Drug Development Committee, called the price increase for these patients, who may have no choice as to the medications they need to survive, “pharma terrorism perpetrated against the patients who need new drugs the most.”
Abbott said the price spike was justified by its need to raise money for research and development. “New medicines cost hundreds of millions of dollars to develop,” Jeffrey Leiden, president and chief operating officer of Abbott’s Pharmaceutical Products Group, told a National Institutes of Health meeting in May. “So it’s critical that we capture the value of today’s drugs to allow development of these new therapies in our pipeline as quickly as possible.”
Moreover, Leiden said, the price increase would not deny any patients access to the drug. The price increase does not apply to federal AIDS drug programs, which cover 54 percent of people with HIV/AIDS. Price increases only apply to private insurers and to uninsured individuals, who Abbott says can get the product for free under a special program it operates.
Making the Abbott price jump especially pernicious in the eyes of consumer advocates was that the drug was invented on a grant from the U.S. federal government.
Because of the U.S. government’s financing role, Essential Inventions, Inc., a nonprofit corporation created to distribute affordable public health and other inventions, in January petitioned the government to exercise its “march-in” rights under the federal Bayh-Dole Act and issue an open license to generic firms to produce their own version of Norvir.
“Essential Inventions is asking the Bush Administration to adopt a simple rule — U.S. consumers should not pay more for drugs invented on government grants,” said Essential Inventions President James Love. Following the U.S.-only price increase, Norvir is 5 to 10 times more expensive in the United States than in other high-income countries.
But NIH rejected the Essential Inventions proposal, arguing that companies that obtained licenses to government-funded inventions have a duty only to commercialize the inventions. NIH does not have authority to consider the price at which a product is sold and the impact of the price on access, the agency ruled — even though the Bayh-Dole Act says government-funded inventions should be made “available to the public on reasonable terms.”
“If Secretary Thompson agrees that quadrupling the price of a life-or-death AIDS drug, rigging the market, and discriminating against U.S. consumers is ‘reasonable,’ you can’t help but wonder what the Secretary considers unreasonable,” said Representative Sherrod Brown, D-Ohio, in criticizing the NIH decision.
AIG: DEFERRED PROSECUTIONS ON THE RISE
The nation’s number one corporate crime buster, New York Attorney General Eliot Spitzer, launched his campaign for higher office in December, announcing that he was running for Governor of New York, the next step in his quest for the presidency.
Spitzer is out to prove that projecting a tough cop image against corporate crime pays dividends — as long as you pull your punches when it comes to settlement time.
When Spitzer announced in November that he was opening a new front against the insurance industry, there was the usual quaking in the boots by the Wall Street Journal and the other lead megaphones for big business, charging Spitzer with using his law enforcement powers to force changes in business practices.
And have no doubt — the corporate lobbies would prefer a do-nothing law enforcement agency to an activist one, even a mildly activist one.
That’s why they rail against Spitzer, and even against SEC chair William Donaldson, a former chief executive himself and friend of the Bush family.
Big business now reportedly wants even Donaldson removed from office for his mild activism.
But when push comes to shove, there is no shoving allowed by prosecutors. If you do shove, or push too hard, you will not be allowed to proceed up the political ladder. Period. End of story.
Spitzer sent clear signals when he started his crusade against Merrill Lynch.
Remember the Merrill Lynch analysts who told their customers — trust me, buy this stock, this stock is highly rated?
And then they would turn around and e-mail their buddies — hey, this stock is lousy, why are we recommending this stock to our customers?
Spitzer got his hands on the e-mails, charged Merrill with violating the law and forced them to pay $100 million.
But he got Merrill to pay up only by agreeing not to criminally prosecute the company.
Spitzer later admitted that had he forced Merrill to admit wrongdoing, the firm would have gone kaput.
Just like Arthur Andersen.
In October, 2004 Spitzer moved against a major insurance broker, Marsh & McLennan, alleging that the company steered unsuspecting clients to insurers with whom it had lucrative payoff agreements, and that the firm solicited rigged bids for insurance contracts.
By threatening criminal action, Spitzer forced the company’s CEO to resign — and replaced him with a former work colleague.
Major insurance companies — ACE, American International Group, The Hartford and Munich American Risk Partners — were named in the complaint as participants in steering and bid rigging. Other insurance companies are still under investigation.
Here’s a prediction — Marsh & McLennan will not be convicted of any wrongdoing. Why? Because Spitzer fears, as he feared in the Merrill case, that forcing a company to admit to guilty would push it to the brink — à la Andersen.
Andersen’s conviction sent a powerful message to big business — engage in criminal wrongdoing, and you will be criminally prosecuted to the full extent of the law.
Too powerful, as it turns out.
So, with the Merrill case, Spitzer has started a trend.
Yes, prosecute corporate crime, but don’t force companies to admit guilt.
Thus, when the world’s largest insurer, American International Group Inc. (AIG), was charged by federal prosecutors with crimes in November, it quickly cut a deal with the Justice Department that ended a criminal probe into its finances with a deferred prosecution agreement.
In a deferred prosecution, the corporation accepts responsibility, agrees not to contest the charges, agrees to cooperate, usually pays a fine and implements changes in corporate structure and governance to prevent future wrongdoing.
If the company abides by the agreement for a period of time, then the prosecutors will drop the criminal charges.
In a non-prosecution agreement — like the one secured by Merrill Lynch’s in 2003 with New York Attorney General Eliot Spitzer — prosecutors agree not to bring criminal charges in exchange for corporate fines, cooperation and a change in corporate structure and governance.
“This comprehensive settlement brings finality to the claims raised by the SEC and the Department of Justice,” said AIG Chair M. R. Greenberg. “The role of the independent consultant complements our own transaction review processes. We welcome this enhancement to our overall risk management and control mechanisms.”
“We have always sought to adhere to the highest ethical standards and ensure that we are in compliance with the applicable laws and regulations that govern our businesses around the world. As part of this effort, we regularly review our compliance policies and procedures and take additional action whenever appropriate to enhance them.”
Under the deal with AIG, an AIG subsidiary was charged with a crime for the next 12 months, but then the charge will be dismissed with prejudice — if AIG abides by the deferred prosecution agreement.
As part of the agreement, AIG and two subsidiaries will pay an $80 million penalty, and $46 million into a disgorgement fund maintained by the SEC.
Federal officials in October filed a criminal complaint charging AIG-FP PAGIC Equity Holding Corp., a subsidiary of AIG, with violating the federal securities laws, by aiding and abetting PNC Financial Services Group, Inc. (PNC) in connection with a fraudulent transaction to transfer $750 million in mostly troubled loans and venture capital investments from subsidiaries off of its books.
These transactions were previously the subject of a deferred criminal disposition involving PNC.
Earlier this year, the Department dismissed the criminal complaint against a PNC subsidiary, after the company fulfilled its deferred prosecution agreement obligations.
Merrill, AIG and PNC are three of 10 major corporations that have settled serious criminal charges with deferred prosecution, no prosecution or de facto no prosecution agreements over the last two years. The other seven are Computer Associates, Invision, AmSouth Bancorp, Health South, Banco Popular de Puerto Rico, Canadian Imperial Bank of Commerce and MCI. Bank of New York is currently seeking a similar deal with prosecutors in Brooklyn.
Companies are getting off the criminal hook with these agreements, which were originally intended for minor street crimes.
Now they are being used in very serious corporate crime cases.
If a crime has been committed — and there is little doubt that crimes have been committed by the corporations in these cases — then the companies should plead guilty and pay the penalty.
If prosecutors want to impose change on the corporation, they can do this after securing a conviction through probationary orders.
Right now, corporate lawyers are teaming up with prosecutors to go after individual executives while the company’s record is wiped clean.
COCA-COLA: KILLERCOKE.ORG VS. COKEKILLS.ORG
Check out KillerCoke.Org. You’ll find a raft of information on Coke and its bottlers’ operations in Colombia. There is extensive documentation of rampant violence committed against Coke’s unionized workforce by paramilitary forces, and powerful claims of the company’s complicity in the violence.
An April 2004 report from a fact-finding delegation headed by New York City Council Member Hiram Monserrate contends:
“To date, there have been a total of 179 major human rights violations of Coca-Cola’s workers, including nine murders. Family members of union activists have been abducted and tortured. Union members have been fired for attending union meetings. The company has pressured workers to resign their union membership and contractual rights, and fired workers who refused to do so.”
“Most troubling to the delegation were the persistent allegations that paramilitary violence against workers was done with the knowledge of and likely under the direction of company managers. The physical access that paramilitaries have had to Coca-Cola bottling plants is impossible without company knowledge and/or tacit approval. Shockingly, company officials admitted to the delegation that they had never investigated the ties between plant managers and paramilitaries. The company’s inaction and its ongoing refusal to take any responsibility for the human rights crisis faced by its workforce in Colombia demonstrates — at best — disregard for the lives of its workers.”
“Coca-Cola’s complicity in the situation is deepened by its repeated pattern of bringing criminal charges against union activists who have spoken out about the company’s collusion with paramilitaries. These charges have been dismissed without merit on several occasions.”
Allegations such as these formed the basis of a lawsuit filed in 2001 by the International Labor Rights Fund and the United Steelworkers of America in U.S. courts against Coke on behalf of a Colombian trade union and union leader victims of violence at Coke bottling facilities in Colombia.
In 2003, a federal court dismissed the claims against Coke, arguing that its relationship with the owners of the Coke bottling plant in Colombia was too attenuated to hold the soft drink multinational responsible for human rights abuses at the plant. The plaintiffs have since refiled their complaint — they argue the original decision was mistaken, but that Coke’s subsequent purchase of the Colombia bottlers means the company is now clearly responsible for the bottlers’ actions.
Here’s what Coke has to say:
“Colombia is a dangerous place, but The Coca-Cola Company and its bottling partners will continue to do everything they can to keep employees safe.”
“The pervasive violence in Colombia, and the targeting of union members by its perpetrators, has, unfortunately, touched The Coca-Cola Company in a very personal way. Employees of our Company and bottling partners in Colombia have been threatened, kidnapped, and some have even been murdered. Among them was Isidro Gil, who was on security duty at a bottling facility in Carepa in December 1996 when he was shot at the plant gate. In a lawsuit in Colombia, the court concluded that the bottler not only took proper steps to initiate investigation by the authorities, but went further to enhance its workers’ safety by heightening security at the plant. In the United States, The Coca-Cola Company was dismissed from a lawsuit concerning, among other things, Mr. Gil’s murder.”
“In the midst of the violence plaguing Colombia, The Coca-Cola Company and its bottling partners have instituted special safeguards to protect employees — not just while they’re on the job. For those at greatest risk, the security measures extend beyond the workplace.”
“The Coca-Cola Company and Coca-Cola FEMSA [the Colombia subsidiary] believe that respect for human rights and labor rights are non-negotiable, fundamental values. We operate our businesses in Colombia and throughout the world according to these values.”
The back-and-forth is rather detailed. We find the claims of the advocates for Coke’s Colombian workers most persuasive.
Leave aside for the moment the issue of Coke’s legal liability. The idea that Coke can’t control the behavior of its bottlers is simply implausible. It can control them if it so chooses — just the way that clothing retailers can control the actions of their manufacturers, but even more so.
Instructive in raising questions about Coke’s good-faith concern for its workers is its unwillingness to support an independent investigation into the Colombia allegations — even after the company’s former General Counsel, and the former assistant U.S. attorney general, Deval Patrick, had committed to one. Coke’s refusal to authorize an investigation reportedly contributed to Patrick’s decision to resign from the corporation.
Even more instructive is Coke’s refusal to agree to “Seven Points for Settlement” put forward by the Colombian union and its advocates. These are reasonable points to which the company could agree without accepting blame for the abuses committed at the bottling plants. Completely apart from the litigation and the campaign against Coke, these are points to which the company should agree if it wants to clamp down on violence in the bottling plants. They include:
DOW CHEMICAL: FORGIVE US OUR TRESPASSES
Let’s assume for a second, as the law does, that a corporation is a person.
If a corporation is a person, then how come we don’t see biographies of corporations?
We’re not talking about “official” biographies — those written by people in the pocket of the corporation.
Of course they exist.
By why not warts-and-all biographies of major corporations?
Like “The Life and Times of General Motors?”
Actually, a historian by the name of Brad Snell has been working for years on such a biography about General Motors — warts and all. He says he’s almost finished.
In 1974, Gerard Colby Zilg wrote a book titled DuPont: Behind the Nylon Curtain, which was a biography of DuPont Corporation — warts and all.
Zilg claimed that his publisher, under pressure from DuPont, buried the book — and it went nowhere.
Now comes Jack Doyle.
Doyle is trying to make a career out of writing critical corporate biographies.
In 2002, under contract with the Environmental Health Fund, Doyle wrote his first corporate biography, titled Riding the Dragon: Royal Dutch Shell & The Fossil Fire.
To coincide with the twentieth anniversary of the Bhopal disaster, Doyle came out with Trespass Against Us: Dow Chemical and the Toxic Century.
At midnight on December 2, 1984, 27 tons of lethal gases leaked from Union Carbide’s pesticide factory in Bhopal, India, immediately killing an estimated 8,000 people and poisoning thousands of others.
Today in Bhopal, at least 150,000 people, including children born to parents who survived the disaster, are suffering from exposure-related health effects such as cancer, neurological damage, chaotic menstrual cycles and mental illness.
Over 20,000 people are forced to drink water with unsafe levels of mercury, carbon tetrachloride and other persistent organic pollutants and heavy metals.
Activists from around the world — including human rights, legal, environmental health and other experts — mobilized this year to demand that Dow Chemical, the current owner of Union Carbide, be held accountable.
Twenty years after this disaster, the company responsible for this catastrophe and its former executives are still fugitives from justice. Union Carbide and its former chairman, Warren Andersen, were charged with manslaughter for the deaths at Bhopal, but they refuse to appear before the Indian courts.
Here is Dow’s “complete statement” on Bhopal:
Twenty years ago on December 3, 1984, one of the most tragic incidents in the history of industry occurred in Bhopal, India. Those of us in industry remember that day well, and the following days, when several thousand people died.
Dow has no responsibility for Bhopal? The people of Bhopal don’t agree. They say Union Carbide was responsible, and if Union Carbide is now owned by Dow, then Dow’s responsible. They refuse to accept Dow’s corporate shell game.
Doyle took the title of his book, “Trespass Against Us,” from the Lord’s prayer:
Give us this day our daily bread, and forgive us our trespasses as we forgive those who trespass against us.
We asked Doyle if he was urging humanity — those who have been polluted by Dow chemicals — to forgive Dow for its trespass against us.
“Not at all,” Doyle said. “By using the ‘trespass against us’ phrase, I am trying to make visible the invisible — trying to show that there are boundary lines being violated daily by toxic substances. Corporations are making a profit on the invasion of my personal space, my biology. They are not controlling the full costs of their operation, and we are picking up the tab for their externalities in form of disease, illness, lower immunity, altered reproduction, birth defects, cancer. That’s not right. That’s a mortal trespass, an unforgivable transgression that must be stopped. We are certainly not calling on consumers to ask that companies be forgiven — quite the opposite. They need to be prosecuted. Companies like Dow are getting away with biological trespass daily.”
And his book documents this.
Dow says that for most of the past decade it has pursued a “series of ambitious goals to improve Environment, Health, and Safety performance. We did this because we value the safety of our people and neighbors.” The result, according to the company, has been 10,000 injuries averted since 1996.
“Our ‘Vision of Zero’ means we want no injuries, illnesses, accidents, or environmental harm to result from our enterprise,” asserts the company. “It is a lofty goal, but it is also the only acceptable Vision for us to work toward.”
But these words gloss over an odious history.
In honor of the dead and dying in Bhopal, we urge you to buy Doyle’s book. Every time you use common plastic items, think of the destruction. Every time you use Saran Wrap (originally a Dow product), question the consequences.
And in commemoration of the twentieth anniversary of the crime of Bhopal, we present here 20 things to remember about Dow Chemical — the company now responsible for Bhopal and a fugitive from justice.
20. Agent Orange/Napalm — The toxic herbicide and jellied gasoline used in Vietnam created horrors for young and old alike — and an uproar back home that forced Dow to rethink its public relations strategy.
19. Rocky Flats — The top secret Colorado site managed by Dow Chemical from 1952 to 1975 remains an environmental nightmare for the Denver area.
18. Body burden — In March 2001, the Centers for Disease Control reported that most people in the United States carry detectable levels of plastics, pesticides and heavy metals in their blood and urine.
17. 2,4-D — An herbicide produced by Dow Chemical, 2,4-D is still in used for killing lawn weeds, crop weeds and range weeds, and along utility company rights-of way and railroad tracks. One of the key ingredients in Agent Orange, the toxic defoliant used in Vietnam, 2,4-D is the most widely used herbicide in the world.
16. Mercury — In Canada, Dow had been producing chlorine using the mercury cell method since 1947. Much of the mercury was recycled, but significant quantities were discharged into the environment through air emissions, water discharges, waste sludge and in end products. In March 1970, the governments of Ontario and Michigan detected high levels of mercury in the fish in the St. Clair River, Lake St. Clair, the Detroit River and Lake Erie. Dow was sued by state and local officials for mercury pollution.
15. PERC — Perchloroethylene is the hazardous substance used by dry cleaners everywhere. Dow tried to undermine safer alternatives.
14. 2,4,5 T — This is one of the toxic ingredients in Agent Orange. Doyle says that “Dow just fought tooth and nail over this chemical — persisted every way it could in court and with the agencies, at the state and federal levels, to buy more time for this product. They went into a court in Arkansas in the early 1970s to challenge the EPA administrator. They did that to buy some extra marketing time, and they got two years, even though it appears that Dow knew this chemical was a bad actor by then, caused birth defects in lab animals, and was also being found in human body fat by then. But it wasn’t until 1983 that Dow quit making 2,4,5-T in the United States, and 1987 before they quit production in New Zealand. And 2,4,5-T health effects litigation continues to this day.”
13. Busting unions — In 1967, unions represented almost all of Dow’s production workers. But since then, according to the Metal Trades Department of the AFL-CIO, Dow undertook an “unapologetic campaign to rid itself of unions.”
12. Silicone — The key ingredient for silicone breast implants, made by a joint venture between Dow and Corning (Dow Corning), made women sick. Litigation over silicone breast implants — removed from the market more than a decade ago — continues.
11. DBCP — DBCP is the toxic active ingredient in the Dow pesticide Fumazone. Doctors who tested men who worked with DBCP thought they had vasectomies — they had no sperm present.
10. Dursban — Dursban is the trade name for chlorpyrifos, a toxic pesticide, a product that proved to have the nerve agent effects that Rachel Carson warned about. It was tested on prisoners in New York in 1971 and in 1998 at a lab in Lincoln, Nebraska. It replaced DDT when DDT was banned in 1972. A huge seller, in June 2000, EPA limited its use and forced it off the market at the end of 2004.
9. Dow at Christmas — “Uses of Dow plastics by the toy industry are across the board,” boasted Dow Chemical in an internal company memo one Christmas season — “and more and more of our materials are found under the Christmas tree and on the birthday table, make some child, some toy company, and Dow, very happy indeed.” Among the chemicals used in these toys — polystyrene, polyethylene, ethylene copolymer resins, saran resins, PVC resins, or vinyls and ethyl cellulose. And a Happy New Year.
8.The Tittabawassee — The Tittabawassee is a river and river basin polluted by Dow in its hometown, Midland, Michigan.
7. Brazos River, Freeport, Texas — A February 1971 headline in the Houston Post read: “Brazos River is Dead.” In 1970 and 1971, Dow’s operation there was sending more than 4.5 billion gallons of wastewater per day into the Brazos and on into the Gulf of Mexico.
6. Toxic Trespass — Doyle writes: “Dow Chemical has been polluting property and poisoning people for nearly a century, locally and globally — trespassing on workers, consumers, communities, and innocent bystanders — on wildlife and wild places, on the global biota and the global genome. ... Dow Chemical must end its toxic trespass.”
5. Holmesburg Experiments — In January 1981, a Philadelphia Inquirer story revealed that Dow Chemical paid a University of Pennsylvania dermatologist to test dioxin on prisoners at Holmesburg Prison in Philadelphia. Tests were conducted in 1964 on 70 inmates.
4. Worker deaths — Dow has a long history of explosions and fires at its facilities, well documented by Doyle. One example, in May 1979: an explosion ripped through Dow Chemical’s Pittsburgh facility, killing two workers and injuring more than 45 others.
3. Brain tumors — In 1980, investigators found 25 workers with brain tumors at the company’s Freeport, Texas facility — 24 of which were fatal.
2. Saran Wrap — The thin slice of plastic invaluable to our lives, Saran Wrap was produced by Dow until consumers were looking for Dow products to boycott. Dow decided to get out of consumer products for this reason — it sold off Saran Wrap — and since then the company, now the world’s largest plastics maker, just manufactures the chemical feeds that manufacturers use to make our consumer products.
1. Bhopal — Give us this day our daily bread, and forgive us our trespasses, as we seek to bring to justice those who trespass against us.
GLAXOSMITHKLINE: DEADLY DEPRESSING
GlaxoSmithKline, Paxil and selective serotonin reuptake inhibitors (SSRIs). It was the story that foreshadowed and strikingly paralleled the controversy surrounding Merck, Vioxx and Cox-2 inhibitors.
Longstanding evidence of harm from a heavily advertised, blockbuster medicine. Company and regulatory refusal to consider disturbing evidence of dangerous side effects. Suppression of Food and Drug Administration (FDA) regulators willing to look coldly at the evidence. And an eventual, but too long delayed breakthrough in appropriate health messages to the public.
With the antidepressant Paxil (generic name: paroxetine), the story was driven primarily from the United Kingdom, by the BBC Program “Panorama,” and a public interest group called Social Audit. They called attention to the severe side effects from the drugs — notably that they are addictive and lead to increased suicidality in youth.
In 2003, the evidence of dangerous side effects had piled too high for British regulators to continue to ignore it. In June, the UK health experts advised that children should not be prescribed Paxil.
In February 2004, Panorama reported on internal documents from GlaxoSmithKline (GSK) showing the company knew that Paxil could not be proved to work in children.
In March 2004, days after the Medicines and Healthcare Products Regulatory Agency — the UK’s drug regulatory agency — advised that Paxil dosages should be kept to low levels, an expert participating in the Paxil review resigned, claiming the agency had possessed evidence for more than a decade suggesting that Paxil dosages should be kept low, but failed to act on it.
By this time, the story had started to heat up in the United States. Dr. Andrew Mosholder, of the FDA Office of Drug Safety, had conducted an analysis of clinical trials related to antidepressant use in children, and found a heightened risk of suicidality. But his superiors refused to let him present his findings to an advisory panel convened to look at the issue in the wake of the British action.
According to an investigation by Senator Charles Grassley, R-Iowa, the FDA actually tried to get Mosholder to present data that deceptively underrepresented the risk of suicidality.
Although Paxil is not approved by the FDA for prescription to children, doctors routinely write “off-label” prescriptions for the product for children, a practice permitted under FDA rules. More than two million prescriptions for Paxil were written for children and adolescents in the United States in 2002. Nearly 900,000 of these prescriptions were for youngsters whose primary diagnosis was a mood disorder, the most common of which is depression.
In April 2004, the Lancet, the prestigious British medical journal, published a paper showing that clinical test data did show problems with prescribing Paxil and other SSRIs to children. The Lancet would later name this article the scientific paper of the year.
In June, New York State Attorney General Eliot Spitzer filed suit against Glaxo, charging the giant drug maker with suppressing evidence of Paxil’s harm to children, and misleading physicians.
“By concealing critically important scientific studies on Paxil, GSK impaired doctors’ ability to make the appropriate prescribing decision for their patients and may have jeopardized their health and safety,” said Spitzer in announcing the suit.
GSK responded in a statement that it “has acted responsibly in conducting clinical studies in pediatric patients and disseminating data from those studies. All pediatric studies have been made available to the FDA and regulatory agencies worldwide. We have publicly communicated data from all pediatric studies.”
Spitzer’s complaint cited a 1998 GSK memo which states that the company must “manage the dissemination of these data in order to minimi[z]e any potential negative commercial impact.”
Responding to Spitzer’s suit, GSK claimed that, “As for the 1998 memo, it is inconsistent with the facts and does not reflect the company position.”
The New York complaint asserted as well that “GSK has repeatedly misrepresented the safety and efficacy outcomes from its studies of paroxetine as a treatment for MDD [Major Depressive Disorder] in a pediatric population to its employees who promote paroxetine to physicians.”
Later in June, GSK announced a new policy, whereby it would post on the Internet summaries of the results of clinical trials it conducts. In August, the company settled with Spitzer for $2.5 million, plus a commitment to maintain the policy of posting clinical trial results, for all drugs marketed by the company.
The next month, the Star-Ledger of New Jersey reported on a Glaxo memo from the year before, instructing the company’s sales force not to talk to doctors about company data showing dangers from prescribing Paxil to kids. Glaxo says sales people do not discuss off-label uses with doctors.
In October, the FDA ordered Glaxo and other SSRI makers to include a “black box” warning — the agency’s strongest warning — with their pills. The warning says SSRIs double the risk of suicide in children, though some medical researchers say the number should be higher. At least one GSK clinical trial showed 7.5 percent of youth taking Paxil suffering from suicidality (versus zero percent among those taking a placebo).
Glaxo continues to insist that it disclosed information to appropriate authorities as soon as it discerned important results from its clinical studies.
Thanks largely to Glaxo and other drug companies’ bombardment of the airwaves with ads touting the wonders of drug treatments for all kinds of emotional disorders, childhood use of antidepressants and other pills is skyrocketing — even for drugs that haven’t been shown to help kids. No one should understate the sometime difficulties of adolescence and the trauma that many youth must deal with. But overdosing kids is no answer — and pushing ineffective drugs that spike their risk of suicidality is deplorable.
HARDEE’S: HEART ATTACK ON A BUN
Hardee’s, Home of the Monster Thickburger. When Hardee’s introduced the thickburger earlier this year, Jay Leno joked that it was being served in little cardboard boxes shaped like coffins.
David Letterman did a skit showing a Hardee’s executive suffering a heart attack as he defended the thickburger.
But, alas, there is no defense for the Monster Thickburger.
With other major fast food outlets moving to green salads, Hardee’s revels in big beef.
Let’s now go to Hardee’s press release of November 15, 2004, which begins this way:
“St. Louis, Missouri — First there were burgers. Then there were Thickburgers. Now Hardee’s is introducing the mother of all burgers — the Monster Thickburger™. Weighing in at two-thirds of a pound, this 100 percent Angus beef burger is a monument to decadence, yet is still a throwback, as it features lots of meat, cheese and bacon on a bun. Available at all Hardee’s restaurants starting today, the Monster Thickburger is certain to crush the hunger pangs of even the most famished burger lovers.”
Clearly, Hardee’s, a subsidiary of CKE Restaurants, Inc. of Carpinteria, California, is not worried about the public health aspects of unleashing the monster into the marketplace.
It’s a 1,420-calorie sandwich.
Eating one Thickburger is like eating two Big Macs or five McDonald’s hamburgers.
Add 600 calories worth of Hardee’s fries and you get more than the 2,000 calories that many people should eat in a whole day, according to Michael Jacobson of the Center for Science in the Public Interest, which calls the Thickburger “food porn.”
What’s in a Thickburger?
Two 1/3-lb. charbroiled patties of Angus beef, topped with no less than four strips of crispy bacon, three slices of American cheese, and some mayonnaise — all on a buttered, toasted, sesame seed bun.
The Monster Thickburger sells for $5.49 by itself, or $7.09 for a combo meal including medium fries and a medium drink.
Want to see a picture of the beast? Go to www.monsterthickburger.com.
Hardee’s doesn’t believe in doing well without doing good, so the hamburger chain partnered with the National Football league in 10 markets to raise money for charity.
In each of the markets, one “monstrous” NFL player will work the drive-thru of a local Hardee’s for two hours, and the proceeds from every Monster Thickburger sold at that location on that day will be donated to the player’s charity of choice.
Like what charity — medical efforts to drive down diabetes or hypertension?
And check the limits of law enforcement:
The Federal Trade Commission (FTC) earlier this year charged KFC Corporation, owner of the Kentucky Fried Chicken national restaurant chain, with making false claims in a national television advertising campaign about the relative nutritional value and healthiness of its fried chicken and with making false claims that its fried chicken is compatible with certain popular weight-loss programs.
The false claim? KFC said that eating fried chicken, specifically two Original Recipe fried chicken breasts, is better for a consumer’s health than eating a Burger King Whopper.
One ad featured a woman putting a bucket of KFC fried chicken down in front of her husband and announcing, “Remember how we talked about eating better? Well, it starts today!” The ad then states that “Two KFC breasts have less fat than a BK Whopper.”
The FTC says that while it is true that the two fried chicken breasts have slightly less total fat and saturated fat than a Whopper, they have more than three times the trans fat and cholesterol, more than twice the sodium, and more calories.
KFC settled the case.
But there will be no law enforcement action brought against Hardee’s.
Because Hardee’s makes no pretensions that the Hardee’s thickburger is good for you.
And they are reveling in the publicity from Jacobson’s group, Leno and Letterman.
Jacobson says that if Hardee’s persists in marketing this junk, it should at least list calories right up on the menu board.
But Hardee’s has no qualms about the impact of the monster on the public’s health.
The fast-food pusher’s new advertising campaign is straight up — “Be afraid. Be very afraid.”
As the New York Times put it in an editorial, “It is a setback for public health, but a triumph for truth in advertising.”
MERCK: 55,000 DEAD
It’s not as if people in power didn’t know about the impending disaster — what David Graham, a Food and Drug Administration (FDA) drug safety official, calls “maybe the single greatest drug-safety catastrophe in the history of this country.’’
Testifying before a Senate committee in November, Dr. Graham put the number in United States who had suffered heart attacks or stroke as result of taking the arthritis drug Vioxx in the range of 88,000 to 139,000.
As many as 40 percent of these people, or about 35,000-55,000, died as a result, Graham said.
The unacceptable cardiovascular risks of Vioxx were evident as early as 2000 — a full four years before the drug was finally withdrawn from the market by its manufacturer, Merck, according to a study released by The Lancet, the British medical journal.
“This discovery points to astonishing failures in Merck’s internal systems of post-marketing surveillance, as well as to lethal weaknesses in the U.S. Food and Drug Administration’s regulatory oversight,” The Lancet editors wrote.
Authors of the Lancet study pooled data from 25,273 patients who participated in 18 clinical trials conducted before 2001. They found that patients given Vioxx had 2.3 times the risk of heart attacks as those given placebos or other pain medications.
Merck withdrew Vioxx on September 30 of this year after a company-sponsored trial found a doubling of the risks for heart attack or stroke among those who took the medicine for 18 months or more.
Merck says it disclosed all relevant evidence on Vioxx safety as soon as it acquired it, and pulled the drug as soon as it saw conclusive evidence of the drug’s dangers.
“Over the past six years,” Merck CEO Raymond Gilmartin told the Senate Finance Committee at the November hearing where Graham made his big splash, “since the time Merck submitted a New Drug Application for Vioxx to the FDA, we have promptly disclosed the results of numerous Merck-sponsored studies to the FDA, physicians, the scientific community and the media and participated in a balanced, scientific discussion of its risks and benefits.”
Until the September clinical trial results came in, Gilmartin said, “the combined data from randomized controlled clinical trials showed no difference in confirmed cardiovascular event rates between Vioxx and placebo and Vioxx and NSAIDs other than naproxen. When data from the APPROVe study [the September results] became available, Merck acted quickly to withdraw the medicine from the market.”
But there is evidence that strongly suggests a different version of the story.
The Lancet findings came in the wake of new disclosures that suggest Merck was fully aware of Vioxx’s potential risks by 2000.
The Wall Street Journal revealed e-mails that confirm Merck executives’ knowledge of their drug’s adverse cardiovascular profile — the risk was “clearly there,” according to one senior researcher.
Merck’s marketing literature included a document intended for its sales representatives which discussed how to respond to questions about Vioxx — it was labeled “Dodge Ball Vioxx.”
“Given this disturbing contradiction — Merck’s own understanding of Vioxx’s true risk profile and its attempt to gloss over these risks in their public statements at the time — it is hard to see how Merck’s chief executive officer, Raymond Gilmartin, can retain the confidence of the public, his company’s most important constituency,” the Lancet editors wrote. “The FDA’s position is no less [un]comfortable. The public expects national drug regulators to complete research in their ongoing efforts to protect patients from undue harm. But, too often, the FDA saw and continues to see the pharmaceutical industry as its customer — a vital source of funding for its activities — and not as a sector of society in need of strong regulation.”
Dr. Graham, the federal drug-safety reviewer, continues to seek to publish his study demonstrating the dangers of Vioxx, but he has been delayed and demeaned by top officials at the Food and Drug Administration.
At the Senate hearing, Dr. Graham said that the FDA “as currently configured is incapable of protecting America against another Vioxx,” because of ties between agency reviewers and the pharmaceutical industry.
Graham says that as a result of his testimony, his bosses have threatened to toss him out of the FDA’s drug safety unit.
In December 2004, a group of 22 members of the U.S. House of Representatives sent a letter to the FDA complaining about efforts to intimidate and smear Dr. Graham.
House members, led by Bart Stupak, D-Michigan, sent the letter to acting FDA Commissioner Lester Crawford “to express strong dismay at recent reports about efforts taken by some at FDA to discredit and smear Dr. Graham.”
“This shameful behavior by management cannot continue, and we demand you put a stop to it,” the letter said.
“Your treatment of Dr. Graham undoubtedly has had a chilling effect on the willingness of FDA employees to speak up and disagree when they believe the public’s health is at risk,” the letter said.
If Graham were targeting just Merck, his job might be safe. But it is about more than Vioxx and Merck.
At the Senate hearing, Graham said that at least five medications currently on the market pose such risks that their sale ought to be limited or stopped. Graham named the five as Meridia, Crestor, Accutane, Bextra and Serevent.
In November 2004, Forbes.com — capitalist tool that it claims to be — named David Graham “face of the year.”
We join with Forbes in saluting Graham “for his steadfast advocacy of drug safety and his willingness to blow the whistle on his bosses.”
“Without Graham, the Vioxx debacle might have been seen as an isolated event,” Forbes wrote. “But because he was willing to step into the spotlight, the withdrawal of Vioxx from the market looks like part of a systemic failure to properly weigh the risks and benefits of drugs. To hear Graham tell it, this is part of a systemic failure to address drug safety on the part of the FDA, a story that reaches back over the entirety of his 20-year career at the agency. That could kick-start a broad debate over what risks we’re willing to take every time we swallow pills. In the long run, change would be good for regulators and drug companies.”
McWANE: DEATH ON THE JOB
When the New York Times is bad, it can be very bad. But when it is good, it can be very good.
Earlier this year, it was very good.
It was very good when it ran a three-part series by David Barstow and Lowell Bergman that exposed the egregious safety record of McWane Inc., a large, privately held Alabama-based sewer and water pipe manufacturer.
Nine McWane employees have lost their lives in workplace accidents since 1995.
More than 4,600 injuries were recorded among the company’s 5,000 employees.
According to the series, one man died when an industrial oven exploded after he was directed to use it to incinerate highly combustible paint. Another was crushed by a conveyor belt that lacked a required protective guard.
Three of McWane’s nine deaths were the result of deliberate violations of safety standards.
In five others, safety lapses were a contributing factor.
According to the Times, McWane pulled the wool over the eyes of investigators by stalling them at the factory gates, and then hiding defective equipment.
Accident sites were altered before investigators could inspect them, in violation of federal rules.
One former plant manager told of submitting phony water samples to environmental investigators, the Times reported.
When government enforcement officials did find serious violations, “the punishment meted out by the federal government was so minimal that McWane could treat it as simply a cost of doing business.”
“After a worker was crushed to death by a forklift that apparently had faulty brakes, an Occupational Safety and Health Administration investigation found defects in all 14 of the plant’s forklifts, including the one involved in the death,” the Times reported. The fine was just $10,500. Employers are further protected by the workers’ compensation system, which can make it hard for victims to sue.”
Companies who cause the death of workers on the job rarely face the full force of the criminal law. Manslaughter and negligence prosecutions in workplace death cases have been declining for years — as the dead worker bodies steadily pile up.
According to the Times, in one McWane oven explosion that killed an employee, Frank Wagner, McWane “hired a well-connected lobbyist to lean on Dennis Vacco, then New York State’s attorney general, and ended up with a settlement in which it did not admit responsibility for the death.”
The experts who looked at the case determined that the explosion that killed him was the result of reckless criminal actions by McWane, which was operating a cast-iron foundry in Elmira, New York, where Wagner worked.
“The evidence compels us to act,” the prosecution team wrote in a confidential memorandum to Vacco in 1996. The team urged him to ask a grand jury to indict McWane and its managers on manslaughter and other charges. A grand jury inquiry, senior investigators believed, could have taken them up the corporate ladder, the Times reported.
But Vacco never sought an indictment against McWane for any crime.
Only after an unusual intervention by the United States attorney in Buffalo, who threatened federal charges, did McWane agree to plead guilty to a state felony and pay $500,000.
“But as the company and Mr. Wagner’s widow are quick to note, that charge, a hazardous-waste violation, specifically did not hold McWane accountable for Mr. Wagner’s death,” the Times reported.
“It was a reckless act on the part of certain individuals in that company that caused the death of that person. I’ll believe that till the day I die,” says Donald Snell, who supervised the state environmental agency’s investigation. “The ends of justice were not met.”
As the Times series showed, in plant after plant, year after year, “McWane workers have been maimed, burned, sickened and killed by the same safety and health failures.”
The Times documented more than 400 safety violations and 450 environmental violations since 1995 alone.
“Yet regulators and law enforcement officials have never joined forces to piece this record together, never taken a coordinated approach to end patterns of transgression,” the Times reported. “Their responses, piecemeal and disjointed, bring into sharp relief weaknesses in government’s ability to take on corporations with operations spread far and wide.”
McWane says it is changing — and it’s certainly paying more attention to PR after the Times series.
“Over the last several years, our Company has embarked on significant changes that are focused on setting the industry standard in employee safety, health and environmental programs,” asserts a May 2004 report from the company on health and safety. “We have challenged ourselves to go beyond compliance in the development of a state-of the-art safety, health and environmental management system to create a comprehensive program designed to exemplify excellence in environmental, health and safety performance, integrity, service and quality.”
“McWane and its subsidiaries actively promote a safe workplace,” the company asserts. “We have positive and ongoing working relationships with federal, state and local authorities to continuously improve our safety training, workplace technologies, and overall safety programs.”
That doesn’t exactly jibe with what company managers call “the McWane way” — what federal and state regulators characterized to the Times as a “lawless” and “rogue” operation that ruthlessly sought profits with disregard for worker safety and well-being.
Now, consider this:
McWane is responsible for nine worker deaths and countless injuries.
Scott Peterson was responsible for the death of his wife and unborn child.
Which one did the mass television media focus on?
Who got the death penalty?
RIGGS BANK: THE PINOCHET CONNECTION
Being a military dictator is not as easy as it looks.
You need suppliers of weapons. You need an army to work with you. And, if you are a crook — as most military dictators are — you need a bank to hold on to your money.
That’s where Riggs Bank in Washington, D.C. comes in.
An explosive report from the U.S. Senate Permanent Subcommittee on Investigations of the Committee on Governmental Affairs, issued in July, revealed that Riggs illegally operated bank accounts for former Chilean dictator Augusto Pinochet, and routinely ignored evidence of corrupt practices in managing more than 60 accounts for the government of Equatorial Guinea.
An ongoing internal investigation by Riggs has revealed that the bank’s dealing with Pinochet dates back to 1985, while the Chilean despot remained in power, according to a November Washington Post report.
Riggs has not so far been cited for civil or criminal violations in connection with the Pinochet money-laundering scheme. In May, the bank paid $25 million in fines in connection with money-laundering violations related to the Equatorial Guinea and Saudi Arabian governments.
The bank is the subject of ongoing criminal investigations by the U.S. Department of Justice and the U.S. Attorney’s Office for the District of Columbia, according to recent filings with the Securities and Exchange Commission.
Riggs, which traces its history back to 1840, likes to brag about serving such historical figures as President Abraham Lincoln (and 19 other presidents) and American Red Cross founder Clara Barton, and having supplied the gold for the purchase of the state of Alaska.
It capitalized on its venerable reputation in Washington to become the banker to the embassies that dot the city and the large foreign diplomatic corps resident in the U.S. capital.
Riggs eagerly sought to service them all, apparently even when dictators and their families requested the bank engage in illegal activities to launder money.
The Permanent Subcommittee on Investigations report found that from 1994 until 2002, Riggs opened at least six accounts and issued several certificates of deposit (CDs) for Pinochet while he was under house arrest in the United Kingdom and his assets were the subject of court proceedings. The aggregate deposits in the Pinochet accounts at Riggs ranged from $4 million to $8 million at a time.
What is now becoming apparent is that Riggs was collaborating with Pinochet even a decade earlier, with a scale of activity not yet clear.
Riggs was not a passive or unknowing actor in this drama. According to the Permanent Subcommittee on Investigations report, high bank officials solicited Pinochet’s business, the bank helped Pinochet set up offshore shell corporations and open accounts in the names of those corporations to disguise his control of the accounts, altered the names of his personal accounts to disguise their ownership, and otherwise worked to help him hide his money flow.
Although these activities seem to violate U.S. banking rules, the Office of the Comptroller of the Currency (OCC) did not take enforcement action against the bank after it learned of these matters in 2002. That presumably was not unrelated to the fact that the OCC examiner at Riggs soon thereafter went to work for Riggs.
This is not just a matter of avoiding taxes or failing to follow legalistic rules. These are the actions that reward dictators, and help them live lavishly after stepping down from power. They come at the expense of the dictator’s victims — thousands of dead and tortured in the case of Pinochet. For those who need a reminder of Pinochet’s brutality, see www.memoriaviva.com for a moving list and pictures of victims.
Pinochet is not the only dictator for whom Riggs undertook money laundering.
Equatorial Guinea is a small, oil-rich West African country dominated by a dictator, President Teodoro Obiang Nguema Mbasago. Obiang, his family and cronies live a life of luxury, while the rest of the country remains desperately poor.
The Permanent Subcommittee on Investigations report found that from 1995 until 2004, Riggs Bank administered more than 60 accounts and CDs for the government of Equatorial Guinea, Equatorial Guinea government officials or their family members. Money laundering to cover up corruption appeared to be routine.
Combined, these accounts represented the largest relationship at Riggs Bank, with aggregate deposits ranging from $400 to $700 million at a time.
Riggs does not deny these activities took place, and its internal investigation is continuing. A number of Riggs employees involved in the scandals have been fired or demoted. In July, Riggs announced that it was going to be acquired by PNC Financial Services Group (about which see the profile of AIG above) for more than $700 million. Ongoing legal problems at Riggs could derail the deal, which is supposed to be consummated early in 2005, but for now both parties say it remains on.
WAL-MART: THE WORKFARE COMPANY
You only have to look at the cover of Wal-Mart’s 2004 Annual Report to know the company is facing trouble unlike any it has had to handle before.
“It’s my Wal-Mart,” asserts the slogan on the cover of the annual report.
At the bottom are these claims: “Good Jobs * Good Works * Good Citizen * Good Investment.”
Missing is any reference to “Always Low Prices.”
Stepped up and novel community and legal challenges confronting the company are making the mammoth retailer expend energy on repositioning its image. Hence the annual report, the major image-oriented television ads, the sponsorships on National Public Radio — listened to by few of its shoppers — and the huge surge in campaign contributions. Wal-Mart and its managers gave more than $2 million to federal candidates in the last U.S. electoral cycle, more than any oil company, and almost triple the level the company donated in the 2000 elections.
The company faces a class action lawsuit on behalf of 1.6 million women workers, alleging rampant employment discrimination at Wal-Mart.
The Service Employees International Union (SEIU) has announced plans to spend $25 million a year with the ultimate goal of unionizing Wal-Mart, the largest private U.S. employer.
And the company — which has already lost more than 200 site fights — faces an even more-intensified resistance to its efforts to locate new stores, as it increasingly seeks to enter markets in more urban areas. In April, voters in the largely African-American and Latino working class town of Inglewood, California rejected a referendum that would have allowed Wal-Mart to open a Supercenter without being subject to normal municipal reviews.
But while on a bit of a public relations defensive, the company remains the colossus of U.S. — and increasingly global — retailing. It registers more than a quarter trillion dollars in sales. Its revenues account for 2 percent of U.S. Gross Domestic Product.
The company takes in more than one in five dollars spent nationally on food sales, and market researcher Retail Forward predicts Wal-Mart will control more than a third of food store industry sales, as well as a quarter of the drug store industry, by 2007. Wal-Mart is the largest jewelry seller in the United States, “despite the fact that the prime target market for jewelry — high-income women from 25 to 54 years — are the least likely of all consumers to shop for jewelry in discount channels,” as Unity Marketing notes. Wal-Mart is the largest outlet for sales of CDs, videos and DVDs. And on and on.
For two years running, Fortune has named Wal-Mart the most admired company in America. It is arguably the defining company of the present era.
The company’s business model has relied on new innovations in inventory management, focusing on ignored markets (low-income shoppers in rural areas — though this is now changing), and squeezing suppliers to lower their margins. But it has also relied centrally on undercompensating employees and externalizing costs on to society.
A February 2004 report issued by Representative George Miller, D-California, encapsulated the ways that Wal-Mart squeezes and cheats its employees, among them: blocking union organizing efforts, paying employees an average $8.23 an hour (as compared to more than $10 for an average supermarket worker), allegedly extracting off-the-clock work, and providing inadequate and unaffordable healthcare packages for employees.
Miller’s report’s innovation was in documenting how Wal-Mart’s low wages and inadequate benefits not only hurt workers directly, but impose costs on taxpayers. The report estimated that one 200-person Wal-Mart store may result in a cost to federal taxpayers of $420,750 per year — about $2,103 per employee. These public costs include:
“There’s no question that Wal-Mart imposes a huge, often hidden, cost on its workers, our communities and U.S. taxpayers,” Miller said. “And Wal-Mart is in the driver’s seat in the global race to the bottom, suppressing wage levels, workplace protections and labor laws.”
Wal-Mart’s abuses are giving rise to countervailing efforts, but it is an open question whether the company has amassed such power that it will be able to defeat such initiatives.
In California, in November, the company was able to stave off by a 51-to 49 percent margin a proposition that would have required every large and medium employer in the state to provide decent healthcare coverage for their workers, with the employer contribution set at a minimum of 80 percent of costs.
Wal-Mart dumped a half million dollars into the anti-Proposition 72 campaign just a week before the vote.
“As one of California’s leading employers, we care about the health of our 60,000 employees here,” said Wal-Mart spokesperson Cynthia Lin, in celebrating the defeat of Proposition 72. “That’s why we provide our employees with affordable, quality health care coverage.”
“Prop. 72 was never about Wal-Mart,” she claimed. “It was about allowing businesses to operate without unreasonable government mandates, it was about the survival of small businesses and it was about consumer choice in healthcare benefits.”
The biggest immediate challenge facing Wal-Mart is the class action lawsuit filed by its women workers. The women allege that Wal-Mart pays female workers less than men, promotes men faster than women and men above more competent women, and fosters a hostile work environment. A federal judge ruled in June that the case could proceed as a class action.
“We strongly disagree with his decision and will seek an appeal,” says company spokesperson Mona Williams. “While we cannot comment on the specifics of the litigation, we can say we continue to evaluate our employment practices. For example, earlier this month Wal-Mart announced a new job classification and pay structure for hourly associates. This new pay plan was developed with the assistance of third party consultants and is designed to ensure internal equity and external competitiveness.”
Liza Featherstone, who has chronicled the claims of the women employees in her book Selling Women Short, says women workers report “a pattern of arbitrary, very subjective decision-making by management.” They report business meetings being held at Hooter’s or strip clubs.
The contradiction of a self-righteously moral company — which won’t sell racy magazines or CDs with parental advisory labels — permitting such behavior is a reflection of women employees’ powerlessness. “Unlike its female workforce,” Featherstone writes, “the women who shop at Wal-Mart can’t be ignored, and many of them have conservative values.”
But while Wal-Mart is willing to bend to consumer demand on marginal issues like covering over the headlines on Cosmopolitan magazine, it is not so flexible on respect for worker rights. Nor is there any sign of a consumer rebellion on anything like the scale necessary to make the company revisit its employment policies.
Russell Mokhiber and Robert Weissman are co-authors of On the Rampage: Corporate Predators and the Destruction of Democracy (Monroe, Maine: Common Courage Press). Robert Weissman is general counsel for Essential Inventions, a nonprofit mentioned in the Abbott profile.