Names in the News

Boeing's Dirty Deals

A BOEING SUBSIDIARY PAID BRIBES to politicians in the Bahamas to obtain a $64 million contract for five aircraft, the Canadian Broadcasting Corporation (CBC) reported in October 1994.

 The bribes - $400,000 split equally between two Bahamian cabinet ministers - were paid in 1991 by Toronto-based DeHaviland Inc., a maker of Dash 8 commuter planes. DeHaviland, owned by Boeing from 1986 to 1992, sold three new Dash 8s and two used Dash 8s to the government-owned airlines, Bahamasair, in 1991. DeHaviland is now owned by Montreal- based Bombardier Inc., with a minority stake held by the Ontario government.

 The other aircraft maker bidding for the contract, the German company Fokker, was also asked to pay bribes to the same cabinet ministers to obtain the contract, says a Fokker source familiar with the company's bid.

 According to the CBC, when the Dash 8s were delivered, the bribe money flowed from DeHaviland's head office in Toronto through three consultants to relatives of the two ministers of transport in the Bahamas government of Sir Lynden Pindling. "The sole function of the consultants was as conduits for the bribe money," says former Bahamasair comptroller John Utter, who blew the whistle on corruption at Bahamasair. The money trail was revealed in testimony in a recently-completed Commission of Inquiry in Nassau. Investigators from the Royal Canadian Mounted Police and Scotland Yard helped uncover the payoff scheme.

 DeHaviland said in a letter to the CBC that it had cooperated fully with the Bahamian inquiry. However, inquiry investigators told the CBC that the company kept them from questioning the salesperson who had made the bribe arrangement with the Bahamian politicians and that the company had refused to testify at the inquiry in Nassau.

 A Boeing spokesperson in Seattle would not comment on the inquiry testimony, referring questions back to DeHaviland.

 The Commission of Inquiry finished its public hearings in Nassau in late-August and its report is expected by the end of the year.


Fix Is In for the Fixers

THE AVERAGE FINE IMPOSED in antitrust criminal price-fixing cases from 1955 to 1993 amounted to only a tiny percentage of the optimal penalty, according to the first comprehensive study of criminal antitrust sanctions.

 The study, "Criminal Penalties Under the Sherman Act: A Study in Law and Economics," published in the October 1994 issue of the journal Research in Law and Economics, looked at fines in 250 price-fixing cases. Fines were compared to optimal penalties, calculated by a complex formula that looks at a number of factors, including the harm caused by price-fixing to society and the probability of successful government prosecution.

 The study found the average fine from these cases amounted to 0.04 percent of the optimal penalty.

"Despite the recent increase in aggregate criminal penalties, they probably remain a relatively small expected burden to offenders when compared with the external costs of the offenses committed," the report concluded. "To date, the level of criminal penalties has not, by itself, provided adequate deterrence against antitrust offenses."

 One of the study's authors, Joseph Gallo, chair of the Department of Economics at the University of Cincinnati says, "We can conclude that there is very little deterrence resulting from these criminal prosecutions." According to the authors, optimal deterrence is achieved when the expected costs of the antitrust offense to the potential offender, taking into account the degree of risk of being successfully prosecuted, equals the external costs of the offense to society.


Hazards of Kodak

EASTMAN KODAK WILL PAY an $8 million civil penalty and will spend millions of dollars more to inspect, repair and upgrade an estimated 31 miles of industrial sewers at its giant Rochester, New York Kodak Park facility.

The 104-year-old Rochester facility, which employs more than 20,000 workers in 400 buildings, was charged under the Resource Conservation and Recovery Act (RCRA), the primary U.S. law regulating hazardous wastes. Federal officials say that Kodak violated RCRA by failing to identify hazardous wastes at its Kodak Park facility, and by allowing the unlawful disposal of various hazardous wastes through leaks in the facility's industrial sewer system.

Federal officials say Kodak will be permitted to satisfy up to $3 million of the penalty by implementing environmental projects, worth at least $12 million, to reduce hazardous waste at Kodak Park. The settlement also requires Kodak to implement a state-of-the-art database system to classify and track all hazardous wastes, which will enable the company to reduce the discharge of such wastes into the sewer system. Kodak will also upgrade and obtain permits for an incinerator that treats wastewater sludge. Two other incinerators have been closed.

The lawsuit was the first to employ the primary hazardous waste law to attack ongoing pollution from leaking sewers." Our nation's aging manufacturing plants pose new challenges to environmental enforcement," says Assistant Attorney General Lois Schiffer. "Today's settlement shows how government and industry can address the problem without forcing plants to close or jobs to move."

"This settlement is about compliance with regulations. It is not about human health or major environmental impact," says Kodak Vice President and General Manager Kenneth O. Hoffman. "During the past six years since the investigation began, most of the issues cited by EPA have been corrected, or are in process of being corrected."

 The Justice Department may still pursue criminal penalties in addition to the civil penalty, according to Justice Department spokesperson Bert Brandenburg.

- Russell Mokhiber and Jock Ferguson