Corporate Profile

The Westinghouse Web

by Jim Donahue

"BIG PLAYERS can dominate the market," Westinghouse Chair and Chief Executive Officer Paul Lego told the Senate Judiciary Committee at a January 1992 hearing, as he and other U.S. CEOs lobbied Congress to enact stronger antitrust laws. The comments were extremely ironic, since Lego heads a diversified corporation that commanded $12.8 billion in sales in 1991 and employs 116,000 people worldwide.

Lego and his colleagues were not seeking stronger laws to prevent abuses stemming from the size of their own corporations, however. Rather, they were lobbying for greater restrictions on foreign competitors encroaching on their corporate oligarchy in the United States.

 But Westinghouse's own record serves as an excellent example of why antitrust laws should be strongly enforced - and why stronger laws are needed - for both foreign and domestically based corporations operating in the United States. There is no question that Westinghouse has engaged in illegal oligopolistic practices, as Westinghouse Canada's 1977 conviction of conspiring with General Electric Canada and GTE Sylvania Canada to prevent competition in the light bulb business demonstrates. Westinghouse was fined $150,000 for the illegal activity.

 Westinghouse's size is not merely a technical or academic matter. Because of its powerful market position, Westinghouse is insulated from competition in many of the industry segments in which it operates. In many cases consumers - whether individuals, other businesses or governments - cannot easily turn to an alternative supplier. This has enabled the company to bilk consumers and taxpayers and pollute the environment with some degree of impunity. In the nuclear equipment industry alone, Westinghouse has been the defendant in scores of suits charging the company with manufacturing defective reactors, breaching uranium supply contracts or violating antitrust laws.

Westinghouse's sprawl

 George Westinghouse, the inventor of the train air brake and technology that allows for long distance electrical transmission, founded the company in 1886. In 1920, the company set up one of the first radio broadcasting stations, KDKA.

Today, Westinghouse is a massive conglomerate, active in seven business segments: radio and television broadcasting; electronics products; financial services; transport temperature control equipment and other industrial operations; office furniture manufacturing; power systems; and environmental cleanup services.

Much of Westinghouse's business is in industries that tend to have few competitors. Its Thermo King unit accounts for nearly 75 percent of the truck refrigeration market in the United States, for example. In the nuclear field, in 1991, Westinghouse exclusively supplied reactor coolant pumps, nuclear fuel and other products and services to 51 of the 111 operating nuclear reactors in the United States, five of the seven reactors in Belgium, six of the nine reactors in South Korea and six of the nine reactors in Spain.

The corporation also manages and operates six U.S. government-owned nuclear facilities involved in uranium production, fuel reprocessing and/or nuclear waste disposal. The U.S. government awarded $3.49 billion in non-military contracts to Westinghouse in 1990, making the company the largest civilian government contractor. Over 90 percent of those contracts were awarded by the Department of Energy (DOE) for nuclear operations. In the same year, Westinghouse received $2.2 billion in military contracts, making it the twelfth largest defense contractor.

 Westinghouse operates 77 manufacturing plants in 20 states and Puerto Rico. It also operates in Canada, Brazil, Australia, Germany, France, Italy, Ireland, Switzerland and Barbados. In 1990, foreign subsidiaries accounted for 12 percent of the corporation's consolidated sales and operating revenues, and exports accounted for an additional 9 percent.

Westinghouse is currently involved in modernizing Russia's air traffic control system as well as Poland and the Czech and Slovak Republic's fossil-fuel power plants. In January 1992, Westinghouse won a $10 million contract with the government of Bulgaria to design and start up the first low-level radioactive waste processing plant in Eastern Europe. The waste will be processed at the Kozloduy nuclear power plant north of Sofia.

 Westinghouse even owns a financial institution, Westinghouse Credit Corp., which lost $1.48 billion in the fourth quarter of 1991, due primarily to sour real estate loans. The company's current troubles contrast starkly to its performance in the 1980s, when Westinghouse handed out loans like candy. Between 1981 and 1990, Westinghouse Credit's assets increased from $2 billion to $10 billion and the unit's earnings were a major contributor to the corporation's overall profits. Its real estate portfolio increased from $300 million to $2 billion. By the end of 1991, however, two thirds of its real estate loan portfolio of $4.5 billion was classified as non-performing, which means borrowers have stopped paying interest on loans.

The unit is currently selling more than $700 million worth of assets to cover its losses, a measure that will adversely affect workers, many of whom are likely to be laid off by the assets' new owners.

 Hurting workers, the Westinghouse way

 During his testimony before the Senate Judiciary Committee, Lego maintained that foreign competition is "hurting workers." He neglected to mention Westinghouse's own dismal record in dealing with its employees.

Westinghouse has one of the most contemptuous labor records in the United States. A recent study by Essential Information found that from 1977 through 1990, the federal Occupational Safety and Health Administration (OSHA) cited Westinghouse for 1,338 violations of worker safety regulations, making it the second largest violator among the 50 largest corporations in the 1990 Fortune 500. During the 1980s, Westinghouse treated workers' lives like commodities, selling more than 70 businesses and acquiring over 50.

Westinghouse employees have emerged as some of the harshest critics of the company's endemic corruption, which is fostered by its large size. Whistleblowing workers have drawn attention not only to the company's deplorable worker safety record, but to its history of contaminating and polluting the environment, endangering communities and overcharging the U.S. government.

Westinghouse takes its worker-critics seriously, especially because its oligopolistic position renders it somewhat impervious to pressures that might heel other corporations. The company has become notorious for harassing workers who complain about safety problems.

 Westinghouse has made its contempt for worker privacy, safety and health most clear while operating the DOE's Hanford Nuclear Reservation in Washington:

 In January 1992, Westinghouse released an internal survey that showed 20 percent of its Hanford employees feel intimidated or reluctant to discuss safety and other issues with their supervisors. Nevertheless, Westinghouse Hanford spokesperson Craig Kuhlman says, "Everyone is encouraged to come forth with their [safety] concerns." He adds that "in some cases," whistleblower concerns "have been very well taken." He insists that Westinghouse "does not condone any harassment" of workers.

Manufacturing a "radioactive mess"

 Westinghouse took over the problem-plagued Hanford Nuclear plant from Rockwell International in 1987, when it was shut down for safety problems. Prior to 1987, the plant's nine nuclear reactors produced plutonium for nuclear weapons, but not without disastrous consequences. From 1944 to 1989, 444 billion gallons of radioactive water and liquid waste were accidently spilled or deliberately dumped into the soil at the Hanford site, prompting Rep. Les AuCoin, D-Oregon, to declare the plant "a nuclear accident in slow motion."

Radioactive contaminants at the site include cesium, strontium, tritium, iodine, technetium, uranium and plutonium, and chemical contaminants include nitrates, sodium, phosphates, sulfates, ammonia, fluoride and carbon tetrachloride. Some of the waste migrating toward drinking water supplies exceeds concentration levels considered safe by the federal government.

 Gerald Pollet, an attorney with Heart of America Northwest, a 16,000-member Hanford watchdog organization, says, "Serious environmental crimes at Hanford are going uninvestigated and unpunished." The group is currently suing Westinghouse and the DOE for violating the Clean Water Act, failing to report contamination of the Columbia River and failing to meet cleanup deadlines. The group also alleges that illegal pollution is continuing under a secret agreement between state and federal governments. Westinghouse would not comment on the suit.

 In 1991, the DOE decided to permanently terminate nuclear production at the Hanford Nuclear Reservation. Now, Hanford is nothing more than a massive toxic waste dump requiring long term de-contamination that will take several generations. Rep. AuCoin recently commented on the "irony" that "the people [who] have brought us the arms race in order to protect us have left a radioactive mess in the form of waste in these reservations that now threatens us."

 The DOE justified its permanent closure of Hanford's reactors partly on the grounds that the Westinghouse-operated Savannah River Nuclear Site in Aiken, South Carolina could provide nuclear supplies. The 40-year-old South Carolina plant, which was designed to produce tritium for nuclear weapons, is as unsafe and environmentally destructive as Hanford, however. The plant's five reactors have been closed since spring 1988 because of numerous environmental and workplace-safety flaws, and the government has spent more than $2 billion in an effort to revive one of them.

 Like Hanford, Savannah River is more of a toxic waste dump than a nuclear processing facility. The plant has more than 300 waste sites and radioactive tritium is leaking from on-site storage tanks into groundwater. The DOE asserts that none of the tritium is leaking into drinking water supplies, but the leaks will pose a permanent human health threat for generations to come. In addition, the DOE acknowledges that an average of 50,000 curies of radioactive material is routinely released per year at the site, an amount that exceeds the national average for nuclear plants. Nevertheless, the DOE and Westinghouse, which took over the plant in April 1989, are pushing to re-start Savannah River's aging K reactor.

 In 1990 alone, the site had more than 400 operating problems, including equipment malfunctions, worker accidents and procedural violations. The number of problems exceeded that of any other DOE facility that year. In April 1991, the DOE found hundreds of environmental and worker-safety problems at the plant, and in May, the Augusta Chronicle of Augusta, Georgia quoted anonymous plant workers who said Westinghouse attempted to meet deadlines by forcing them to work in conditions that required possible exposure to radiation. Even the nuclear industry's technical support group, the Institute of Nuclear Power Operations (INPO), issued a report critical of the plant. INPO found numerous violations of worker-safety regulations, including allowing workers to enter contaminated areas without protective clothing.

 Westinghouse attempted to re-start the plant's K reactor in December 1991, but it failed miserably, with potentially dangerous consequences to human health. During the attempted start-up, over 150 gallons of water containing 6,000 curies of radioactive tritium spilled into the Savannah River. Parts of the river showed radioactivity levels exceeding federal safety limits by two to 10 times. The public water system in Beaufort and Jasper counties, South Carolina was temporarily closed and businesses in nearby Port Wentworth, Georgia were shut down for several days. The embarrassing episode forced Westinghouse and the DOE to further delay the re-start of a reactor that opponents say should be permanently closed.

 Less than a month before the spill, the DOE had issued a report critical of the plant's ability to deter radioactive water spills. Even if the reactor is put back on line, because of safety concerns, the plant will not be able to operate beyond 30 percent of its capacity.

 Daryl Kimball, associate director for policy at Physicians for Social Responsibility, says there is absolutely no reason for Savannah River to reopen. "The cost and the health risk [of reopening the site] far outweigh any benefit for producing new tritium," he says, "especially because the United States is going to be recovering large volumes of tritium from the warheads that have recently been retired."

Rick Ford, spokesperson for DOE, counters, "We will not disarm by following the tritium decay curve," referring to tritium's 10-year half-life. "Even if we don't need new tritium for 10 years or perhaps even 15 years, there will be a need to have the capability to produce it should we need to," he says.

Deception and fraud

 Labor and environmental problems are only part of the criminal story of Westinghouse. In March 1991, the DOE's Inspector General found that Westinghouse and Bechtel Corp., a subcontractor, attempted to conceal millions of dollars in cost overruns at Savannah by using the government's $400 million construction account to buy equipment and services that should have been purchased with a separate account. The alleged fraud occurred with the approval of DOE field personnel and sparked a criminal investigation of top Westinghouse executives. The investigation was dropped after the president of Westinghouse Savannah and a DOE official were reassigned to other duties. "It was a loose way of accounting for funds," says the DOE's Ford, who maintains that nothing illegal was done. Ford contends that the "historical practice" of concealing taxpayer funds was in fact "just a loose control over the budget process."

 This was not the only time Westinghouse had been charged with fraud. The U.S. General Accounting Office (GAO) reported last May that four defense contracts awarded to the Marine Division of Westinghouse between 1985 and 1987 were fraudulently overpriced by about $9 million due to the company's artificial inflation of subcontracting costs. The GAO claimed that instead of paying the prices established in its original pricing proposal to the government, Westinghouse paid subcontractors a lower fee, keeping the leftover government funds as profit. In one instance, the government agreed to spend $68 a unit for a missile part. After seeking new bids, Westinghouse bought the part from a subcontractor for $6.57 a unit, or $377,426 less than the proposed order price, the GAO concluded.

 In 1985, Westinghouse employees were found guilty of defrauding the Pentagon of $200,000. The employees were convicted of deliberately charging the Pentagon for electrical equipment that was never delivered to the company; they received two-to-three- year prison terms.

 While Westinghouse has repeatedly stolen from governments, it has also engaged in a pattern of currying favor with government officials by means of bribes and questionable gratuities. In 1988, for example, a Pentagon investigation found that Westinghouse, along with other defense contractors, paid more than $10,000 between 1981 and 1986 for at least 30 golf outings attended by members of Congress and Pentagon personnel. The contractors gave away prizes and cheated during golf games to ensure that members of Congress and their aides would win. The Defense Criminal Investigative Service of the Pentagon concluded that Air Force personnel accepted illegal gratuities from Westinghouse and four other corporations. Although the case was referred to a U.S. attorney, no action was taken.

 The Philippine government has leveled even more serious charges against Westinghouse. It alleges in a lawsuit that Westinghouse bribed former Philippine President Ferdinand Marcos in order to win a contract to build a nuclear power plant. After the Philippine government refused Westinghouse's offer to settle the case, a U.S. District Court judge denied Westinghouse's request for dismissal of the suit and scheduled a trial for March. Although Westinghouse eventually built the plant, safety problems and defects have prevented it from ever going on line [see "Buying Manila," Multinational Monitor, December 1991].

 Bribing government officials is not a new practice at Westinghouse. In October 1978, Westinghouse pleaded guilty to illegally providing $322,000 to an Egyptian government official before the company won a $30 million contract to build a fossil-fuel power plant in Cairo. According to Ron Hunt, a Westinghouse spokesperson, the illegal payments, made in 1974 and 1975, were discovered by an internal company investigation. U.S. District Judge Barrington Parker fined Westinghouse $300,000 for bribing Ahmed Sultan Ismail, the Egyptian minister of electricity who later became deputy prime minister. A fine of $10,000 was imposed for each of 30 counts of falsely declaring to the Export- Import Bank and the Agency for International Development that no illegal payments were made.

Ironically, Westinghouse attempted to void a 1986 contract between a competitor and the State of Oklahoma by declaring the contract was awarded with the help of illegal gratuities to state officials. Westinghouse bid on the $27 million contract, which involved a turbine generator for the Grand River Dam in Oklahoma, but lost out when the job was awarded to Asea Brown Boveri (ABB) of Switzerland. During a lawsuit over the questionable gratuities offered by ABB, however, it was determined that Westinghouse supplied similar gratuities - a free plane trip to the World Series and choice ball park tickets - to state-appointed dam officials during the contract bidding process. The Oklahoma Supreme Court ruled that ABB's gratuities violated the law, but it refused to void the contract for the benefit of Westinghouse.

 Westinghouse has profited from lax antitrust laws and lethargic law enforcement, but society has paid an enormous price through reduced competition, wasted government funds, damaged environmental well-being and worsened health of workers. Lego could have most strongly made the case for stringent application of anti-trust laws - against U.S. or foreign companies - during his January Congressional testimony by reviewing Westinghouse's own miserable record. It illustrates quite clearly the importance of curbing concentrated corporate power.