Names in the News

Scamming the Tax Man

THE U.S. GOVERNMENT WILL LOSE $70 billion to $100 billion over the next seven years because some of the largest and most profitable foreign corporations which operate in the United States avoid paying U.S. income tax on billions of dollars of profit earned here, according to a General Accounting Office (GAO) report released in May 1995.

 The GAO concluded that 25,138 foreign-based multinational firms operating in the U.S. paid no income tax despite sales of $359 billion and more than $680 billion in assets in 1991, the most recent year for which figures are available. Nearly half of the largest firms with assets of $100 million or more paid no U.S. income tax. The number of firms that size which pay no U.S. income tax doubled in the last four years measured by the GAO to 715 firms.

 U.S.-based multinational firms are also avoiding U.S. taxes, the GAO report concluded. More than 1.2 million U.S.-based multinational firms - 62 percent of U.S.- based multinationals - paid no U.S. income tax, despite sales of $1.5 trillion and $3.2 trillion in assets.

 "The problem of massive tax avoidance is growing rapidly worse," says Senator Byron Dorgan, D-North Dakota, "Tax avoidance on this scale is an outrage."

 Dorgan says corporations use a scheme called "transfer pricing" to avoid U.S. taxes. Under the scheme, companies transfer profits out of the country through "creative accounting" practices. Foreign-based operations paid their U.S.-based affiliates artificially low prices for goods and services produced in the United States and sold their own foreign-produced goods and services to U.S. affiliates at artificially high prices. With transfer pricing, some firms claim their U.S. affiliates "purchased safety pins for $29 each, toothbrushes for $18 each and sold pianos for $50 each and tractor tires for $7.69 each," Dorgan says.

Dorgan called on the Internal Revenue Service to "scrap its outdated international tax enforcement tools" which allow the companies to avoid paying U.S. taxes through transfer pricing. He also called on the Senate Finance Committee and the House Ways and Means Committee to hold hearings aimed at beefing up tax enforcement multinational corporations.


Tort Hypocrisy

U.S. CORPORATIONS HAVE BEEN DUPLICITOUS in their drive to duck responsibility for dangerous products, consumer advocate Ralph Nader charged in a May 1995 letter to U.S. Senators.

"Time after time, the same companies that tell Congress, the investment community and the public that product liability is ruining them, report in their filings with the [Securities and Exchange Commission (SEC)] that their liability exposures pose no material threat to the bottom line," Nader wrote.

Nader identified executives of a number of corporations who have publicly protested the prohibitive cost of product liability even though the financial reports that their companies file tell a completely different story.

 For example, Nader quoted David S. J. Brown, Monsanto vice-president for government affairs and chair of the Product Liability Coordinating Committee. "Out-of-control product liability litigation clogs our courts, curtails American innovation and creativity, drives up the costs of consumer products, and prevents some valuable products and services from ever coming to market," Brown said in a news release. The numbers are "in the stratosphere," added Monsanto's CEO Richard J. Mahoney, referring to jury awards in product liability cases.

But if Monsanto's product liability costs are in the stratosphere, its profits are somewhere much further out in orbit. According to Monsanto's 10-K report for the period ending December 31, 1993, "while the results of litigation cannot be predicted with certainty, Monsanto does not believe these matters or their ultimate disposition will have a material adverse effect on Monsanto's financial position."

Nader took similar contrasting statements from officials of several other companies, including Upjohn, Dow Chemical,Corning, Coleman Co. and CooperIndustries.

 "Elected officials have a duty to see through these transparent deceptions and vote against weakening product liability law standards that protect people," Nader says. "Experience has shown that this is the best way to minimize the size of the next generation of victims of dangerous and faulty products."

Conoco Fined

DUPONT-OWNED CONOCO INC. WILL PAY $1.5 million in penalties proposed by the Occupational Safety and Health Administration (OSHA) following an investigation of an explosion and fire at its Westlake, Louisiana refinery in which one worker was killed and another hospitalized. The company will also perform a corporate- wide process safety management audit.

 "Conoco has agreed to resolve this matter as quickly as possible and to implement a corporate-wide program of auditing and correcting any deficiencies in the process safety management of highly hazardous chemicals," says OSHA chief Joseph Dear. "The settlement agreement avoids the burden of possible prolonged litigation and furthers the efforts of both OSHA and Conoco to provide safe workplaces."

 The explosion and fire at the Westlake refinery occurred on October 28, 1994. One fatality and one hospitalization resulted. The explosion occurred during startup operations on a catalytic cracking unit. A large isolation valve leaked, allowing flammable gases to reach an ignition source.

 OSHA alleges the company failed to provide employee training required under process safety management standards, did not perform required inspections and tests on process equipment and failed to correct equipment deficiencies.

 "Although we disagree with the [OSHA] citation and findings, it is best to put this behind us and move forward," says Conoco Lake Charles refinery manager Jim Leigh.

 Ten contractors working at the Westlake refinery also were cited for various alleged violations as a result of the OSHA investigation.

 - Russell Mokhiber