The Missing Rap Sheet

Government Records on Corporate Abuses

by Jim Donahue

THE DAILY MEDIA CONTINUALLY report on private lawsuits or government actions seeking redress against fraud, pollution, personal injury and other consequences of anti-social corporate behavior. Administrative, civil or criminal actions brought against corporations often expose behaviors that generally result in far more significant personal and monetary damages than is inflicted by street criminals. Preventable corporate negligence frequently results in violent injury or loss of life, and estimates of the economic cost of corporate criminogenic behavior range as high as $200 billion per year. In comparison, estimates of the cost of all street crime range from $3 billion to $4 billion.

Despite its social significance, illegal, negligent and injurious behaviors of corporations remains a little-studied phenomenon. Amitai Etzioni of George Washington University and corporate criminologist Marshal Clinard have conducted two of the few in- depth studies of corporate crime. Etzioni found that, between 1975 and 1984, 62 percent of Fortune 500 companies were "involved in one or more incidents of corrupt behavior, including price fixing, bribery, violation of environmental regulations, and tax fraud." A 1979 study by Clinard concluded that 45 percent of the 582 largest corporations in the United States had been charged with at least one moderate or serious violation in 1975 and 1976.

 Information on individuals who commit criminal offenses is easily accessible to law enforcement agencies through the National Crime Information Center of the Federal Bureau of Investigation. The Center maintains a national database that is used by local, state and federal law enforcement officials to track criminals and is available to police officers in patrol cars. The computer system contains criminal histories and soon will be upgraded to contain on-line fingerprints and photographs. Unfortunately, a similar database on corporations does not exist. Public records pertaining to a corporation's record of negligent or illegal misconduct are either unavailable or incomplete.

No freedom of information

 In order to obtain a comprehensive picture of anti-social corporate behavior, Essential Information, the publisher of Multinational Monitor, filed Freedom of Information Act (FOIA) requests with 20 federal agencies to obtain data on completed enforcement actions against the largest 50 corporations in the 1990 Fortune 500. The survey period extended from January 1, 1977 to May 1, 1990. Under FOIA, government agencies are required to disclose all requested government records and documents, subject to certain exemptions.

 A simple request to the government for a list of enforcement actions often turns into a bureaucratic nightmare. One agency initially refused to provide enforcement information without an explanation for why it was sought; another agency simply refused to comply with the request and said that information could be obtained only if a researcher traveled to several state-wide offices in Wyoming; one agency mistakenly provided incomplete data which falsely indicated that many corporations had not violated regulations; many agencies provided data over a shorter time span than requested under the FOIA; and some agencies provided only the number of charges filed against each corporation without indicating the final action taken.

 The least responsive and most bureaucratic agencies contacted during the study included the Federal Aviation Administration (FAA), the Department of Energy (DOE), the U.S. Customs Service and the Federal Bureau of Investigations (FBI).

 Essential Information's experience with the FAA raises serious questions about agencies responding to FOIA requests with misleading or false information. The FAA initially failed to disclose 23 fines imposed against Boeing totaling $493,500; four fines against General Electric totaling $16,900; one fine against Mobil Chemical for $2,500; one fine against Chevron totaling $40,000; one fine against Texaco Chemical for $2,000; three fines against United Technologies for $42,000; two fines against McDonnell Douglas for $181,700; two fines against Rockwell International for $30,400; two fines against Johnson & Johnson for $20,000; one fine against Lockheed for $2,000; and one fine against Goodyear Tire and Rubber for $7,500. Essential Information discovered the FAA's error by comparing a similar FOIA response from four years earlier which contained these violations. The agency said the mistake occurred because its computer was not programmed to retrieve all data sought in Essential Information's FOIA request.

The Department of Energy's response to Essential Information's FOIA request provides another example of how corporate misconduct is often hidden beneath bureaucratic procedures in a way that makes it difficult for the average citizen to obtain data. The agency responded to the FOIA request by directing Essential Information to the agency's public library. The DOE's library, however, is inadequate and incomplete. For example, a Notice of Probable Violation issued by the DOE to a corporation details the allegations of the notice, but does not indicate the final enforcement action taken against the corporation. Although the company's response in defense of the allegations is included in the files, no information is available to indicate the final decision in the enforcement process and whether any penalties were imposed. Bob Perrygo of the DOE's Office of Economic Regulatory Administration says that a citizen would "probably never be able to determine the final disposition" of a DOE enforcement action, because different stages of enforcement actions are handled by various agencies within and outside the DOE. Perrygo says that the process is basically a "huge headache."

 The U.S. Customs Service initially responded to Essential Information's FOIA request by citing a federal regulation which requires the agency to respond by providing the name of corporate violators and the penalty. Nevertheless, the agency subsequently claimed that its initial response was inaccurate. It also claimed that, in order to obtain a fee waiver - which the FOIA allows for information disclosed for purposes that benefit the public interest - citizens must first demonstrate their "expertise" in the area of customs law and regulation. However, there is no requirement under the FOIA that calls for substantiating expertise in any subject matter to obtain fee waivers.

 The Federal Bureau of Investigation (FBI) responded to the FOIA request by suggesting that a search of corporate crime data would be time-consuming and difficult because the information is listed on computer by individuals' names, not by corporate names. Four months later, the FBI's FOIA officer Linda Kloss telephoned to say that she found data on three of the 50 corporations in the survey. Kloss insisted that the information be provided over the telephone rather than through the mail. Although the information was available for conveyance by telephone, Kloss said it would take "several months" to send it through the mail.

 Essential Information's experience demonstrates that data from the government concerning corporate crime is either unavailable, inadequate or incomplete. This problem is due not only to indifferent or obstructive bureaucrats, but also to the fact that many agencies have not yet computerized enforcement data. As the computer age pushes forward, procedural and research difficulties arising from the "paper" bureaucracy can no longer serve as valid excuses to withhold government information on corporate malfeasance.

Setting the record straight

 Essential Information's upcoming report on corporate crime calls for federal legislation to establish a central databank to which publicly-traded corporations would report the outcome of all cases in which liability for damages or remedial action is ordered through administrative, civil or criminal proceedings and the outcome of all out-of-court settlements in which corporations were required to make restitution.

 Government investigatory agencies are not currently required to report information on administrative and civil offenses (which comprise nearly all of the enforcement actions against corporations) to a central location. Thus, citizens must make separate inquiries from every federal agency to obtain information on nearly all government enforcement actions against corporations.

Congress has passed legislation requiring central reporting locations in the past. Under the Hate Crime Statistics Act, enacted in 1990, the U.S. attorney general is required to maintain a central location on "crimes that manifest evidence of prejudice based on race, religion, sexual orientation, or ethnicity." Publicly traded corporations are required by law to disclose results of financial activity, as well as legal proceedings that may significantly affect their financial condition, to the Securities and Exchange Commission. Another law, the Community Right-to-Know Act of 1986, requires manufacturing plants to report the annual amount of toxic pollutants discharged into the environment to the Environmental Protection Agency.

 In enacting the financial reporting requirements, Congress affirmed that the millions of shareholders who provide essential capital to corporations are entitled access to vital financial information to protect their investments. Similarly, in enacting the Community Right-to-Know law, Congress affirmed that citizens have the right to know which chemicals are being emitted into the environment by neighboring factories. Access to all information on corporate misconduct is even more vital to the public's interest because it pertains not only to shareholder rights and public health, but to all aspects of life, including fair pricing, product safety, equal employment opportunity and safe workplaces.



Essential Data on Corporate Abuses

A NEW STUDY being conducted by Essential Information contains a compilation of data on anti-social corporate behavior obtained by surveying news stories. The study includes only those stories that reported findings of guilt, liability or negligence in a court of law; penalties or remedial orders imposed by government agencies; and out-of-court settlements in which corporations were required to make payment or other forms of remedy.

 The study tracks news reports on the largest 25 corporations in the 1990 Fortune 500. Among the sources used to compile the data are the Associated Press, the Business Wire, Multinational Monitor, States News Service, United Press International and the Wall Street Journal. The stories surveyed are from January 1, 1977 through 1990.

 The data do not represent a scientific sample of all alleged or confirmed wrongdoing or anti-social corporate behavior; news organizations tend to report only those situations that result in the harshest penalties or largest monetary settlements. There are, for example, thousands of unreported notices of probable violations issued by state environmental agencies every month. In addition, it is virtually impossible for the media to report all results of the vast number of settlements. Many of the corporations in the survey contested the accuracy of the information. Nevertheless, even the very small number of cases reported in the media demonstrate the profound effect of anti-social corporate behavior on society and the public costs incurred as a result.

 From 1977 through 1990, news stories reported that the 25 surveyed corporations were found guilty of wrongdoing, fined or required to make payment to correct past behavior at administrative, civil or criminal proceedings on 858 separate occasions.

Table 1 shows that 56.5 percent of the stories involved allegations in which the corporations or their executives were either found guilty of violating the law, fined by an administrative agency or a court or held liable for compensatory damages. The remaining 43.5 percent of the stories reported settlement of civil complaints out-of-court. Government action to remedy an alleged or confirmed violation of regulations were involved in 56.3 percent of the news stories, while 43.7 percent involved private action.



Table 1. Private and government action resulting in findings of guilt, liability and/or fines and settlement.

  Guilt Liability Fines
Private 174 (20.3%) 201 (23.4%) 375 (43.7%)
Government 311 (36.2%) 172 (20.0%) 483 (56.3%)
Total 485 (56.5%) 373 (43.5%) 858 (100%)

Table 2. Subject matter of reported lawsuits or complaints.

Environmental271 (31.6%)
Product Liability175 (20.4%)
Unfair Business Practices158 (18.4%)
Labor/Worker Safety97 (11.3%)
Consumer83 (9.7%)
Discrimination47 (5.5%)
Other27 (3.1%)
Total858 (100%)