VOL 27 NO. 6
J'Accuse: The 10 Worst Corporations of 2006
by Russell Mokhiber and Robert Weissman
Meet the War Profiteers
by Charlie Cray
Multinationals to China: No New
by Jeremy Brecher, Brendan Smith and
Wall Street Rallies for Bush - And Seeks Payback
by Andrew Wheat
King Coal's Dark Reign
An Interview with
Behind the Lines
(No) Shame On the Street
Rural Bank Window Closed - Feudalism in Pakistan
The Lawrence Summers Memorial Award
Capitalism 3.0 - A Guide to Reclaiming the Commons
Names In the News
J'Accuse: The 10 Worst Corporations of 2006
by Russell Mokhiber and Robert Weissman
Selecting the 10 worst corporations of the year is more art than science.
We do, however, apply certain guidelines. One is that, barring extraordinary circumstances, we do not place companies on the list two years running.
The rationale for this guideline is that we want to diversify the pool of named companies (and there is a big pool of bad actors from which to select).
The downside is that we inevitably leave off companies who did something really bad in the previous year — solely on the grounds that they were malefactors the year before.
So, as a warm-up to the 2006 list, permit a quick review of the recent activities of those companies on the list in 2005.
BP: In March 2006, a leak in the Alaska pipeline that BP maintains led to the second biggest oil spill in Alaskan history. Then, in August 2006, BP was forced to shut down the pipeline because of massive corrosion problems the company had permitted to fester.
Delphi: Delphi continued in bankruptcy through 2006, plowing ahead with its shameful scheme to manipulate the bankruptcy system to escape wage and pension payments owed to past and present workers. Final arrangements are still pending for Delphi to emerge from bankruptcy, but it’s fair to say the company will have achieved much of what it desired — trashing its unionized wage and benefit structure, if perhaps not as fully as it fantasized doing.
Dupont: Dupont appeared on our list in 2005 for a decades-long cover-up on the effects of a chemical used to make Teflon and grease-resistant coatings. At the end of 2005, the company agreed to phase out its use, over the course of a decade. But the company continues to deny it has any harmful effect on humans. Meanwhile, a federal criminal investigation is ongoing.
ExxonMobil: In 2005, ExxonMobil appeared on our list for its global warming denialism, and price-gouging that resulted in record profits of $36 billion. In 2006, the company began massaging its position on global warming — ExxonMobil now agrees that “climate change is a serious and long-term challenge,” but doesn’t want governments to do anything serious about it — and its continued mass rip-off of consumers enabled it to rake in $39.5 billion in profits, a new record.
Ford: Ford lost more than $12 billion in 2006, the legacy of the company’s complete failure to recognize that the future rests with fuel efficient vehicles (and soon, petroleum-free transportation) rather than gas-guzzling giant SUVs. Investors took a big hit, but workers felt the worst impact; at the start of 2006, Ford announced it would eliminate a quarter of its U.S. jobs.
Halliburton: Halliburton continued with its scandalous looting of taxpayers. In a small but totally typical example, the Associated Press in September reported that a company whistleblower revealed in a lawsuit filed in 2005 that Halliburton’s KBR subsidiary in Iraq billed millions to U.S. taxpayers for nonexistent recreational activities. In July 2006, the Army fired Halliburton from its contract (which Halliburton called a routine decision to suspend the contract). The contract to rebid will be broken up into several pieces — Halliburton may yet end up as the overseer of the companies that take over its old contractual duties.
KPMG: KPMG, the accounting firm mired in controversy over the sweetheart deal it negotiated in 2005 to escape prosecution for peddling illegal tax shelter schemes, started off 2006 with a bang. On January 3, the esteemed accountants at KPMG agreed to pay $2.77 million for failing to disclose rebates the firm received for travel expenses billed to the U.S. government.
Roche: In July, the newspaper The Australian reported that Roche had spent a remarkable $49,000 on a dinner for 300 doctors. Held at a restaurant in the Sydney Opera House, the purpose of the dinner was to promote the drug makers’ pill rituximab, used to treat non-Hodgkin’s lymphoma. The dinner violated the Australian drug industry’s code that donated meals to doctors be “simple and modest.”
Suez: Suez struggled to hold on to its privatized water business, which seems increasingly non-viable in developing countries. In March, Argentina threw Suez out of the country, terminating its 30-year contract on the grounds that Suez had failed to make promised investments. Suez also left Bolivia in October, extracting a $5 million payment, but backing down on threats to sue the country’s government in international arbitration.
W.R. Grace: In 2005, W.R. Grace appeared on our 10 worst list after being indicted for its operations in Libby, Montana, a mining town where the company let hundreds be exposed to deadly doses of asbestos and then concealed the problem. In April 2006, the New York Times reported that “doctors at the clinic that has treated hundreds of asbestos victims accuse the company of trying to discredit them and force the clinic to close.”
Anyway, that’s an update on our 2005 list. We’ve got a whole new crop for 2006, presented herewith in alphabetical order.
ABBOTT: BULLYING THE PHILIPPINES
UNICEF and World Health Organization recommend exclusive breastfeeding in the first six months of life. This is particularly important in poorer countries, where newborns face greater health risks and the water used to make baby formula may be contaminated.
Nonetheless, and despite a decades-long global public health campaign to increase breastfeeding rates throughout the developing world, breastfeeding rates are low.
In the Philippines, less than half of all babies are exclusively breastfed for at least than one month, according to UNICEF. Only 16 percent of babies four to five months of age are still exclusively breastfeeding. In the Philippines, according to public health authorities, 82,000 children die each year before their fifth birthday. Improving breastfeeding rates is the single most effective action that can be taken to prevent these deaths.
The Filipino government decided to do something about this.
But the government’s public health measure has been blocked by Abbott and other infant formula makers.
In July, the government issued regulations to ban the marketing of infant formula for babies under two years of age.
The Pharmaceutical and Health Care Association of the Philippines (PHAP), whose members include U.S. formula companies (Abbott Ross, Mead Johnson and Wyeth), and Gerber (now owned by Swiss Novartis), promptly sued the government to stop implementation of the new rules.
The Philippines Supreme Court declined to issue an injunction to stop the new rules from going into effect.
Then, on August 11, Thomas Donohue, the head of the U.S. Chamber of Commerce, wrote a letter to Philippine President Gloria Arroyo. Donohue complained that the regulation was overbroad and unjustified, and adopted through improper purposes. His complaint came with a threat: “If regulations are susceptible to amendment without due process, a country’s reputation as a stable and viable destination for investment is at risk.”
Four days later, the Supreme Court reversed itself and issued an injunction against the new rules.
The companies’ interference has mobilized women and public health organizations in the Philippines. In one action, more than a thousand breastfeeding mothers rallied in Manila.
“We want to make companies accountable for the harmful effects of babyfood products that undermine the power of breastfeeding and food security in the Philippines,” Ines Fernandez, executive director of Arugaan, a Filipino breastfeeding organization, told UNICEF.
Meanwhile, Abbott has also come under fire for its handling of AIDS drugs. Its product Kaletra is a vital drug for treatment of people with HIV/AIDS, but the company maintains inflated prices for the drug in many developing countries, and has failed to register a variant of its drug that does not require refrigeration in many poor nations.
In August, the company announced a new discount deal for developing countries. It set a price of $500 per patient a year in least developed countries, and $2,200 in low-income and low-middle-income countries.
The company’s new release quoted Dr. Robert Redfield, director of Clinical Care and Research, Institute of Human Virology in Baltimore as saying, “as a caregiver of HIV patients in the developing world, I am pleased with Abbott’s continued effort to develop new and innovative programs related to medication costs. These efforts will enable individual countries to maximize their ability to provide medicine for their citizens.”
Perhaps Redfield thinks Abbott deserves congratulations. Most public health advocates do not. They say the price remains out of reach, especially in middle-income countries, and complain that Abbott continues to widely register its heat-resistant version.
“Where is Abbott’s Kaletra?” asks Anuja Singh, a member of the Student Global AIDS Campaign and a student at Columbia University. “Abbott is in possession of life-saving medication — but the people who need it do not have it.”
After a case lasting seven years and a trial unfolding over nine months, Federal District Court Judge Judith Kessler in August 2006 issued a ruling in United States v. Philip Morris.
Adjudging Philip Morris USA, its parent company Altria, and the other leading tobacco companies in the United States to be “racketeers” under the terms of the Racketeering-Influenced and Corrupt Organizations Act (RICO), she wrote: “What this case is really about … [is] an industry, and in particular these defendants, that survives, and profits, from selling a highly addictive product which causes diseases that lead to a staggering number of deaths per year, an immeasurable amount of human suffering and economic loss, and a profound burden on our national healthcare system. Defendants have known many of these facts for at least 50 years or more. Despite that knowledge, they have consistently, repeatedly and with enormous skill and sophistication, denied these facts to the public, to the government and to the public health community. Moreover, in order to sustain the economic viability of their companies, defendants have denied that they marketed and advertised their products to children under the age of 18 and to young people between the ages of 18 and 21 in order to ensure an adequate supply of ‘replacement smokers,’ as older ones fall by the wayside through death, illness, or cessation of smoking. In short, defendants have marketed and sold their lethal product with zeal, with deception, with a single-minded focus on their financial success, and without regard for the human tragedy or social costs that success exacted.”
In her more than 1,600-page ruling, Kessler spelled out in excruciating detail how Philip Morris and the other defendants carried out their deadly conspiracy to deceive and addict.
For example, Kessler found that “Philip Morris intensively studied nicotine and both its pharmacological and physiological effects on smokers (sometimes called addictive, dependence producing or reinforcing effects) in an effort to increase its market share within the industry. However, Philip Morris withheld from the public its internal knowledge and acceptance that smoking, because of nicotine, was addictive.”
As evidence, Kessler noted that one-time Philip Morris Principal Scientist William Dunn “observed that while Philip Morris would continue its research program ‘to study the drug nicotine, we must not be visible about it.’ And while the program depended on a ‘heavy commitment’ by Philip Morris, Dunn wrote that ‘our attorneys, however, will likely continue to insist on a clandestine effort in order to keep nicotine the drug in low profile.’”
Similarly, she found that since the 1970s Philip Morris has used brand descriptors such as “light” and “ultra light” to suggest, misleadingly, that lower tar and nicotine cigarettes are less harmful.
Citing statements from James Morgan, who was brand manager of Marlboro from 1969 to 1972, during the time when Philip Morris introduced Marlboro Lights, its first “light” cigarette, and who subsequently became CEO of the company, Kessler found, “Philip Morris made a calculated decision to use the phrase ‘lower tar and nicotine’ even though its own marketing research indicated that consumers interpreted that phrase as meaning that the cigarettes not only contained comparatively less tar and nicotine, but also that they were a healthier option.”
She also concluded that Philip Morris markets to young people, including those under 18. Philip Morris and other defendants’ “marketing activities are intended to bring new, young and hopefully long-lived smokers into the market in order to replace those who die (largely from tobacco-caused illnesses) or quit,” Kessler found. “Defendants used their knowledge of young people to create highly sophisticated and appealing marketing campaigns targeted to lure them into starting smoking and later becoming nicotine addicts.”
“As a result,” she determined, “88 percent of youth smokers buy the three most heavily advertised brands — Marlboro, Camel and Newport. Fewer than half of smokers over the age of 25 purchase these three brands. For example, in 2003, Marlboro, the most heavily marketed brand, held 49.2 percent of the 12-to-17 year old market but only 38 percent of smokers over age 25.”
“Defendants spent billions of dollars every year on their marketing activities in order to encourage young people to try and then continue purchasing their cigarette products in order to provide the replacement smokers they need to survive.”
And Kessler found that “Philip Morris suppressed and concealed many scientific research documents, even going so far as to send them to a foreign affiliate in order to prevent the disclosure of documents in litigation and in federal regulatory proceedings.” For example, “in 1970, Helmut Wakeham, Philip Morris’s vice president for research & development, recommended that Philip Morris purchase INBIFO, a research facility in Cologne Germany, arguing that Germany ‘is a locale where we might do some of the things which we are reluctant to do in this country.’”
While Judge Kessler’s findings were a devastating indictment of Philip Morris and the rest of Big Tobacco, she pronounced herself handcuffed in terms of remedies. A previous appellate court ruling had limited the judge’s ability to impose monetary penalties or remedies based on the prior misconduct of the defendants.
Philip Morris is appealing the ruling.
“Philip Morris USA and Altria Group, Inc. believe much of today’s decision and order are not supported by the law or the evidence presented at trial, and appear to be Constitutionally impermissible or infringe on Congress’ sole right to provide for the regulation of tobacco products,” said William S. Ohlemeyer, Altria Group vice president and associate general counsel.
“Moreover, the conclusion that PM USA and Altria are reasonably likely to engage in future wrongdoing is flawed in light of the profound and permanent changes in the way cigarettes are marketed today, including requirements imposed by agreements with the state attorneys general and other voluntary — and irrevocable — changes made by our companies,” he said.
BAE, BLAIR, BRIBERY AND THE BENEFITS OF BREAKING THE LAW
Bribery is a menace that undermines democracy.
Yet, despite laws prohibiting bribery, corporations continue to bribe worldwide.
Because corporations consider a law violation as merely a cost of doing business.
Let us not forget the advice of two of the most revered corporate law professors in the United States — University of Chicago Law Professors Frank Easterbrook and Daniel Fischel — authors of the number one cited work in legal academia over the last 25 years — The Economic Structure of Corporate Law — who advocate that corporations violate the law if profits from the law-violating activity outweigh the fine.
But that’s not to say that corporations won’t go to the end of the world to try and beat back those who would accuse of them of criminal activity.
Take the case of BAE Systems — one of the world’s largest military contractors.
In 2006, the cops in the UK were deep into a bribery investigation of BAE in Saudi Arabia.
Then the UK’s Serious Fraud Office took some serious political heat for its investigation. The heat was generated by BAE and the Saudis. And the prosecutors couldn’t stand the heat. So, they got out of the kitchen.
As in — they closed down the investigation.
Well, according to a press release from the prosecutors in the Serious Fraud Office:
“This decision has been taken following representations that have been made both to the Attorney General and the Director of the SFO concerning the need to safeguard national and international security. It has been necessary to balance the need to maintain the rule of law against the wider public interest. No weight has been given to commercial interests or to the national economic interest.”
BAE and the Saudis had been lobbying to close down this investigation for months. More than $19 billion or so in BAE contracts was on the line.
Of course, no weight was given to these commercial interests.
In December 2006, Prime Minister Tony Blair defended the move to close down the investigation by implying that it would hurt the UK’s relationship with Saudi Arabia.
“Our relationship with Saudi Arabia is vitally important for our country in terms of counter-terrorism, in terms of the broader Middle East, in terms of helping in respect of Israel-Palestine, and that strategic interest comes first,” Blair said.
Wait a second? Shut down a bribery investigation as a way to enhance the peace process?
A coalition of more than 40 public interest groups wrote to Prime Minister Tony Blair that “the early termination of the investigation for reasons that do not relate to the legal merits of the case sends the message that companies trading with countries that a government claims to be of strategic importance are above the law and can bribe with impunity.”
The groups pointed out to Blair that the UK is a signatory to the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions (the OECD Antibribery Convention).
Article 5 of the convention requires that the investigation and prosecution of foreign bribery “shall not be influenced by considerations of national economic interest” or “the potential effect upon relations with another State.”
It’s not as if the BAE case is an isolated instance of big corporations getting their way through bribery.
According to the Guardian paper in London, a $12 million BAE bribery scandal is brewing in Tanzania.
Also according to the Guardian, Robin Cook, the former foreign secretary under Blair, has written his memoirs in which he notes that “I came to learn that the chairman of BAE appeared to have the key to the garden door to No. 10. Certainly I never knew No. 10 to come up with any decision that would be incommoding to BAE.”
BAE says it does not comment on corruption allegations.
In a question-and-answer statement, it says, “There have been several media reports relating to allegations made against our Company. None of these allegations has been substantiated. We will not tolerate bribery or other attempts to influence improperly the decisions of customers and suppliers. The intent of our policies is to establish compliance with the law as the minimum standard and to aim for higher standards where possible.”
BOEING: OFF THE HOOK, AGAIN & AGAIN
Up until a couple of years ago, if you were a major U.S. corporation and you engaged in criminal wrongdoing, and some insider had the goods on the company and could convince a federal prosecutor to bring a case, there was a good chance that the corporation would be forced to plead guilty to a crime.
Now, the odds are running the other way.
The corporate defense lawyers have federal prosecutors on the run.
Now, if you are a corporate insider, and you have the goods on corporate criminal wrongdoing — the best that you can expect in most cases is a deferred prosecution agreement or a non-prosecution agreement.
These agreements allow the corporation to clean house, fire a few “rogue” employees, cooperate with federal authorities in putting the individual wrongdoers behind bars, admit no corporate wrongdoing — and move on to the next crime.
Case in point: Boeing.
In May, the Justice Department announced a tentative agreement with Boeing to resolve two entirely separate cases of apparent criminal wrongdoing — “concerning Boeing’s hiring of former Air Force acquisition official Darleen Druyun in 2002 and the investigation by the United States Attorney’s Office for the Central District of California regarding possession of a competitor’s information in connection with launch service contracts with the Air Force under the Evolved Expendable Launch Vehicle Program and with a task order with NASA for 19 missions under its launch services contract.”
In the Evolved Expendable Launch Vehicle Program scandal, Boeing acquired 25,000 pages of bidding documents from its sole competitor, Lockheed Martin. It then used the information to set its bids just below those of Lockheed. The government and taxpayers were thus cheated of the benefits of genuine competition.
In the elaborate Darleen Druyun affair, Air Force contracting officer Druyun admitted doing a variety of “favors” for Boeing. In the Pentagon’s misguided deal to lease rather than buy tankers from Boeing, Druyun admitted that she “agreed to a higher price for the aircraft than she believed was appropriate.” Boeing reciprocated for these gifts — ripoffs of taxpayer money — by hiring her. Her hiring was managed at the highest levels of the company, involving then-Chief Financial Officer Michael Sears. Druyun and Sears were sentenced to jail time for their crimes.
There was no such pain for Boeing. Like most corporations that violate the criminal law, it was able to cut a deal. Even by the degraded standards of the day, Boeing was able to exact some extraordinary concessions. Boeing was forced to pay a $615 million fine — modest for the company, especially in the context of its wrongdoing — but the government agreed to describe the penalty payment from Boeing as a potentially tax deductible “monetary penalty” rather than a “criminal penalty.” And the deal permits Boeing not to acknowledge that federal prosecutors had sufficient evidence to warrant felony charges.
Among other advantages, these concessions will assist the company in defending itself in civil litigation. This comes on top of the main benefits: no criminal charges, no ongoing scrutiny of the company’s performance in the context of a criminal prosecution, no criminal penalties.
Perhaps the most audacious innovation of the Boeing non-prosecution agreement is that it resolves not just one instance of potential criminal activity, but two. One of the key factors in the Justice Department’s guidelines for prosecuting companies (known as the Thompson Memorandum), and in any common-sense exercise of prosecutorial discretion, is whether the wrongdoer has engaged in repeated violations of the law. Here by definition Boeing had engaged in repeat violations, for the non-prosecution agreement settled two brazen and potentially criminal abuses of the contracting process. It should also be noted that Boeing has a record replete with other cases of serious wrongdoing (most resolved civilly).
From Boeing, it was the typical corporate line — that’s all in the past. “We take full responsibility for the wrongful acts of the former employees who brought dishonor on a great company and caused harm to the U.S. government and its taxpayers,” Boeing CEO Jim McNerney told the Senate Armed Services Committee in August. Note: “former” employees.
Now, everything has changed, McNerney said. “In my 14 months as the company's chairman, president and CEO, I have made it my mission to understand the root causes of what went wrong in years past. And I can attest that those former employees referred to in the settlement do not represent the people of Boeing, who are devoted to conducting their work ethically and in the best interests of our customers and our country.”
Of course, as the Justice Department noted in announcing the deal, “the company is fully cooperating with the government’s investigation.”
Now, would the federal government make a similar deal with, say, the mafia?
Imagine reading the following: “Under a deal cut with the federal government, the mob agreed to pay $615 million and the United States agreed not to bring criminal charges related to the conduct in part because ‘the mob is fully cooperating with the government’s investigation.’”
We didn’t see the argument against corporate criminal liability being made by the Chamber of Commerce or the white collar bar when the feds were cracking down on the mob.
They didn’t say — go after the individual mob bosses, but forget the enterprise.
In fact, the FBI and the Justice Department were so concerned about mob “enterprise liability” as they called it, that they got passed through the Congress a special law to help them deal with the problem — the RICO Act, the very law used innovatively to go after the tobacco companies.
Putting away individuals is not enough. The corporate culture poisons the system. You have to deal with the organization, the enterprise, the corporation, the mob.
You would get the impression from listening to the onslaught of propaganda emanating from the big corporate law firms that corporations are innocent vessels — it’s the corrupt individuals who are evil.
Put them behind bars. Let the corporation do its good work.
In fact, corporate crime and violence has inflicted far more damage on society than all individual wrongdoing combined.
And that’s why’s its important to preserve corporate criminal liability.
The criminal law is the big stick in society’s bag of tricks for controlling immoral, illegal and anti-social behavior.
So, why not use it against society’s most dangerous criminals?
It’s important to be able say — with legal justification — to those who spend billions on public relations campaigns to make themselves look good, “J’accuse — you are a criminal.”
Exxon is a criminal. ADM is a criminal. Genentech is a criminal. Chevron is a criminal. Coors is a criminal. Tyson is a criminal. GE is a criminal. Teledyne is a criminal.
All convicted of crimes in the 1990s, before the anti-corporate crime cult took hold of our minds and legal system.
Today’s wrongdoers get off easy, and feel no shame.
Boeing in fact feels so little shame that it has now entered into a joint venture with Lockheed, its sole competitor in the satellite launch business and the company from which it stole thousands of proprietary documents.
In October, the Federal Trade Commission (FTC) blessed the creation of the joint venture, which it acknowledged will create a durable monopoly, raise prices and reduce innovation.
The FTC let the deal go through because the Defense Department — the sole customer for the joint venture — endorsed it.
But whether the Pentagon just cravenly bows to the wishes of contractors, or is fooling itself, or both, it is a safe prediction that the joint venture approval will lead not to speeded-up satellite launches, but further delays. And no one will be in position to do anything about it, because there won’t be any competitors.
FIRSTENERGY: NUCLEAR POWER IS NOT THE ANSWER
In January 2006, Akron, Ohio-based FirstEnergy’s Nuclear Operating Company agreed to pay $28 million to settle criminal charges that it made false statements to the U.S. Nuclear Regulatory Commission.
Now we agree with Dr. Helen Caldicott that — as she put it in the title of her recent book — Nuclear Power is Not the Answer.
But if you are going to run a nuclear power facility, you can’t lie to the regulators. And if you do, you should pay the price.
Was FirstEnergy forced to plead guilty?
Instead, it was charged with crimes, but the criminal prosecution was deferred — if FirstEnergy is a good boy for a couple of years, the charges will be dropped.
No harm, no foul.
Under the agreement, the company admitted that the government was able to prove that its employees, acting on its behalf, knowingly made false representations to the Nuclear Regulatory Commission (NRC) in the course of attempting to persuade the NRC that its Davis-Besse Nuclear Power Station was safe to operate.
Prasoon Goyal, a design engineer, also accepted and entered into a deferred prosecution agreement with the government.
In addition, two former employees and one former contractor of the company were charged in a five-count indictment for allegedly preparing and providing false statements to the NRC.
Federal officials alleged that David Geisen, Andrew Siemaszko and Rodney Cook falsely represented to the NRC that past inspections of the plant were adequate to assure safe operation until February or March of 2002.
“By misleading the NRC about its prior safety inspections, the company failed to meet its regulatory obligations and violated the public’s trust,” said Assistant Attorney General Sue Ellen Wooldridge for the Justice Department’s Environmental and Natural Resources Division. “The deferred prosecution agreement entered today involves a full admission of responsibility by the company and includes a financial penalty that reflects the revenue that the company realized by misleading the NRC and delaying required safety inspections at the Davis-Besse facility.”
The company owns and operates the Davis-Besse Nuclear Power Station, which is located on the southwestern shore of Lake Erie, near Oak Harbor, Ohio.
To produce energy, the plant utilizes pressurized water reactors to heat water to approximately 600 degrees Fahrenheit through the process of nuclear fission. At that temperature, the reactor coolant water — which is sealed inside a reactor pressure vessel — reaches a pressure of 2000 pounds per square inch. The reactor coolant is then used to super-heat steam to drive turbines that generate electricity.
Reactor operators use two systems to control the rate of fission.
In one, they can raise or lower vertical control rods in the reactor core to absorb the neutrons that drive the reaction. The machinery that raises and lowers the control rods is attached to the reactor vessel head of the reactor pressure vessel. Nozzles pierce the dome-shaped head and the control rods are raised and lowered through those nozzles. The Davis-Besse reactor vessel head had 69 nozzles.
In the 1990s, some reactors in power plants, like Davis-Besse, started to develop cracks where the nozzles were welded to the reactor vessel head. This cracking could lead to breaks where control rod nozzles penetrated the steel-walled vessel that contained the nuclear fuel and the pressurized reactor coolant water, resulting in a potentially serious accident that would stress the plants’ safety systems.
Engineers predict that a broken nozzle, propelled by reactor coolant at 2000 pounds per square inch, would violently launch itself out of the reactor vessel head, leaving a hole through which reactor coolant would escape into the containment building.
In August 2001, following reports of nozzle cracks, the NRC issued Bulletin 2001-01, requiring reactor operators to report on their plant’s susceptibility to cracking, the steps they had taken to detect it, and their plans for addressing the problem in the future.
Any licensee that did not plan to inspect the reactor vessel head for signs of cracking by December 31, 2001 was required to justify operation beyond that date.
Federal officials said that in the months following the issuance of Bulletin 2001-01, the company submitted five letters to the NRC, arguing that its past inspections were adequate to assure safe operation until February or March 2002, at which time the plant had a prescheduled shut-down.
Federal officials charged that in order to persuade the NRC that their plant was safe to operate until the prescheduled shutdown, company engineers and contractors — including Geisen, Siemaszko and Cook — presented false information in its submissions to the NRC.
The federal indictment charges that the defendants prepared and submitted false and misleading responses to the NRC’s bulletin and concealed material information, eventually persuading the NRC that Davis-Besse was safe to continue operation until February 15, 2002.
Upon the scheduled shutdown in March 2002, workers discovered a pineapple-sized cavity in the head of the reactor vessel at Davis-Besse.
Subsequent analysis showed that this hole was the result of corrosive reactor coolant leaking through a nozzle crack.
In addition to alleging false and misleading statements to the NRC, the indictment alleges that Geisen, Siemaszko and Cook lied about the extent of inspections done in 1996, 1998 and 2000.
Two of the defendants, Geisen and Siemaszko, were also charged with providing the NRC with photographs bearing captions that falsely indicated generally good conditions for visual inspections.
As part of the settlement agreement, the company will pay more than $23 million in fines and will spend an additional $4.3 million on community service projects.
No guilty plea.
As is typical in such cases, FirstEnergy expressed regret, chalked up the “mistake” to a bygone era and said that the overall experience was positive. “FENOC [First Energy's Nuclear Operating Company] regrets the significant performance deficiencies that led to the reactor head issue and accepts full responsibility for the failure to accurately communicate with the NRC,” said FENOC President and Chief Nuclear Officer Gary R. Leidich. “We have learned much from this experience, and FENOC is a better and stronger company today than in 2001 when this occurred. The agreement closes an important chapter on the Davis-Besse reactor head issue for the company. FENOC will continue to focus on safe, reliable plant operations, and do nothing to retreat from its recovery nor erode the trust it has regained.”
Even when the company engages in run-of-the-mill pollution with visible consequences — the fines are nothing, the slap is a tap.
In Pennsylvania, the Department of Environmental Protection fined FirstEnergy Generation Corp. $25,000 for a “stack rain out” that covered more than 300 Beaver County homes and properties in a black, sooty material July 22, 2006.
The material came from the tall stack of the company’s Bruce Mansfield power plant in Shippingport Borough and rained over a two-mile area that extended from the borough into Raccoon Township.
“This was a significant event that affected hundreds of nearby residents,” DEP’s Kenneth Bowman said. “We recognize that FirstEnergy worked to clean up the sites by removing the material from public and private properties. But the company still must pay a price because of the nature and scope of the incident.”
The $25,000 fine — the maximum penalty allowed by the state’s Air Pollution Control Act — was paid to the Clean Air Fund, which finances air quality improvement projects across the commonwealth.
DEP analysis of samples of the material taken from sites in Shippingport and Raccoon Township showed elevated levels of arsenic.
Analysis of samples taken by FirstEnergy from the facility also showed elevated levels of arsenic.
KROGER: NOT TRUTHFUL TO THE OUTSIDE WORLD
Kroger Co. is a $60 billion corporation based in Cincinnati, Ohio.
It owns more than two dozen supermarket and department store chains — including Kroger’s, Fred Mayer and Ralphs.
Ralphs is based in southern California.
On October 10, 2006, Kroger’s chair and CEO, Dave Dillon, gave a speech to a group of analysts.
“A company is an artificial device that the government allows us to form, but it is nothing more than a bunch of people,” Dillon said. “And those people coming together for a common purpose also have to define themselves and they do through their values. And at Kroger, when we began this journey about five years ago or so, we decided we need to identify in what do we believe. What were the values that we were going to hold true. And there were six that we identified. I’d like to talk about them each briefly. The first is honesty, the second is integrity, the third is safety, the fourth is diversity, the fifth is inclusion and the sixth is respect. So let’s go back to those. Honesty is probably obvious, truthful to one another, truthful to the outside world.”
At about the time he was speaking these words, one of Kroger’s company’s, Ralphs, was negotiating a guilty plea with federal officials in California for one of the more audacious union-busting schemes in recent history.
Grocery unions were negotiating a new contract in 2003. The supermarkets in the Los Angeles area claimed they were being squeezed by big box stores like Wal-Mart.
And they threatened to pull the fully paid health benefits to their more than 60,000 grocery workers.
The unions struck Vons — and as a show of solidarity with their corporate brother, Ralphs and Albertsons locked out their workers.
One hard and fast federal rule governing strikes — companies can’t hire union workers during the strike.
And during the strike, when asked, Ralphs said it hadn’t hired union workers.
After all, let’s recall Dave Dillon’s words about the values Ralphs hold dear — “Honesty is probably obvious, truthful to one another, truthful to the outside world.”
So, what was Ralphs doing during the strike?
Hiring union workers.
Ralphs was dishonest about it.
And untruthful to the outside world about it.
In November 2006, the company pled guilty to a number of criminal acts in connection with the strike.
Federal officials in Los Angeles said this is what happened:
The unions struck Vons on October 11, 2003. Pursuant to a secret agreement among three grocery store chains, Albertsons and Ralphs Grocery locked out their grocery workers on October 12. While workers picketed their stores, Ralphs, Vons and Albertsons continued to operate with management and temporary workers.
During labor disputes, federal law allows an employer to lockout all union employees, but prohibits “selective lockouts” where only a portion of the union workforce is locked-out.
On Halloween 2003, the unions decided to stop picketing Ralphs stores, which led to a huge increase in business at its supermarkets. The increase in business caused problems at the store level because Ralphs was operating without its normal workforce.
In order to deal with the influx of customers, Ralphs began selectively rehiring locked-out workers — many under false names and false social security numbers — in order to operate with experienced personnel.
The lockout and strike lasted 141 days and affected approximately 65,000 to 70,000 grocery workers, making it the longest and largest labor dispute involving the grocery industry in the United States.
Ralphs admitted that during the course of this labor dispute it falsified hundreds of employment records and filed hundreds of false tax forms with the IRS and Social Security Administration. Ralphs also admitted that a number of its executives participated in the criminal conduct.
Ralphs pled guilty to several criminal charges of illegal rehiring hundreds of locked-out union workers. The company paid a $20 million criminal fine and $50 million in compensation for Ralphs’ workers, their health benefit and pension funds, and their unions.
A federal judge in Los Angeles put the company on three-year probation.
At the plea hearing, United States District Judge Percy Anderson said that he was “surprised, disturbed and disappointed” by Ralphs crimes, which were committed to gain a “tactical, unfair advantage” over its employees and unions.
The company’s conduct, according to the judge, had the effect of “eroding public confidence in the collective bargaining system.”
Ralphs, Judge Anderson stated, had a “pervasive and powerful corporate culture” that “exalted profits” with a “win-at-any-costs” approach.
KING COAL: MASSEY ENERGY, DON BLANKENSHIP, AND THE SKEWERING OF WEST VIRGINIA
Massey Energy is the largest coal producer in West Virginia. It’s the fourth largest coal company in the United States. It’s the number one mountain top removal coal producer.
Blow off the top of the mountain with explosives, remove the coal from the exposed seams, dump the wastes in the valley below.
Hey, this produces clean coal.
How do you clean the coal?
Well, you clean the coal with nasty chemicals. You store the clean coal in giant silos — and then take the toxic waste product and put it in a giant human-made pond.
At the Massey facility in Sundial, West Virginia, the pond sits high above the Marsh Fork Elementary School.
Ed Wiley used to work for a contractor at the site. And his granddaughter went to Marsh Fork.
Wiley is worried that the human-made dam he helped build will someday give way, sending 2.8 billion pounds of toxic slurry onto the community and elementary school below.
Appalachia has seen such disasters before. In February 1972, in Logan County, West Virginia, a Pittston Coal Company coal slurry impoundment dam blew, unleashing 132 million gallons of black waste water upon the residents of 16 coal mining communities in Buffalo Creek Hollow.
One hundred and twenty-five people were killed, 1,121 were injured, and over 4,000 were left homeless. Saunders, West Virginia was completely leveled.
In October 2000, a Massey Energy impoundment in Kentucky blew, sending 306 million gallons of sludge into local waterways — one of the worst environmental disasters in Kentucky history.
So, Ed Wiley has reason to be concerned.
Wiley wants the school shut down and moved to a new location. Massey and Governor Joe Manchin can’t seem to find the will to do it.
That’s in part because Don Blankenship has Manchin and the state by the proverbial cojones.
Wiley was so upset with the threat to the school, its children and the surrounding community — not just from the impoundment — but from the deteriorating quality of air and water in the area — that he quit his job and took off on trek throughout West Virginia to Washington, D.C. to publicize the problem
At one stop, in Berkeley Springs, West Virginia, Wiley was asked why during his entire slide show presentation of the problem with the Massey site he never mentions the company’s name or the name of the company’s CEO.
He says he was told by major environmental groups who were handling his tour not to mention the names of his antagonists because the company and its CEO were a nasty bunch of people.
The less their names were mentioned, the better.
But Massey’s and Blankenship’s reputations as corporate bullies are well deserved. In 2004, Blankenship blew up the state’s political landscape when he spent $3.5 million of his own money to defeat Warren McGraw, a West Virginia Supreme Court justice who had ruled against Massey and the coal companies on a wide range of issues.
Guess what Blankenship called the 526 committee he set up defeat McGraw. “For the Sake of the Kids.”
Blankenship’s message was that McGraw let sex offenders roam among children. McGraw was defeated. A no-name — Brent Benjamin — was elected. And the state has been in a downward spiral ever since.
In the 2006 election, Blankenship dumped more than $3 million to pull the state legislature away from the Democrats — to no avail.
According to the Wall Street Journal, more than 13 people, including some contract employees, have died while working at Massey-owned mines in the past five years.
Massey is also under federal criminal investigations for some of those deaths.
Federal prosecutors have opened a criminal investigation into the January 2006 deaths of two miners at a Massey Energy mine in Logan County, West Virginia, according to West Virginia Public Radio. The mine had recurrent problems with broken or missing fire-fighting equipment. According to the report, the state had fined Aracoma Coal’s Number One mine 28 times for bad fire equipment over the last two and a half years. One former miner told West Virginia Public Radio’s Dan Heyman that the water hoses did not work when the workers needed them to get the deadly blaze under control.
Heyman said that the Mine Safety and Health Administration (MSHA) had requested a federal criminal probe after it issued several citations in its own review of the fire.
A former miner at the mine, Brandon Conley, told Heyman that the exact same thing happened at the same mine, a month before.
“The same exact thing that happened on the 23rd,” Conley said. “I could see all kinds of belt shavings, pretty much flaming. And there was all kinds of smoke, pretty thick smoke. My CO monitor was going off.”
Conley quit Aracoma, a subsidiary of Massey, soon after the deadly January fire, saying he did not want to go back to work where his friends died.
“The fire hose did not match up to the water line,” Conley said of the December 23 fire. “And I can tell you that the fire suppression and also the management knows that the fire suppression on that particular belt did not work.”
But don’t think Massey doesn’t care. Its corporate statement proclaims, “We are committed collectively and individually to the health and safety of each employee.”
And the company says it “takes very seriously its responsibility to protect, restore and reclaim land and communities where it operates. Along with our regular comprehensive land reclamation activities, we are focused on restoring and improving the lands impacted by mining-related activities.”
For example, in the very Logan County area where Massey has had so many safety problems, the company says it is working with local officials to develop a “state-of-the-art” dirt racetrack on the “reclaimed” portion of a former mine.
PFIZER: INTIMIDATION IS OUR GAME
When it comes to the pharmaceutical industry, Pfizer is the biggest and baddest kid on the block.
Over at the World Trade Organization in Geneva, some staffers refer to the Agreement on Trade-Related Aspects of Intellectual Property (TRIPS — the agreement mandating all WTO members adopt U.S.-style patent systems) as the Pfizer Agreement. That’s because Pfizer played such a crucial role — operating through business coalitions like the Intellectual Property Committee — in drafting TRIPS and ensuring that it would be adopted as one of the WTO agreements.
Pfizer has built a business model of acquiring — or, occasionally, innovating — potential blockbuster drugs, and then marketing them like crazy. The company’s business model — like that of most of Big Pharma — has been premised on extended patent and other monopoly protections for its products, permitting it to charge super-high mark-ups sufficient to cover its major cost — marketing — and still secure megaprofits.
In its ruthless drive to defend its monopolies worldwide, Pfizer takes no prisoners.
Just ask Leticia Barbara Gutierrez and Ernilio Polig, Jr. Gutierrez is the director of the Philippines’ Bureau of Food and Drugs, the Filipino equivalent of the U.S. Food and Drug Administration. Polig is a top attorney at the agency.
In March 2006, Pfizer filed suit against not just BFAD, but Gutierrez and Polig in their personal capacities. The suit also named the Philippine International Trading Corporation (PITC) as a defendant. The Pfizer lawsuit charged that BFAD and its top officials, along with PITC, were infringing on a Pfizer patent by permitting limited imports of Pfizer products without the company’s permission. Pfizer sought money damages for the claimed harm to the company — not just from BFAD, but from Gutierrez and Polig.
This is a nightmare scenario that has long hung over drug regulators in developing countries, who fear that if they take measures to speed the introduction of price-lowering generic competition, they will be held personally liable for the purported unjustified harms to patent holders. Just the thought of such action has exerted a major deterrent on drug regulators. Pfizer’s action was designed to send a message not just in the Philippines, but around the world.
The Pfizer message was especially powerful, precisely because the company’s claim was so tendentious. It was complaining about practices that are permitted in the United States, Europe, Australia and many other countries, and had long been considered acceptable in the Philippines.
The Philippines has among the highest drug prices in the world. A new PITC program seeks to shop on the world market for the lowest prices available. But the agency is not challenging existing patent rights, and it is not seeking to import commercial quantities of brand-name products while they remain on patent — even though such imports are completely permissible under WTO rules.
What PITC does intend to do is import cheaper versions of drugs once they go off patent. In order to begin such imports immediately upon patent expiration, PITC needs to begin the process of obtaining regulatory approval for the products it will import while the patents remain in effect. To do so, it has to import limited versions of the products it hopes later to import in quantity, solely for the purpose of conducting tests to obtain regulatory approval.
This “early working” of patents is understood as an exception to patent rights in the TRIPS agreement, and is standard practice in the United States and other industrialized countries.
One drug that PITC has targeted is amlodipine besylate, a hypertension drug sold by Pfizer under the brand name Norvasc. Pfizer charges more than seven times as much for Norvasc in the Philippines as it does in India.
PITC and BFAD’s effort to exercise early working rights on Norvasc are what prompted Pfizer’s suit.
In a bland statement about the suit, Pfizer claimed “the case Pfizer filed versus PITC and BFAD is not only a trade issue, but a public health concern as well.” Pfizer argued that there was a risk that the Philippines would import counterfeit or poor quality amlodipine besylate (although the whole point of early working is to undertake tests to demonstrate quality).
Pfizer was not able to escape scrutiny in the case, which gained significant attention in the Philippines, and was the object of a modest international pressure campaign.
Most notably in the campaign was the intervention of Dan Murphy, a medical student at the New York College of Osteopathic Medicine. He attended a CNN event at which Pfizer CEO Hank McKinnell was bragging about the company’s contributions to addressing global AIDS.
Murphy buttonholed McKinnell at the event. “I cornered Hank post filming and we had a nice argument,” Murphy reports.
“I told him that I was a med student that I was upset about the lawsuit against the Philippines, and that he was going to be facing a lot more angry students if they didn’t end it. He said it wasn’t about generics, it was about protecting patents and we spent most of our discussion arguing about this. Towards the end of the discussion he started saying that it didn’t matter, because he had ordered a review of the matter and would be ending it if it wasn’t about ‘legitimate protection of patented medicines.’ Eventually his people dragged him away.”
Pfizer and the defendants settled the case in August, on terms favorable to Pfizer.
PITC and BFAD agreed not to import Norvasc until its patents expire.
BFAD also agreed not to grant marketing approval for pharmaceuticals in the future until after the expiration of applicable patent terms, a practice commonly known as “linkage.” Health advocates criticize linkage on the grounds that it transforms drug regulatory agencies into patent enforcers — even though they typically do not examine (nor have the expertise to examine) the validity of the patents they are enforcing. Left unclear in the settlement is whether the Philippines will be able to employ early working provisions in the future.
Pfizer’s victory may be pyrrhic. Partially in response to the litigation, the Philippines legislature is considering and likely to pass legislation that would give the government much more flexibility to speed the introduction of generic competition.
And, more centrally for Pfizer — and McKinnell — its business model is now widely viewed as bankrupt.
Pfizer’s board forced McKinnell out in July. Pfizer’s stock had declined by more than 40 percent during McKinnell’s reign. Its acquired blockbusters are starting to approach the end of their patent period, and its pipeline is dry — no surprise at a company that has been weak at innovation.
Don’t cry for McKinnell, though. His business model may be bankrupt, but he’s not. He managed to leave with a $200 million parting package from the company.
Shortly after taking over the company, McKinnell’s replacement Jeffrey Kindler announced he would be slashing the payroll by 10,000. Thousands of those to be laid off are marketers, but most are involved in manufacturing and research.
SMITHFIELD: JIM CROW ECONOMICS ALIVE AND WELL
Smithfield, the largest pork producer in the United States, has appeared twice before on the Monitor’s 10 worst list — once for factory farm pollution, once for its takeover of the former number two pork producer, a move that dramatically worsened agribusiness concentration and left small farmers increasingly at the mercy of the remaining giant processors. This year, Smithfield is on the list for its labor practices.
Jim Crow economics is alive and well at Smithfield’s Tar Heel, North Carolina pork processing plant, the largest in the world.
For more than a decade, the more than 5,000 workers there have attempted to organize a union, only to be met by a vicious anti-union campaign that has included organized beatings of union supporters, operation of an official company police force within the plant (not a private security operation, but a governmental police force) with the power to arrest workers and detain them at the plant, the deployment of the local sheriff’s department to intimidate workers, racist slurs, and use of the Immigration and Naturalization Services department to harass Smithfield’s increasingly immigrant workforce.
Smithfield opened the Tar Heel plant in 1992. Workers sought an election for union representation in 1994. The union campaign failed, but the National Labor Relations Board (NLRB) general counsel charged the company with violating federal labor law. In 1997, the company agreed to rerun the election and pledged to respect labor laws.
That promise was betrayed. The workers and their union, the United Food and Commercial Workers (UFCW), lost the 1997 election, only for the NLRB general counsel to issue a new set of charges. By 2004, the full NLRB finally ruled on those allegations, which had been upheld by an administrative law judge.
The NLRB found that, among other wrongful acts, Smithfield illegally:
Lawanna Johnson was one of Smithfield’s victims. After the Smithfield plant manager overheard her encouraging fellow workers to support the unionization effort, the NLRB found, he “pointed his finger in her face and said that if he heard her mention anything about voting for the union he would fire her on the spot.” Three days later, she was fired on pretextual grounds.
- interrogated employees concerning union sentiments;
- threatened plant closure;
- threatened reprisals against union supporters;
- threatened wage freezes;
- assaulted a union supporter; and
- caused the arrest of a union supporter.
A former supervisor at the plant, Sherri Bufkin, was fired, she says, because she refused to provide false testimony to the NLRB. She testified about her experience before a U.S. Senate committee in 2002.
She explained that when the union campaign recommenced in 1997, Smithfield brought in anti-union lawyers who directed supervisors. According to Bufkin, the lawyers said “they would do whatever was necessary to keep UFCW out. And they did.”
She described how she was ordered to fire union supporters. “A lady — her name was Margot — who worked for me in laundry as the second shift crew leader was pro-union. She wasn’t afraid to voice her opinions to her co-workers. I was called downstairs and told that the company wanted to speak with me. A plant manager was with him. The lawyer said that he had just come from an antiunion meeting where her name came up and asked me if she was one of mine. I told him she was, and the attorney said, and I quote, ‘fire the bitch, I’ll beat anything she or they throw at me in court.’”
Bufkin also testified about how Smithfield sought to divide African-American and Latino workers. “Smithfield keeps Black and Latino employees virtually separated in the plant with the Black workers on the kill floor and the Latinos in the cut and conversion departments. Management hired a special outside consultant from California to run the anti-union campaign in Spanish for the Latinos who were seen as easy targets of manipulation because they could be threatened with immigration issues. The word was that black workers were going to be replaced with Latino workers because blacks were more favorable toward unions.”
Eventually, the UFCW filed charges about union-related firings. According to Bufkin, “The attorney wrote false affidavits for me to sign and gave those affidavits to the Labor Board. The attorney wrote things that came out of his own mouth, and I told him they weren’t true. I felt I had no choice but to sign the statement because I had a family to feed.” When she was asked to stick to her story at an NLRB trial, however, she refused. “I told them I wasn’t going to lie. I was fired shortly after that.”
In 2006, a federal appeals court upheld the NLRB’s 2004 decision, which ordered Smithfield to cease and desist from the host of labor violations it identified, to provide the UFCW with the names and addresses of workers at the plant, and to order another election.
The response from Smithfield was a little bizarre.
After the appeals court ruling, Joseph W. Luter, IV, president and chief operating officer of Smithfield Packing Company, said, “Smithfield respects and accepts the court’s judgment, even though we strongly disagree with the findings. We have argued strenuously that the allegations the union made concerning Smithfield’s conduct during both elections were false. But we recognize that we have lost our case in court.”
He didn’t sound too contrite, however, particularly given the egregious nature of the findings against the company.
“When a new election is called,” he said. “We will comply fully with the NLRB’s remedies to assure a fair vote that represents the wishes of our plant’s employees. We believe that our employees should have the right to choose whether to unionize, and we respect the choices they make. Unions, including the UFCW, represent employees at a number of our plants and have done so for years without labor conflict. The UFCW has unsuccessfully attempted to organize employees at this particular plant for over a decade.”
With the UFCW determining that conditions at the Tar Heel plant remain too intimidating to undertake another election, the union has launched a Smithfield Justice campaign, urging consumers and citizens to pressure the company. Smithfield has responded by taunting the union, daring it to seek another election.
WAL-MART: A VERY BAD YEAR
It can’t be easy being Lee Scott, CEO of Wal-Mart.
Your company is facing an onslaught of criticism, for just about everything it does. You care about this criticism — perhaps because you fear it will affect your ability to enter Northeastern, West Coast and urban markets that you hope to penetrate. You hire very expensive help to head off the campaigns mounted against you — including Michael Deaver, a former chief of staff for President Reagan who is now vice chair of the Edelman public relations firm.
But nothing seems to work. The problem is that the growing outrage directed at your company is based not on the company’s image, but on what it does. And not just abusive practices that are ancillary to Wal-Mart’s operations (though these, too), but on core elements of your business model.
So, try as you might, you get pounded in public opinion, over and over. All for good reason.
In January, the state of Maryland passed Fair Share legislation, requiring private companies with more than 10,000 Maryland employees to spend at least 8 percent of their payroll on employee healthcare, or to contribute the amount they fall short to the state’s Medicaid program. Wal-Mart is the only employer in the state meeting the size threshold and not spending 8 percent of payroll on health insurance costs. Wal-Mart would go on to get the Fair Share legislation overturned in court (via a suit by the trade association, the Retail Industry Leaders Association) — saving it from a duty to cover health costs for its employees, but clarifying again its refusal to provide decent worker benefits.
Contends Wal-Mart: “This politically motivated legislation did nothing to control the cost of healthcare or improve access to healthcare, so it’s no wonder that legislators across the country have rejected this as bad public policy.”
In February, the advocacy campaigning group WakeUpWalMart.com published a report claiming the number of Wal-Mart workers with company health insurance decreased by 5 percent in 2005 — from 48 percent to 43 percent. WakeUpWalMart.com estimated that “nearly 300,000 Wal-Mart workers and their family members depended on taxpayer-funded public health care at a total cost to American taxpayers of $1.37 billion.”
Wal-Mart acknowledges that less than half of its workers receive insurance through the company, but says that its surveys show 90 percent of employees get coverage from “Wal-Mart or another source such as a spouse, Medicare, a parent, another employer, the Department of Veterans Affairs (VA) or other government programs.”
That same month, another campaigning organization, Wal-Mart Watch, obtained access to an internal Wal-Mart website where company CEO Lee Scott responded to a manager’s request about provision of health insurance to retirees by stating that merely asking the question suggested the manager should quit. “Quite honestly,” wrote Boss Scott, “this environment isn’t for everyone. There are people who would say, ‘I’m sorry, but you should take the risk and take billions of dollars out of earnings and put this in retiree health benefits and let’s see what happens to the company.’ If you feel that way, then you as a manager should look for a company where you can do those kinds of things.”
In March, the company capitulated to pressure from women’s groups, and agreed to carry Plan B, the emergency contraceptive, in its pharmacies.
Also in March, the New York Times reported that Wal-Mart was covertly working with bloggers to create an appearance of public support for the company. “Under assault as never before,” the Times reported, “Wal-Mart is increasingly looking beyond the mainstream media and working directly with bloggers, feeding them exclusive nuggets of news, suggesting topics for postings and even inviting them to visit its corporate headquarters.”
In April, Wal-Mart announced the promotion of Susan Chambers, to executive vice president. Chambers won notoriety in 2005 for urging that employees be required to perform some physical duties, such as “some cart gathering.” The rationale for this recommendation was to discourage unhealthy people — who cost employers more — from working at Wal-Mart.
In May, WakeUpWalMart.com obtained a company memo encouraging Wal-Mart suppliers to join a company front group, Working Families for Wal-Mart. “Wal-Mart is under attack, and Wal-Mart and Sam’s Club suppliers have the power to do something about it and help protect their business,” asserted the memo, which was written by the former national political director for the Bush-Cheney 2004 campaign.
In June, Wal-Mart Watch reported that its effort to put up a billboard in Bentonville, Arkansas — where Wal-Mart’s headquarters is located — was squashed, with a billboard company backing out of a signed contract. “Apparently there is no First Amendment in Bentonville,” stated Wal-Mart Watch’s Andy Grossman.
In July, Wal-Mart abandoned the German market, selling its stores in the country at a $1 billion loss to a German retailer. The Bentonville giant was unable to gain ground against German discount chains.
In August, Chinese news services reported that the viciously anti-union Wal-Mart agreed to recognize the All-China Federation of Trade Unions (ACFTU). The move highlighted Wal-Mart’s hypocrisy, but is unlikely to make much difference to Wal-Mart’s workers in China — the Communist Party-affiliated ACFTU is something less than a vigorous exponent of its members rights.
In September, Wal-Mart announced plans to cut down on packaging and company-related greenhouse gas emissions. Many environmentalists applauded the move — but noted also that Wal-Mart’s business model is inherently ecologically unsustainable. The firm’s heavy dependence on global supply chains and the superstore approach that requires consumers to drive long distances are structural problems that cannot be cured without a fundamental change in what Wal-Mart is.
In October, WakeUpWalMart.com disclosed internal company documents revealing that Wal-Mart was capping salaries for full-time employees — a reversal from a company commitment just two years before. Company guidance to store managers on how to convey the news to employees includes this question-and-answer:
[Question] You told us in 2004 that we wouldn’t have pay range maximums. Sam was a man of honor. Apparently current management doesn’t care about integrity and honor.
In November, Business Week reported on how Chinese suppliers to Wal-Mart (and other major retailers and manufacturers) easily skirted inspections designed to reveal sweatshop conditions, with methods as simple as keeping two sets of books. Wal-Mart acknowledges the problems, but told Business Week that “it does more audits than any other company — 13,600 reviews of 7,200 factories last year alone — and permanently banned 141 factories in 2005 as a result of serious infractions, such as using child labor.”
[Answer] Wal-Mart is built on change and the ability to evolve and continually meet the needs of customers. Therefore, things that may have been the best approach in the past may not be appropriate to meet our future business direction. These latest pay program changes, including pay ranges, fall into this latter category.
In December, the New York City Comptroller filed a shareholder resolution calling on the company to issue a report “on the negative social and reputational impacts of reported and known cases of management non-compliance with International Labor Organization (ILO) conventions and standards on workers’ rights and the company’s legal and regulatory controls.”
Wal-Mart may oppose this proposal, but for Lee Scott and the rest of the company, there is no escaping that its abusive practices have done major damage to the company’s reputation — and there’s good reason to believe that this damage has had an impact on the company’s bottom line.
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