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Smoking Guns and the Law: Litigation and the Humbling of Big Tobacco
Behind the Lines
Taco Bell Cracks
Bowing to a pressure campaign launched by a Florida-based farmworker organization, the Coalition of Immokalee Workers (CIW), Taco Bell announced in March that it would pay a penny-per-pound surcharge on tomatoes to increase farmworkers’ pay. The company also agreed to work for legislative reforms to strengthen farmworker rights.
With the announcement, CIW agreed to end its three-year boycott of Taco Bell. The boycott had picked up steam especially on college campuses, where Taco Bell is a major presence.
“This is an important victory for farmworkers,” says Lucas Benitez, a leader of the Coalition of Immokalee Workers, “one that establishes a new standard of social responsibility for the fast-food industry and makes an immediate material change in the lives of workers. This sends a clear challenge to other industry leaders.”
Prior to the announcement of the Taco Bell concessions, the company secured an agreement with several of its tomato-grower suppliers, who employ the farmworkers, to pass through the company-funded equivalent of one-cent per pound directly to the workers.
“We recognize that Florida tomato workers do not enjoy the same rights and conditions as employees in other industries, and there is a need for reform,” says Emil Brolick, Taco Bell president. “We have indicated that any solution must be industry-wide, as our company simply does not have the clout alone to solve the issues raised by the CIW, but we are willing to play a leadership role within our industry to be part of the solution.”
Taco Bell is the largest fast-food chain serving Mexican-style food in the United States. CIW targeted the company because it is a major tomato purchaser — in 2004, the company bought approximately 10 million pounds of Florida tomatoes — and an industry leader. Taco Bell insisted on emphasizing that it buys only a small share of Florida tomatoes — less than 1 percent of the state’s tomato production.
BP Sorry for Killing 15
A deadly explosion ripped through BP’s massive Texas City, Texas facility in March, killing 15. It was the third fatal accident at the Texas City BP facility in the last four years.
BP said it had launched an internal investigation to determine the cause of the explosion and will cooperate with federal and state investigators.
In an April update, the company said the explosion “was a result of a very complex process upset that BP America is still striving to understand.”
The company said “it has completed a comprehensive review of every process unit’s safety protection system, and the company immediately addressed any issues identified or shut down work until the issues could be resolved.”
Mohamed Ibrahim, the first assistant district attorney in Galveston County, says that his office has not opened a criminal investigation into the BP matter. “We have no reason to believe at this point that it was anything but an unfortunate industrial accident,” Ibrahim says. “If OSHA [Occupational Safety and Health Administration] came to us and said it was a result of criminal recklessness, we would look at an investigation.”
BP’s U.S. facilities have had more than 3,565 accidents since 1990, ranking first in the nation, according to a 2004 report by the U.S. Public Interest Research Group (PIRG).
“The refining and chemical industry’s so-called Responsible Care plan lets the fox guard the chicken coop,” says Stephanie Carter, field organizer with Texas PIRG. “Accidents are happening at refineries and chemical facilities both in Texas and around the country. Oil refineries and chemical plants should take action to protect the public immediately, and not wait for another catastrophe to happen. They need to act now to switch to safer alternatives.”
Scammers Shut Down
Three operations that scammed low-income consumers out of more than $100 million by falsely promising easy debt relief have settled Federal Trade Commission (FTC) charges that their business practices were illegal. The scams actually worsened the situation of the preyed-upon victims, and plunged some into bankruptcy.
The companies will pay more than $6 million combined in consumer redress and are permanently barred from making deceptive claims about debt-related services.
The companies have effectively been shut down by the FTC, which took prior action to force the companies into receivership.
The three companies are the National Consumer Council, of California, Debt Management Foundation Services, of Florida, and Better Budget Financial Services, of Massachusetts.
“Consumers who want to get out of debt are looking for services to help relieve their financial troubles, not make them worse,” says Lydia Parnes, acting director of the FTC’s Bureau of Consumer Protection.
The National Consumer Council (NCC) functioned as a nonprofit front for the debt scam. NCC solicited customers through an aggressive telemarketing and direct mail advertising campaign that falsely promised free debt counseling, according to the FTC. The real purpose of the NCC’s activities, according to the FTC, was to generate leads for the other parties to the scam, who then charged consumers thousands of dollars in fees to enroll in their debt negotiation programs.
A court-appointed receiver determined that less than 2 percent of the consumers who enrolled in the defendants’ debt negotiation programs — 638 out of 44,844 consumers — actually completed them.
Drug Prices Skyrocket
Drug prices in the United States significantly outpaced inflation for the fifth straight year, according to an April AARP “Rx Watchdog Report.”
Analyzing prices that prescription drug manufacturers charged wholesalers in 2004 for 195 brand name prescription drugs widely used by people age 50 and older, the study found that the average price increase during 2004 was 7.1 percent.
Compared to the 2004 general inflation rate of 2.7 percent, the price hikes are the biggest one-year increase levied by brand name manufacturers in any of the past five years.
Since the end of 1999, manufacturers of 153 of these brand name drugs have raised their prices over two-and-a-half times the rate of general inflation. During that time, manufacturers’ drug prices have increased 35.1 percent on average, compared to an inflation rate of 13.5 percent.
The AARP study also reports on price changes for 24 of the 25 top selling brand-name drugs in 2003 that stayed on the market throughout 2004. All but one drug had manufacturer price increases that exceeded the 2004 rate of general inflation, and 16 drugs had price increases more than double that rate. The highest increase was 11.9 percent for the sleep medication Ambient.
CEO Pay Skyrockets
CEO salaries are soaring, corporate profits are hitting record highs and U.S. wages are sliding down.
That’s the economic snapshot in spring 2005.
Real wages in the United States fell by a half a percent from 2003 to 2004, according to a study released by the Economics Policy Institute and the Center on Budget and Policy Priorities, both based in Washington, D.C. This even though productivity has risen sharply since 2000.
Meanwhile, CEOs are doing a bit better. According to a study commissioned by the Wall Street Journal, “The median salary and bonus for chief executives in office at least two years soared 14.5 percent last year” to nearly $2.5 million. This marks the biggest bump up in executive pay since the annual study began in 1989.
Similarly, the New York Times reported that “the chief executives at 179 large companies that had filed proxies by [the end of March] — and had not changed leaders since last year — were paid about $9.84 million, on average, up 12 percent from 2003, according to Pearl Meyer & Partners, the compensation consultants.”
“We have seen a tremendous amount of interest among workers in holding CEOs and their boards accountable,” says AFL-CIO Secretary-Treasurer Richard Trumka. “They are rightfully outraged when they learn about jaw-dropping executive compensation packages. It’s time to put the brakes on runaway CEO pay.”
Harvard Out of Sudan
Harvard University will divest an estimated $4.3 million of stock in PetroChina Company Limited, in protest of the company’s support for the Sudanese government, university officials announced in April.
“This decision,” said a statement issued by the Harvard Corporation Committee on Shareholder Responsibility, “reflects deep concerns about the grievous crisis that persists in the Darfur region of Sudan and about the extensive role of PetroChina’s closely affiliated parent company, China National Petroleum Corporation, as a leading partner of the Sudanese government in the production of oil in Sudan.”
“Oil is a critical source of revenue and an asset of paramount strategic importance to the Sudanese government,” the statement continued, “which has been found to be complicit in what the U.S. Congress and U.S. State Department have termed ‘genocide’ in Darfur.”
The Harvard move came after months of student protest.
“We’re excited that Harvard is divesting its shares of PetroChina — it shows that administrators are listening to students,” Brandon Terry, a Harvard senior and divestment activist told the Chronicle of Higher Education. “The biggest problem that still remains is that Harvard does not have a transparent investment policy, so we don’t know if they have any other holdings in Sudan,” he said.
The Chronicle estimates Harvard held $4.3 million in PetroChina stock prior to the divestment announcement. The university’s overall endowment is $22.6 billion.