The Multinational Monitor

July 1989 - VOLUME 10 - NUMBERS 7 AND 8

T H E   F R O N T

No Nuke Victory

In a local Sacramento California referendum, residents voted to shut down the Rancho Seco Nuclear Generating Station. The plant, when working, partially powered Sacramento since 1975. The June 6, 1989 victory for safe energy advocates marks the first public vote to close an operating nuclear plant.

Some of those who fought to keep the plant open believe the vote's impact will not be far-reaching. They say the vote had nothing to do with nuclear power or even the Rancho Seco plant itself. Voters, they say, were disenchanted with Sacramento Municipal Utility District (SMUD) and what they called wasteful spending on uniforms and bonuses and mismanagement of the plant.

The vote, according to Kim Dellinger, spokesperson for Citizens for Affordable Energy, a pro Ranch Seco group, may not keep the plant shut indefinitely. The referendum specified that the plant should no longer be operated by SMUD, not that it should be closed forever. In addition, Dellinger said it is unlikely that there will be a domino effect resulting in multiple plant closures nationwide.

Ed Smeloff, who supported plant closure, agrees. "This was not a referendum on nuclear power." Smeloff is one of five elected SMUD board members and a supporter of nuclear power. "This was an issue about one plant," he added.

Michael Remy, a Sacramento attorney and founder of Sacramentans for Safe Energy (SAFE), believes otherwise. He said the Rancho Seco closing could have a "significant effect" on plant closings worldwide. "A lesson to be learned by the anti-nuclear coalition is that we need to, and I hate this word, 'network' beyond our immediate constituents," Remy said.

Citing Rancho Seco as an example, Remy said anti-nuclear activists must make alliances in the business community, with people who will respond to economic arguments though they may not be persuaded by arguments on safety and the environment.

"We can win support and allegiance [from] relatively conservative business types, particularly in the private sector, who are driven by efficiency methods in their own business," Remy said. "If it can be shown that nuclear power is inefficient and artificially subsidized, we can gain allies who are not inherently anti-nuclear."

Remy's interest in Rancho Seco began after Three Mile Island, when the Nuclear Regulatory Commission served Rancho Seco five fix-it tickets and closed the plant until SMUD complied.

In 1986 SMUD officials announced another $93 million repair job. In response to this action Remy formed SAFE. He sent an open letter to the SMUD board and placed an advertisement in a local newspaper requesting a SMUD report showing the validity of the repair work.

When no report was forthcoming from SMUD, Remy himself commissioned the QUEST report which, according to Smeloff, recommended closure of the plant on the basis of economics, engineering and law. Smeloff said the report was "overlooked by the board."

SMUD officials proceeded to spend $400 million on repairs and modifications which resulted in a 27-month outage from 1985 until April 1988. Though the plant had been stop and go, particularly during the preceding four years, that outage was the longest and the most costly.

In December 1986, SAFE gathered enough signatures to put a referendum on the ballot. The referendum, Measure B, said, in effect, shut the plant. SMUD responded with a proposal for an 18 month public review, termed Measure C. After this interim step the SMUD board promised that another vote, Measure K, would determine the ultimate fate of the plant.

In the first vote, SMUD's proposal beat out the closure ticket by half a percentage point. According to Remy, Measure C diffused the support for the proposal to shut the plant and took from SAFE all voters who were undecided. In early June of 1989, the proposed Measure K came to the ballot and 53.4 percent of the ratepayers voted to shut the plant.

The vote was non-binding but a SMUD board resolution passed earlier expressed the board's commitment to follow the will of the people. The day after the vote the plant stopped generating electricity.

Dellinger believes the people's decision was misguided. She said SAFE, not SMUD, had the power in Sacramento. Citizens for Affordable Energy had to come to the defense of SMUD against Remy and SAFE since, as a public utility, SMUD officials "could not lift a finger or spend a dime" in defense of the plant, she said. "Unfortunately, voters went to the polls without all the facts." There is still confusion over what might happen in Sacramento. Currently the plant is undergoing a $200 million to $400 million shutdown operation, according to Ron Scott, a Rancho Seco spokesperson. Because the costs will be passed on to ratepayers, Dellinger said, "it's like building a whole new plant, closing the doors, and walking away--we still have to pay the bills."

Board member Smeloff said there is some "slipping and sliding" among board members in how far they might follow the will of the people. He said there are some who would like to sell the plant to a private utility which could continue to operate it.

Rancho Seco's future is still a question mark and the impact of the closing on other plants is unclear as well. But if safe energy advocates like Michael Remy have their way, nuclear plants throughout the country may soon be forced to defend their claims of efficiency and cost-effectiveness.

- Barak Kassar

OSHA's Doubledealing

A new study by the National Safe Workplace Institute (NSWI) details how the Occupational Safety and Health Administration (OSHA), under the Reagan administration, used "megafines"-- penalties over $100,000--in order to appear tough on corporations that violated worker safety laws, but negotiated privately with the employers for drastic reductions in the fines. The study, Unintended Consequences: The Failure of OSHA's Megafine Strategy, used OSHA data to show how the Department of Labor's Office of the Solicitor negotiated with corporate officials to reduce megafine penalties, often without even requiring abatement of existing hazardous conditions.

According to NSWI, from 1986 to 1989 OSHA imposed a total of $29.3 million in megafines on some of the most notable corporations in the United States. Through negotiations, these fines were bargained down to $9.5 million, an average reduction of 67.5 percent per fine. Moreover, the violating employer paid the original megafine penalty in only three of the 35 megafine cases between 1986 and 1989.

The study's author argues that, "Instead of penalizing violators, OSHA's megafine strategy has allowed employers to negotiate and finance their safety compliance through penalty reductions." Furthermore, because interest charges on unpaid fines are not imposed during the bargaining process, no pressure is brought to bear on corporate violators to act in a timely manner; in essence, employers receive a monetary reward for stalling negotiations.

Today, 24 megafine cases brought over a year ago remain unresolved. The NSWI study urges collection of interest on unpaid fines during negotiations to speed up the process, maintaining that, "Mounting debt from interest charges on unpaid penalties would lead to more timely settlements, more rigorous enforcement, and ultimately, safer workplaces."

Megafines were first imposed under President Carter and were all but eliminated as an enforcement tool in the first six years of the Reagan administration. Reagan's enforcement strategy called on OSHA officials to group violations by category instead of separately, a method which tends to create smaller fines.

After six years of passive enforcement and cutbacks in personnel, OSHA was severely criticized by Congress and the media. In 1986, Labor Secretary William Brock was determined to dampen the criticism by reinstituting megafines. This strategy was designed, according to the report, to make it look like the Reagan administration was getting tough on corporate crime. For example, when a corporation was slapped with a million dollar fine the media would spotlight the action and mistakenly represent it as the final outcome. The public was unaware that subsequent negotiations resulted in much smaller fines than those hyped by the administration. NSWI argues that Brock's megafine strategy "gave American workers, Congress and the media the impression that OSHA had toughened." Although Brock's new "get-tough" strategy appeared laudable, in reality megafine cases became media cases tantamount to propaganda. Nevertheless, Secretary Brock succeeded in deflecting the criticism aimed at OSHA, to the detriment of U.S. workers.

Union Carbide, the chemical company responsible for the Bhopal disaster, was the first beneficiary of Secretary Brock's new megafine strategy. In 1986, the corporation was cited for over 495 wilful record-keeping violations at two of its plants. These violations contributed to a release of toxic substances which led to 141 workers being hospitalized at its Institute, West Virginia plant.

Although OSHA hit Union Carbide with a $1.39 million fine, subsequent negotiations between the company and the government reduced the number of violations to 287, thereby reducing the fine to $408,000, a 70.6 percent reduction. And although the federal government has the power to impose criminal penalties for record-keeping violations, it chose not to do so in this case. NSWI argues that the Carbide settlement established a "terrible precedent" and that, "By early 1987, OSHA knew that large and small corporations had engaged in massive fraud to prevent costly inspections and penalties. The federal government's decision not to prosecute Carbide made it unlikely that it would prosecute other corporations."

The Chrysler Corporation also escaped criminal prosecution. In 1986 Chrysler was penalized $910,000 by OSHA for 182 wilful record-keeping violations at its Belvedere, Illinois plant. When the Labor Department's Office of the Solicitor stepped in to negotiate a deal for Chrysler, it followed its usual procedure of excluding union representatives and the OSHA personnel who discovered the violations. A deal was worked out which provided fora 67.6 percent reduction in fines.

Most of the megafine reductions were accorded to the largest and most prestigious U.S. businesses including Shell Oil, which obtained a 57.8 percent reduction in fines, Ford Motor Company with a 36 percent reduction and USX, which paid half the original megafine penalty.

- Jim Donahue

Defective Defense

A recent report on the defense procurement process called for shifting responsibility for weapons purchases from the Department of Defense to a new, independent "procurement corps," to counter what the reports' authors called America's "defective defense."

The recommendation for a separate government entity to handle all purchases of weapon systems is the most far-reaching of a series of suggestions for improving military procurement outlined in Defective Defense: How the Pentagon Buys Weapons That Do Not Work, by Louis Nemeth and Kukula Kapoor Glastris, published by Ralph Nader's Center for Study of Responsive Law.

"We're spending billions of dollars for planes that can't fly, missiles that can't find their destinations, and tanks that can't roll," said Nemeth. "The Pentagon has over and over proven itself either unwilling or unable to improve our procurement process."

The procurement corps, as described in the report, would be staffed with procurement experts with no other missions, allegiances or temptations, in contrast to many DoD personnel who currently hold sway over the process. Their charge, Nemeth said, would be "to buy the most effective weapons at the lowest possible cost, and to ensure that the systems function as promised once production begins."

"What happens too often now," explained Glastris, "is that after, say, the first 50 jet fighters are delivered, someone discovers that the wings will crack, so the company that built the defective wings gets a multi-million dollar contract to reinforce those same wings that they should have built right the first time."

Military contractors, the Department of Defense and Congress form a "triangle of common interests," asserted Nemeth, that often supersedes concerns about weapon system reliability, quality and effectiveness. "The only way to stop the arming of our military with defective weapons is to take responsibility for buying those weapons away from the military. That is what the procurement corps will do," Nemeth said.

The report also criticizes the Pentagon policy, announced last month, of paying all development costs of new weapon systems in an effort to improve weapon system quality. "DoD contends that forcing contractors to assume some development costs encourages them to 'skimp,' often at the expense of quality," the report states. "[This] ignores the fact that the Pentagon already has the authority and ability to demand quality in weapon systems. Development contracts provide no guarantee of production contracts to follow. If a system is not up to par the Defense Department can merely decline to purchase it and shop elsewhere."

The report examines the problem of defective weapon systems, analyzes how such systems find their way into the U.S. arsenal and makes recommendations to remedy the problem. In addition, the authors have compiled a catalogue of 41 defective weapon systems and outlined the procurement history and problems of these systems.

Included in the catalogue are many systems fundamental to the U.S. arsenal. Jet aircraft cited include the F-14, F-15, F-16 and F/A-18. Helicopters include the Vietnam-era AH1 and UH-1 as well as the brand new AH-64 Apache. The AMRAAM HARM, Maverick, Phoenix, Sparrow, Sidewinder and cruise missiles are all cited as having had or continuing to have serious problems in their performance, as do the M-1 tank, B-1 bomber, and Aegis ship defense system.

Among the contractors cited for producing defective systems are: Ford Aerospace, General Dynamics, Grumman Aerospace Corporation, Hughes Aircraft, LTV Corporation, Lockheed, Martin Marietta, McDonnell Douglas Corporation, Northrop Corporation, Raytheon Company and Rockwell International.

"What the report demonstrates is that much of what the military buys is defective," Nemeth said, "and that taxpayers end up spending billions to correct problems that should have been caught" before the systems went into production.

The report cites several factors as causing the problem of defective weapons, including the vested interests of Department of Defense procurement officers, the lack of competition in military contracting and the practice of concurrent development, by which weapon systems are developed and manufactured simultaneously.

In addition to establishing a procurement corps, the report's other major recommendations include:

  • More accurate and extensive testing of weapon systems before procurement is allowed to proceed;
  • Increased competition in awarding contracts, and an increased number of "prime" contractors producing major weapon systems;
  • Making contractors assume some of the costs of weapon system development to increase contractor stakes in weapon system reliability;
  • Prohibiting "concurrent" development, by which weapon systems enter full-scale production before testing is complete;
  • Insisting on warranties for all major weapon systems;
  • Tightening restrictions on the "revolving door;"
  • Making contractors liable for deaths and injuries resulting from use of defective weapon systems; and
  • Reinvigorating public yards, largely idle in recent years, in order to reduce dependence on contractors.

Copies of the report are available for $12.50 for individuals/$25 for organizations from the Center for Study of Responsive Law, P.O. Box 19367, Washington. D.C. 20036.

Senators and South Africa

Three years have passed since the U.S. Senate overwhelmingly approved a ban on new U.S. investment in South Africa through passage of the Comprehensive Anti-Apartheid Act of 1986. Yet, an examination of recently released Senate financial disclosure reports, which show senators' investments for 1988, reveals that many who support economic sanctions against South Africa continue to invest their own money in companies profiting from apartheid.

Sen. John Danforth, R-MO, leads the list of U.S. senators with investments in companies doing business in or with South Africa for 1988. He held at least $1.4 million in companies involved with the South African economy. Danforth supported sanctions in 1986, declaring on the Senate floor that, "this senator has no hesitation at all in voting for sanctions." Ironically, since 1985 the senator has increased his holdings in such companies an average 54 percent. According to a spokesperson in his Washington office, the Missouri Republican is not likely to support further sanctions contained in a pending bill prohibiting personal and current investment in South Africa.

In response to a similar survey by Multinational Monitor in 1986 and 1988, Sen. Danforth claimed that his South Africa-tied holdings were in a "blind trust" over which he had no control. His investments in companies linked to South Africa, however, were not in a blind trust and were noted on his public financial disclosure statement, authorized and signed by the senator. The senator has also claimed that over 90 percent of such holdings belong to his children. Although most senators disclose investments owned by their children or spouse, Danforth failed to indicate the beneficiary of each investment on his financial disclosure statement.

The second leading investor for 1988 in companies linked to South Africa, Wyoming Republican Malcolm Wallop, held at least $861,011, a 58 percent increase since 1985. Mr. Wallop, who did not support the 1986 sanctions bill, generated income from these investments of at least $32,711.

John Glenn, D-OH, followed Sen. Wallop, maintaining the third largest total investment in companies with South Africa ties. The senator held at least $575,022 in such companies, an average 27 percent increase since 1985 and 1987. In response to a survey by Multinational Monitor in September 1988, the senator attempted to minimize the significance of his investments by arguing that such companies are not wholly dependent on South Africa. For example, in October, 1988, the senator argued that his investment in General Motors, a company with ties to South Africa, is not tantamount to supporting apartheid. Sen. Glenn told Multinational Monitor:

"I doubt if General Motors is more than one or two percent dependent on everything they do in South Africa ... that would be my percent of an investment in South Africa, [but] . . .I suppose that's like 'a little bit of pregnancy' ... I invested in General Motors because it's one of our giant American companies that does their business in [the United States]. The people that do my investing for me . . . didn't run out and say, 'hey, here's a company that does some business in South Africa, let's buy some stock in it.'" Anti-apartheid activists argue, however, that such investments help legitimize South Africa's system of racial separation, particularly when senators hold their own investments in companies profiting from apartheid. Richard Knight of the New York based anti-apartheid organization The Africa Fund argues that senators' investments "have the effect of supporting the apartheid economy because it lessens the pressure [on U.S. companies] to cut off all ties to South Africa." Many senators use investment management firms that decide where their money is invested and may be unaware of their South Africa tied holdings. When asked if he thought it was right for a senator to hold investments in corporations that reap millions of dollars from apartheid's low wage work force, Glenn responded, "I didn't even know that I had them."

Senate Foreign Relations Committee member, Nancy Kassebaum, R- KS, followed Sen. Glenn with $333,016 invested in companies linked to South Africa, an average 22 percent increase from previous surveys. Even while she was leading the fight to restrict investments under the 1986 sanctions bill, Kassebaum held stock in 15 companies linked to South Africa. The senator does not support further sanctions.

Alabama Democrat Howell Heflin rounds out the top five, maintaining $318,006 in companies doing business in or with South Africa. Mr. Heflin supported the 1986 sanctions bill.

Following Heflin, Senate Foreign Relations Committee chairman Claiborne Pell, D-RI, held $292,007 in 1988, the sixth leading investment. In the last few years, Pell divested half his stock from such companies, reducing holdings by $968,036, the largest divestiture of any senator. In response to a survey by Multinational Monitor in September, 1988, Pell stated that he had instructed his investment professionals "to seek to insure that I have no investments in companies that operate in South Africa." However, he also added that, "In a few cases stocks have not been sold because of major tax consequences."

Freshman senator Herbert Kohl, D-WI, invested $155,803 in companies with South Africa connections, placing him seventh, behind Claiborne Pell. Kohl generated the largest amount of income from his tainted investments, pocketing $473,223 from dividends, capital gains and selling shares of stock.

In response to the September 1988 survey by Multinational Monitor, Ernest Hollings, D-SC, claimed that he had sold all stock in companies doing business with South Africa. His disclosure reports for 1988 reveal, however, that he had sold only $50,000 worth of stock in such companies. In 1988 Hollings was the eighth leading investor, holding a $100,001 investment in IBM, a corporation that maintains a licensing agreement with a South Africa based corporation.

John Warner, R-VA, with at least $50,001 and John Chafee, R-RI, with $25,003, are the ninth and tenth ranked investors, respectively. Chafee's holdings increased an average of 45 percent since the 1985 and 1987 surveys. Former vice presidential candidate Sen. Lloyd Bentsen, DTX, was the 12th leading investor in companies linked to South Africa. As a vice presidential candidate, Sen. Bentsen attempted to clear his investment portfolio of such investments, but he still holds at least $15,001 in Columbia Pictures, a subsidiary of Coca Cola.

Many of these senators hold influential positions with respect to U.S. foreign policy and are therefore empowered to make significant decisions about the U.S. relationship with South Africa. Such influential senators include six members of the Senate Foreign Relations Committee who collectively held a minimum of $659,033 in companies with South Africa ties. In addition to Sens. Pell and Kassebaum, those members are: the ranking minority member Jesse Helms, R-NC, with $10,002, Rudy Boschwitz, R-MN, $20,004, Frank Murkowski, R-AK, $3,003 and Mitch McConnell, R-KY, with at least $1,001. Anti- Apartheid activists argue that if these investments are any indication, investment portfolios could influence votes on further sanctions more than a concern for Black South Africans.

The stated purpose of the Comprehensive Anti-Apartheid Act of 1986 is to "promote political, economic and social change leading to the dismantling of apartheid ... in the Republic of South Africa." But critics charge that the Act does not go far enough and have called for passage of Senate bill 507, "Amendments to the Anti-Apartheid Act of 1986." The bill strengthens sanctions outlined in the 1986 Act, requiring that a "United States person [or corporation] may not purchase, acquire, own, or hold any investment in South Africa." The Senate Foreign Relations Committee vote on the bill will be a more significant test of each senator's commitment to ending apartheid. Four senators included in the investment survey, Sens. Helms, Kassebaum, Wallop and Danforth have already indicated opposition to the tougher sanctions.

The survey was conducted by comparing senators' financial disclosure reports for 1988 with a list of companies doing business in or with South Africa. The list is published by The Africa Fund, a New-York based anti-apartheid organization.

Senators disclose the value of their investments according to ranges (e.g.1,001-5,000,5,001-15,000, 15,001-50,000, etc.). Only the minimum investment value was included in this survey.

- Jim Donahue and Katherine Isaac

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