VOL 29 No. 4
Ecuador's Oil Change: An Exporter's Historic Proposal
by Kevin Koenig
Fueling Another Debt Crisis
by Neil Watkins
The Best Congress Oil Could Buy
by Steve Kretzmann
A Call for Global Economic and Energy Transitions
Sin and Society II
by Edward Alsworth Ross
Bolivia Asserts Oil Sovereignty
an interview with Carlos Villegas
Causes of Soaring Oil Prices
interviews with oil industry analysts
Can Big Oil Adapt to Climate Change?
interviews with oil industry analysts
Behind the Lines
Independence from Oil
CAFTA and the Politics of Fear - Whistleblowers Betrayed
The Lawrence Summers Memorial Award
Greed At a Glance
Names In the News
CAFTA and the Politics of Fear
Costa Ricans narrowly approved joining CAFTA, the U.S.-Central American Free Trade Agreement, through an October referendum vote surrounded by controversy. In the months leading up to the referendum, the government of Costa Rica and other interested parties ran a heavily financed, aggressive “yes” campaign to ensure a favorable outcome, while those opposed to CAFTA engaged in massive protests.
Costa Rica was the only country to put ratification of the trade deal to a referendum vote and was the last country to ratify the agreement — which includes Guatemala, El Salvador, Honduras, Nicaragua, the Dominican Republic and the United States. CAFTA aims to liberalize U.S. and Central American markets and create a free-trade zone.
Costa Rican President Óscar Arias publicly said CAFTA would bring investment and jobs, and that it would be “collective suicide” if voters rejected the agreement. However, opponents maintain CAFTA will drive farmers and small business owners into bankruptcy, and limit the country’s sovereignty by making investment disputes subject to international arbitration, among other projected ills.
“This treaty will definitely hurt the country’s middle and poor sectors, and will bring some advantages to the highest sectors,” says Epsy Campbell, head of Costa Rica’s opposition party and a former member of the Costa Rican Congress. “Medicines will become more expensive in the country because the entry of generic medicines into the Costa Rican market will be delayed for years.” While more than 100,000 Costa Ricans turned out in late September to protest the trade agreement, they could not overcome the high-dollar campaign waged by Arias and business backers.
The pro-CAFTA movement spent more than $10 million during their campaign; the “no” campaign spent only $40,000. Román Macaya, executive director of the National Chamber of Generic Products of Costa Rica and one of the leaders of the opposition campaign, faults the Electoral Tribunal for not forcing more transparency in the process. “The Tribunal never forced the pro-CAFTA movement to open their bank accounts and show where the money was coming from,” he says. The “no” side opened up its bank account voluntarily, according to Macaya.
The money for the “yes” campaign came entirely from private donors. “In Costa Rica, raising $10 million in private financing is almost impossible,” Macaya says. He posits that much of the money for the “yes” campaign may have come from outside the country and may have been illegal.
In a country noted for its vibrant democracy, the “yes” campaign employed what opponents denounced as dirty tricks. Leaked in September, an internal memo written by Vice President Kevin Casas and President of the Electoral Commission Fernando Sanchez includes a passage calling for mayors to be threatened to ensure their districts pass a favorable vote in the referendum. “We have to make all of the mayors responsible for the campaign in their districts,” the memo reads, “and let them know, as crudely as possible, a very simple idea: the mayor that doesn’t win their districts on October 7 is not going to receive a cent from the [central] government for the next three years.”
The memo also stated, “It’s crucial that ‘yes’ be associated with democracy and stability … and that ‘no’ be equivalent to violence and disloyalty to democracy. … The argument of defending democracy is the only resource we have left to mobilize the emotion of the people.”
“Stimulate fear,” reads another section of the memo. “This fear is of four categories: 1. Fear of the loss of jobs … 2. Fear of the attacks on democratic institutions … 3. Fear of foreign intervention … 4. Fear of the effect of a no triumph [on governability].”
Players in the “yes” campaign were not limited to the Costa Rican government. According to the Hyattsville, Maryland-based Alliance for Responsible Trade (ART), which opposes CAFTA, the U.S. Ambassador to Costa Rica Mark Langdale visited textile factories and threatened workers, saying if CAFTA wasn’t passed, the factories would all close.
ART also reports that Pindeco, a Dole subsidiary which controls most of the pineapple plantations in Costa Rica and which exports most of its crop to the United States, threatened their workers that if the trade agreement did not pass, Dole would leave the country and all of the workers would lose their jobs. DEMASA, a Mexican company that owns several tortilla factories, also threatened to leave the country and a loss of jobs if CAFTA was not voted through, according to ART.
CAFTA has been controversial in the United States and throughout the Central American region. It passed the U.S. House of Representatives by only one vote in July 2005. Central American countries other than Costa Rica quickly ratified the deal, despite major domestic opposition.
In Costa Rica, however, conflict surrounding CAFTA delayed its ratification and brought the issue to the center of the 2006 presidential elections. Opposition candidate Ottón Solís of the Costa Rican Citizen’s Action Party ran on an “anti-CAFTA” platform and lost to Arias by just 3,250 votes.
Even though the “no” campaign narrowly lost the fight against CAFTA in October, opponents of the deal are aiming, at least, to mitigate the harms they expect.
“There is still a lot of opposition within the Congress and in public sentiment,” Macaya says. “There’s a lot that’s still undefined as far as the implementation is concerned and there’s enough division in Costa Rica that at this point anything could happen.”
— Jennifer Wedekind
One of the promises of the Sarbanes-Oxley Act — the legislative response to the Enron and related scandals — was the strongest protection ever for whistleblowers. By its terms, the Act guarantees protection from retaliation for employees in publicly traded companies in the United States who blow the whistle on fraud or any matter of material interest to investors.
Half a decade after passage, it does not appear the promise has been kept.
When whistleblowers seek protection against retaliation under Sarbanes-Oxley, they prevail less than one time in 20. That’s according to a study conducted by Richard Moberly, a professor at the University of Nebraska College of Law, and published in the October 2007 William & Mary Law Review.
Under Sarbanes-Oxley, a whistleblower who claims their employer retaliated against them may file a complaint against the corporation with the Occupational Safety and Health Administration (OSHA). OSHA has authority to grant reinstatement to a job, attorneys’ fees, compensatory damages and back pay. If OSHA denies a claim, a whistleblower can appeal to an administrative law judge (ALJ). If the ALJ denies a claim, a whistleblower can appeal to an administrative review board (ARB). The ARB decision can be appealed to a federal circuit court. Whistleblowers also have the option of filing initially in federal district court.
Moberly’s study found that the administrative process set up to deliver the goods to whistleblowers has been decidedly arrayed against them.
OSHA decided only 3.6 percent of cases in favor of the whistleblower (13 out of 352 final decisions.) Only 6.5 percent of cases decided by ALJs went in favor of the whistleblower (six out of 93 cases.) The ARB has never ruled in favor of a whistleblower. In fact, the ARB overturned three of the six cases the ALJs decided in favor of the whistleblower.
The study looked at cases filed between 2002 and 2005.
Moberly says there have been an additional 57 settled cases at the OSHA level and 42 settled at the ALJ level. He says he did not include these settled cases in his study because OSHA has refused to make them public.
Moberly is in court seeking to have these settlements and the amounts of the settlements made public. “Part of the reason I don’t include the settlements in my study is that I don’t know what they settled for,” says Moberly. “People settle for all sorts of reasons. There are nuisance value settlements in the low thousands. And then there are settlements in the $150,000 range that clearly indicate this claim was probably meritorious. And then there is a gray area in between.” He says there is no way to determine whether a settlement is a victory for a whistleblower without first seeing the settlement amount.
Moberly says there are a number of roadblocks deterring whistleblowers from gaining justice at OSHA.
First is the 90-day statute of limitations. A good chunk of the cases that come before OSHA and the ALJs are thrown out for not being filed in time, Moberly says. He has called on Congress to double the statute of limitations to 180 days.
Second, the administrative decision makers “often strictly interpret Sarbanes-Oxley’s legal requirements,” Moberly found.
Although Sarbanes-Oxley applies to a “‘contractor, subcontractor or agent’ of any publicly traded company,” he writes, “ALJs consistently determined that the act did not protect employees of privately held subsidiaries and contractors of publicly traded companies.”
ALJs and the ARB “required extraordinary specificity from whistleblowers regarding their disclosure of illegal activity and refused to protect whistleblowers who disclosed general fraud as opposed to fraud related specifically to securities,” Moberly writes. Sarbanes-Oxley is supposed to protect whistleblowing on matters of material interest to investors — which can include almost any matter, so long as it crosses a threshold of significance related to the size of the company.
Moberly says that OSHA often misreads or misapplies Sarbanes-Oxley’s burden of proof requirement. OSHA is charged with enforcing a number of different federal whistleblower statutes, including the Sarbanes-Oxley provision. Some of the other federal statutes require that the employee prove that blowing the whistle caused the retaliation or was a motivating factor for the retaliation. “But Sarbanes-Oxley has a low burden of proof for employees,” Moberly says. “All Sarbanes-Oxley requires is that an employee show that the whistleblowing was a contributing factor.”
Moberly finds that “OSHA tended to misapply Sarbanes-Oxley’s burden of proof regarding causation, to the substantial detriment of employees.” Moberly wants Congress to pass a broader whistleblower law that would protect employees who disclose any illegality.
“This is a law enforcement issue,” Moberly says. “Employees have an internal monitoring capability at companies that the government just can’t have. And if we really want to prevent other Enrons and WorldComs, we need to have people inside the corporation who really know what is going on to step forward when there is illegality.”
Moberly also says that when Congress passed Sarbanes-Oxley, it didn’t give OSHA additional funding to enforce the retaliation provisions. “One of my concerns with this law is that they got 400 to 500 new cases,” Moberly says. “And they got no additional investigators or additional funding to investigate those cases.”
But OSHA doesn’t want additional funding to enforce those provisions. At a May 2007 Congressional hearing at which Moberly testified, Richard Fairfax, OSHA’s director of enforcement, also testified.
In the context of a presentation of Moberly’s findings on Sarbanes-Oxley whistleblower enforcement, Representative Timothy Bishop, D-New York, said to Fairfax: “You say you have 1,900 cases annually, with 72 investigators. Professor Moberly’s testimony included a statistic that now 13 percent of your caseload is Sarbanes-Oxley issues, which prior to 2002 was not a factor for you, and yet there has been no increase in staff. And so my question to you is: the unit that handles this within OSHA, is it adequately staffed? Would you benefit, would the system benefit, from additional investigators?”
In what might be considered a rare statement for a bureaucrat, Moberly said he did not need any additional resources. His reply: “Actually, I think we do a good job with what we have.” Claims related to unjustified firings or retaliation for exercising safety and health rights had fallen during the same period, he said, so investigators are not overburdened.
- Russell Mokhiber
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