Multinational Monitor Editors blog

The Washington Post reports today on the rise in Middle Eastern investment in the United States.

The Dubai-ports controversy is the obvious news hook for the story, but the real story is buried deep into the report from Paul Blustein.

That story is that foreign investment in the United States — both in financial paper and direct investment — is at an extraordinarily high level.

Blustein reports,

Whatever Arab investors abroad finally do, their clout is relatively small — at least for now. At the end of 2004, investors from Arab countries held just $4 billion in direct investment in the United States, according to Commerce Department data.

British investors, by contrast, held $252 billion, Japanese investors held $177 billion, Dutch investors held $167 billion and German investors held $163 billion. Their holdings span industries often deemed “critical,” such as telecommunications (Finland’s Nokia Corp. and Sweden’s Ericsson Inc.), energy (British Petroleum PLC and Royal Dutch Shell PLC) and utilities (E.On AG of Germany, which controls much of the gas and electricity distribution in Kentucky).

The aggregate foreign control of the U.S. economy is quite amazing. One view is: Who cares? These companies and investors are seeking a profit and are no different than U.S. companies and investors. But another take is: This foreign control leaves the U.S. very vulnerable. If the value of the dollar declines, as surely it will thanks to the massive trade deficit, then investors are going to pull out of the United States, or demand much higher returns on investment — meaning interest rates will have to rise.

The considerable foreign control of the U.S. economy is an outgrowth of the trade deficit, and until that problem is addressed, foreign ownership stake will continue to rise.

Here are some more numbers from the U.S. Treasury Department: Foreign companies operating in the US account for 5.8 percent of U.S. GDP from private industry, and 4.7 percent of employment in the U.S. private sector.

And, as of June 2004, the Treasury Department reports, foreign investors held $6 trillion in securities in the United States, up sharply from $5 trillion the year before. New data when it becomes available will surely show the number continuing to skyrocket.

Have You Ever Been Convicted of a Felony?

By Russell Mokhiber and Robert Weissman

Have you ever been convicted of a felony?

That question is asked throughout our lives.
By people who are interviewing us for a job.

By courts seeking jurors.

By Little League officials screening coaches.

For background checks of all kinds.

People want to know.

If you have been convicted of a felony, then it says something bad about you.

And if you have been convicted of a felony, then people generally don’t want anything to do with you.

So, our advice — don’t get convicted of a felony.

But let’s say we had a system where you could commit a felony, and not be convicted of a felony.

Let’s say you rob a bank, and get caught robbing the bank.

And the prosecutor says to you — okay, we can do this two ways.

You can plead guilty to the crime. And be sentenced to prison. And you would have been convicted of a felony.

And that felony will follow you the rest of your life.

Or you can just agree to go to prison, and agree to pay a fine — and we won’t convict you of the felony.

So, when you get out of prison, there won’t be that black mark on your record.

And when you are asked throughout your life — have you ever been convicted of a felony? — you can tell the truth and say — no.

The prosecutor gets everything the prosecutor could get with a conviction — restitution, prison, a fine.

Except for the conviction.

Prosecutors would never accept such a system for human being criminals.

Because prosecutors believe they represent the public.

And in cases of serious crimes, they must defend the public’s right to get justice.

And justice demands not only punishment but deterrence.

And deterrence demands of us that we remember for our entire lives that rules exist for a reason.

Society says, if you commit a serious crime, the conviction will follow you your whole life.

Those are the rules for human beings who commit serious crimes.

For corporate criminals, the rules have changed, in just the past couple of years.

The change is this — a major U.S. corporation that commits a felony no longer has to plead guilty to a felony.

Instead, federal prosecutors will offer — and the corporation will accept — a deferred prosecution or non prosecution agreement.

And it is difficult to find a prosecutor, defense attorney, academic or politician who is not supportive of this trend.

They argue this — a prosecutor gets everything they could get from a criminal prosecution — fines, restitution, changing in corporate structure, cooperation against the guilty individuals — except for the conviction.

And a conviction would threaten innocent third parties — workers and investors. See Arthur Andersen.

So, with deferred and non prosecution agreements, you get the best of both worlds — change within the corporation, fines paid to the government, restitution to the victim — and few if any collateral consequences against innocent third parties.

This sea change has largely gone unnoticed in the mainstream media.

It used to be that a corporation caught committing a serious crime would be convicted of committing a serious crime.

No longer.

Under the new system, outside of a few antitrust and environmental crimes, it is highly unlikely that a major corporate criminal will be convicted of a crime in the United States.

Corporations too do not like to answer “yes” to the question — have you ever been convicted of a felony?

They could be barred from government contracts, from the various markets. Consumers, investors and workers may shun them.

Had corporations introduced legislation in Congress to repeal corporate criminal liability, there would have been an uproar in the press.

But they have effectively repealed corporate criminal liability for big business — through prosecutorial discretion. It is unclear what the effects of this effective repeal will be.

But to those who defend the trend, they must answer this question — why the double standard?

Why not offer deferred prosecution and non prosecution deals to all major individual felons — drug pushers, money launderers and muggers alike?

After all, you get all of the benefits of a criminal prosecution, without the collateral consequences.

Prison, fines, restitution.

It’s just that, when you go to answer — have you ever been convicted of a felony? — then all of us — individuals and corporations alike — will be able to answer “no” with a clear conscience.

PLASTICS

By Russell Mokhiber and Robert Weissman

[Original post on corp-focus, 2/17/06]

Good morning.

We’ve just awakened. Cup of coffee in hand.

We flip through today’s papers.

Looking for stories by our favorite corporate crime reporters.

And this is what we found:

In the New York Times, Jane Perlez reports that Newmont Mining Corporation will pay $30 million to Indonesia in a settlement of a civil lawsuit in which the government argued that the company had polluted a bay with arsenic and mercury. The settlement will have no effect on a criminal trial of the company and its Indonesian director that is now under way in the province of Northern Sulawesi.

In USA Today, Matt Kelley reports that Senator Arlen Specter asked the Senate Ethics Committee to investigate whether a top aide improperly helped direct nearly $50 million in Pentagon spending to clients represented by her husband. The Pennsylvania Republican asked for the review of legislative assistant Vicki Siegel Herson’s actions after Kelly reported Thursday that his office inserted 13 provisions into spending bills benefiting clients of her husband, Michael Herson, a registered lobbyist.

In the New York Times, James Glanz reports that Christopher Joseph Cahill, an executive for a company that was hired by Kellogg, Brown & Root, the Halliburton subsidiary, to fly cargo into Iraq for the war effort pled guilty to inflating invoices by $1.14 million to cover fraudulent “war risk surcharges.”

The Associated Press reports out of Charleston, West Virginia that federal regulators have issued safety citations at the West Virginia coal mines where 14 miners died last month. (Big of them. How about a criminal investigation?)

In the Washington Post, Kathleen Day reports that the Securities and Exchange Commission filed civil charges against two local auditors with the accounting firm KPMG LLP for failing to act on widespread bookkeeping irregularities that the SEC says helped U.S. Foodservice Inc. overstate profits by millions of dollars in 1999 and 2000. The civil complaint alleges that Kevin Hall and Rosemary Meyer “engaged in improper professional conduct” because they found numerous “red flags” in the bookkeeping at the Columbia, Maryland-based hotel and restaurant supply company but didn’t alert the company’s audit committee.

The Associated Press reports that three former executives of a Berkshire Hathaway unit and a former American International Group official pled not guilty to federal charges of conspiring to distort AIG’s finances.

The New York Times, in an editorial titled “Price-Gouging on Cancer Drugs?” says that “the high price charged for Avastin, a drug that has proved moderately effective against colon cancer and is about to be used against breast and lung cancer, seems hard to justify on any ground other than maximum profit for its maker. The pricing scheme planned by Genentech and its majority owner, Roche, is a sign of how the rising cost of new life-extending drugs may affect American health care unless ways are found to mitigate the trend.” The Times reported this week that Genentech’s pricing for Avastin will drive its cost to $8,800 a month for lung cancer and $7,700 a month for breast cancer, up from the $4,400 cost for colon cancer patients. The manufacturers go beyond the standard argument that high prices are needed to recoup research costs and add a new twist: the price reflects the value of this medicine to society.

In the Houston Chronicle, Mary Flood reports that the criminal trial of Enron executives Ken Lay and Jeff Skilling is suddenly picking up speed.

Bloomberg reports that drug wholesaler McKesson Corp. will pay $3 million to settle allegations that it defrauded the Pentagon by charging more for medicine than government contracts allowed. The civil settlement resolves claims McKesson overcharged for pharmaceutical products from October 1997 to December 2001, the Justice Department said.

This is from a quick glance at one morning’s newspapers.

And what are we to conclude?

The idea that the Skilling/Lay trial in Houston is the peak of the most recent “wave” of corporate crime is a fantasy.

The wave has not peaked.

And will not peak until the government stops playing tiddlywinks with society’s most dangerous criminals — the white-collar class.

And so we update that scene from the movie The Graduate where the older guy whispers into a young Dustin Hoffman the one word he believes is the future — “plastics.”

We look into our crystal ball and whisper into the ears of all young reporters, prosecutors, investors, and lawyers — “corporate crime.”

Russell Mokhiber is editor of the Washington, D.C.-based Corporate Crime Reporter, . Robert Weissman is editor of the Washington, D.C.-based Multinational Monitor, . Mokhiber and Weissman are co-authors of On the Rampage: Corporate Predators and the Destruction of Democracy (Monroe, Maine: Common Courage Press).

(c) Russell Mokhiber and Robert Weissman

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