Defending Disclosure

July 21st, 2016 by Phil Mattera

SEC2In 2012 proponents of financial deregulation managed to generate bipartisan support for a dubious piece of legislation that became the Jumpstart Our Business Startups (JOBS) Act. Among the provisions of the law was the requirement that the Securities and Exchange Commission review the provisions of Regulation S-K, which determines what publicly traded companies need to disclose about their finances and their operations.

Presumably, this process was meant to get the SEC to weaken its transparency rules, but the Commission seems to be approaching the issue in an even-handed manner. In April it issued a document called a Concept Release that reviewed the various issues and asked for comments from the public.

Quite a few progressive policy groups have responded with comments urging the SEC to tighten rules regarding the disclosure of foreign subsidiaries. In recent years, many corporations have been using a loophole in Regulation  S-K to avoid listing entities that are likely to be vehicles for engaging in large-scale tax dodging.

On the last day of the comment period, my colleagues and I at Good Jobs First and the Corporate Research Project submitted our own comments that support that position on foreign subsidiaries but also address several other disclosure issues. What follows are excerpts from those comments.

Subsidy Reporting. A key piece of information about a registrant’s finances has been missing from SEC filings, thus giving investors an incomplete picture of a company’s condition: the extent to which the firm is dependent on economic development incentives provided by state and local governments and other forms of financial assistance from the federal government.

It is estimated that companies receive a total of about $70 billion a year in state and local aid, while federal assistance is thought to total about $100 billion. Our Subsidy Tracker database contains information on more than half a million such awards with a total value of more than $250 billion.

For some companies (including their subsidiaries) the cumulative amount of such assistance is substantial. In Subsidy Tracker there are more than 60 firms that have each been awarded $500 million in assistance, and for more than half of those the amount exceeds $1 billion. The most heavily subsidized company, Boeing, has been awarded more than $14 billion. Other companies, including start-ups, may receive sums that are smaller but which account for a larger portion of their cash flow or assets. There are many cases in which a company’s total awards reach a level of materiality.

Investors should know to what extent a company is depending on subsidies — whether in the form of tax credits, tax abatements, cash grants, or low-cost loans. This is vital information for several reasons. First, many of the awards are contingent on performance requirements such as job creation and can be reduced or rescinded if the firm fails to meet its obligations. Second, investors currently face undisclosed political risk, since some state and local subsidy programs cause a significant fiscal burden and may be curtailed at times of budget stress.

We urge the SEC to use this review of Regulation S-K to correct the long-standing gap in financial disclosure relating to government assistance. Companies should be required to disclose both aggregate subsidy awards and breakdowns by type and jurisdiction.

Legal Proceedings. Like subsidies, corporate regulatory violations and related litigation have grown in size and significance. Violation Tracker, a database created by the Corporate Research Project of Good Jobs First, has collected data on more than 100,000 such cases since the beginning of 2010 with total penalties of about $270 billion. The database currently contains information on cases from 27 federal regulatory agencies and the Department of Justice.

Also as with subsidies, some corporations are significantly impacted by these penalties. In Violation Tracker there are 52 parent companies with aggregate penalties in excess of $500 million, including 26 with more than $1 billion. The most heavily penalized companies are Bank of America ($56 billion), BP ($36 billion) and JPMorgan Chase ($28 billion).

The Item 103 requirement that registrants report on material legal proceedings results in disclosure of the largest cases, but some companies fail to provide adequate details on other penalties that may not be in the billions but are still substantial. Since regulatory agencies and the Justice Department base their penalty determinations in part on a company’s past actions, companies omitting adequate data about their regulatory track record are denying investors information that may indicate a heightened risk for much larger penalties in the future.

At the very least, the Commission should do nothing to weaken the provisions of Item 103 and related provisions requiring reporting about regulatory matters and legal proceedings. It is also worth considering whether changes are needed in the Instruction 2 language allowing companies to omit cases with potential penalties that do not exceed ten percent of the firm’s current assets. Losses at or close to the ten percent level could have severe consequences for many companies and pose the kind of risk investors deserve to know about.

Current disclosures based on materiality should be expanded to also require registrants to indicate which of their cases involve repeat violations of specific regulations. Such recidivist behavior will be a matter of concern for many investors.

Subsidiaries. Good Jobs First joins with the numerous other organizations that are urging the Commission to strengthen rules regarding the disclosure of offshore subsidiaries that may be involved in risky international tax strategies.

We believe that better disclosure is necessary with regard to domestic subsidiaries as well. In the course of our work on the Subsidy Tracker and Violation Tracker databases, we have looked at hundreds of the Exhibit 21 subsidiary lists included in 10-K filings. We make extensive use of these lists in the parent-subsidiary matching system we developed to link the companies named in individual subsidy awards and violations to a universe of some 3,000 parent corporations. This enables us to display subsidy and penalty totals for the parent companies and thus provide our users, including investors, with what we think is valuable information about the finances and compliance records of these companies.

When looking at these Exhibit 21 lists we have seen a great deal of inconsistency. Using the Item 601(b)(21)(ii)  exception, some companies are listing few if any subsidiaries, whether domestic or foreign. We find it hard to believe that any large corporation has no subsidiary of significance. The omission of subsidiary names makes it more likely that we will miss an important linkage in our databases relating to a significant subsidy award or violation. It also means that investors doing their own analyses may be working with incomplete information.

In addition to making sure that all registrants provide complete subsidiary reporting, the Commission should mandate that the information is the Exhibit 21 lists be presented in a standardized format. Currently, some companies list all subsidiaries in alphabetical order, while others group them by country. Some companies list second-tier and other levels of subsidiaries under their immediate parents, while others place the various tiers in one alphabetical list or exclude the lower levels entirely. Whichever standardized format is mandated should also have to be made available in machine-readable form.

Employees. Another area of widespread inconsistency is in the reporting on employees. Numerous companies seem to be omitting this piece of information, and a larger number have abandoned the traditional practice of indicating how many of the employees are based in the United States and how many are at foreign operations. An even smaller number of firms maintain the once widespread practice of providing information on collective bargaining.

The size of a company’s workforce is information that investors deserve to know. Given the widespread discussion in the political arena about offshore outsourcing and the talk of compelling firms to bring jobs back to the United States, the foreign-domestic breakdown is of great importance to investors. They should also be told about the extent to which both types of employees are covered by collective bargaining agreements.

And given the growing controversy over employment practices and the potential for stricter regulations, companies should also be required to provide details on the composition of their labor force, including the number of workers who are part-timers, temps or independent contractors.

Racism in Corporate America

July 14th, 2016 by Phil Mattera

racismRecent events have brought increasing attention to the persistence of racism in American life. While policing and criminal justice are currently in the spotlight, there are many more institutions that continue to exhibit systemic bias and must be held accountable.

Among them is Corporate America, which usually says the right things but often harbors dirty secrets. For example, African-American motorists stopped by police for dubious reasons – sometimes with deadly consequences – may have already been victims of racism when they purchased the vehicle they are driving. During the past few years, several major auto financing companies have paid tens of millions of dollars to resolve accusations that they routinely charged higher interest rates to minority customers.

In 2013 the Consumer Financial Protection Bureau (CFPB) announced that Ally Financial (formerly GMAC) would pay $80 million in consumer relief and an $18 million penalty to settle such a case involving more than 235,000 minority borrowers. In similar cases in 2015, American Honda Finance Corporation agreed to pay $24 million in restitution and Fifth Third Bank was required to pay $18 million.

Racial discrimination in commerce is not limited to auto loans. It’s well known that major mortgage lenders steered minority borrowers into predatory mortgages in the period leading up to the financial meltdown and that many of those customers ended up losing their homes. In 2011 Countrywide Financial (which by that time had been taken over by Bank of America) had to pay $335 million to resolve allegations of racial discrimination.  The following year, Wells Fargo paid $234 million and SunTrust $21 million in their own mortgage discrimination cases.

Since the beginning of 2010, ten additional banks and mortgage brokerage firms have settled racial discrimination cases brought by the CFPB and the Civil Rights Division of the Justice Department. Race accounted for nearly all of the high-penalty discrimination cases included in the recent expansion of Violation Tracker. There are also dozens of cases involving discrimination based on nationality, gender, age, disability, etc. Among the major corporations involved in such cases in recent years are McDonald’s, IBM, Carnival cruise lines, Continental Airlines (now part of United Continental) and Greyhound bus lines. These don’t cover workplace discrimination cases, which we are still collecting.

Along with matters explicitly involving racial bias, the CFPB has brought numerous cases against payday lenders and other predatory financial services firms whose unsavory practices disproportionately harm African-Americans and other minorities.

While corporate discrimination does not involve the life and death issues of unequal policing, it is another aspect of systemic racism that must be eradicated. 

 

Serial Corporate Offenders

July 7th, 2016 by Phil Mattera

The vast majority of regulatory enforcement cases end with an agreement by the corporation to correct its behavior in the future. Monetary penalties are meant to reinforce the lesson and act as a further deterrent.

If only it worked that way. Most large companies are, in fact, repeat offenders. In the recently expanded Violation Tracker database, the 2,000 parent companies account for nearly 30,000 individual cases, an average of 15 each. And that’s only since the beginning of 2010.

Such recidivism is all the more troubling when a company has faced criminal rather than civil charges and been allowed to evade serious consequences through a deferred prosecution agreement (DPA) or a non-prosecution agreement (NPA). The Justice Department uses these gimmicks to allow corporations to resolve criminal matters by paying a fine while avoiding a guilty plea. The theory is that this brush with the law will prompt the company to come into full compliance. If that does not happen, it faces the threat of a real prosecution.

Of the 80 parent companies in Violation Tracker that have signed a DPA or NPA, about half have subsequently had no other reported offenses. Maybe the Justice Department system does work — in some cases.

Yet the other half includes companies that continued to rack up numerous violations from agencies such as EPA and OSHA with seemingly no concern that this would jeopardize their agreement with DOJ. These serial offenders include some of the world’s largest banks, both those based in the United States and those doing substantial business here.

The track records of nine of these banks contain serious cases that were resolved following a DPA or NPA. In some instances, these subsequent matters involved behavior that completely pre-dated the signing of the agreement with DOJ, but not always.

Take Bank of America, which has the dubious distinction of being the most penalized corporation in Violation Tracker, with a total of $56 billion in fines and settlements. In 2010 it signed an NPA and paid $137 million to resolve civil and criminal charges of conspiring to rig bids in the municipal bond derivatives market. Yet in 2014 the Consumer Financial Protection Bureau announced that BofA would pay a $20 million penalty and some $700 million in consumer relief to resolve allegations that it engage in abusive marketing of credit-card add-on products during a period that continued after 2010. The CFPB did not refer to the earlier bid rigging case and there was no indication that BofA’s NPA was a factor in how the credit-card case was handled.

Several banks have managed to follow one DPA or NPA with another. Deutsche Bank has been allowed to sign three such agreements: one in 2010 relating to fraudulent tax shelters, one in 2015 for manipulation of the LIBOR interest rate benchmark, and another that year by its Swiss subsidiary in a tax case related to undeclared accounts held by U.S. citizens.

In other cases, a DPA or NPA was followed by a guilty plea in another criminal matter. After signing an NPA in 2011 in a municipal bond case and a DPA in 2014 for its relationship to the Madoff Ponzi scheme, JPMorgan Chase went on to plead guilty on a foreign exchange market manipulation charge in 2015.

It seems that previous DPAs or NPAs mean little to subsequent cases unless the offense is exactly the same. In 2015, for instance, Justice rebuked UBS for violating its 2012 NPA relating to LIBOR manipulation and terminated the agreement, forcing the Swiss bank to enter a guilty plea.

These various outcomes seem to make little difference to the banks. They continue to break the law in one way or another while paying affordable penalties and being allowed to go on operating as usual. Life is good for career corporate criminals.

The Amazing Variety of Bank Misconduct

June 28th, 2016 by Phil Mattera

vt_logo-full_1Since the beginning of 2010 major U.S. and foreign-based banks have paid more than $160 billion in penalties (fines and settlements) to resolve cases brought against them by the Justice Department and federal regulatory agencies. Bank of America alone accounts for $56 billion of the total and JPMorgan Chase another $28 billion. Fourteen banks have each accumulated penalty amounts in excess of $1 billion, and five of those are in excess of $10 billion.

These are among the key findings revealed by Violation Tracker 2.0, the second iteration of an online database produced by the Corporate Research Project of Good Jobs First. The database, which initially focused on environmental and safety cases, has now been expanded to include a wide variety of offenses relating to the financial sector along with cases against companies of all kinds involving price-fixing, defrauding of consumers and foreign bribery. Banks and other financial companies account for about half of the new cases but more than 90 percent of the penalties.

With the expansion Violation Tracker now covers 110,000 cases from 27 regulatory agencies and the DOJ with total penalties of some $270 billion.

Along with the new database, we are releasing a report called The $160 Billion Bank Fee that focuses on a subset of the data: mega-cases — those with penalties of $100 million or more — brought against major banks by the Justice Department and agencies such as the Consumer Financial Protection Bureau, the Federal Reserve, the Office of the Comptroller of the Currency and the Securities and Exchange Commission. Private litigation is not included.

We found 144 of these mega-cases that had been brought against 26 large U.S. and foreign banks. Along with Bank of America and JPMorgan Chase, those banks with $10 billion or more in penalties include: Citigroup ($15.4 billion), Wells Fargo ($10.9 billion), and Paris-based BNP Paribas ($10.5 billion).

Many of the mega-cases address the toxic securities and mortgage abuses that gave rise to the 2008-2009 financial meltdown but there are also numerous other offenses that have received less attention. The cases and penalties break down as follows:

  • Toxic securities and mortgage abuses: $118 billion
  • Violations of rules prohibiting business with enemy countries: $15 billion
  • Manipulation of foreign exchange markets; $7 billion
  • Manipulation of interest rates: $5 billion
  • Assisting tax evasion: $2.4 billion
  • Credit card abuses: $2.2 billion
  • Failure to report suspicious behavior by Bernard Madoff: $2.2 billion
  • Inadequate money-laundering controls: $1.3 billion
  • Discriminatory practices: $939 million
  • Manipulation of energy markets: $898 million
  • Other major cases: $3.8 billion
  • TOTAL: $160 billion

Of the 144 mega-cases, 120 were brought solely as civil matters. The other 24 involve criminal charges, though in two-thirds of those cases the banks were able to avoid prosecution. The latter include 10 cases with deferred prosecution agreements and six with non-prosecution agreements. The banks that have pleaded guilty to criminal charges include: Citigroup, JPMorgan Chase, Barclays, BNP Paribas, Credit Suisse and Royal Bank of Scotland.

While these cases serve to illustrate the magnitude and amazing variety of bank misconduct, it remains to be seen whether they have succeeded in their intended purpose: to get the banks to clean up their act.

The Lax Prosecution of Corporate Crime

June 23rd, 2016 by Phil Mattera

vt_logo-full_1When an individual commits a serious offense, chances are that he or she is going to face a criminal charge. When a corporation breaks the law in a significant way, in most cases it faces a civil penalty.

This disparity between the treatment of human persons and corporate ones became increasingly apparent to me as I finished processing the data for the expansion of the Violation Tracker database my colleagues and I at the Corporate Research Project of Good Jobs First are releasing on June 28.

Violation Tracker 2.0 adds data on some 700 cases involving banks and other financial services companies brought by the Justice Department and ten federal regulatory agencies as well as 600 involving non-financial firms in areas such as price-fixing and foreign bribery. These 1,300 cases account for well over $100 billion in fines and settlements.

These plus the environmental, safety and health cases that made up the initial version of Violation Tracker bring the total number of entries in the database to 110,000 for the period since the beginning of 2010. Of that number, only 473 — less than one half of one percent — involve criminal charges.

It may come as a surprise that the largest portion of the criminal cases involve serious environmental matters referred to the Justice Department by the Environmental Protection Agency and a few from agencies such as the Coast Guard. The largest of these was a $400 million settlement with Transocean in connection with the Deepwater Horizon disaster in the Gulf of Mexico but most have penalties below $1 million.

The next most common category is price-fixing, with 99 cases that imposed penalties ranging up to the $500 million paid by the Taiwanese company AU Optronics. There are 82 tax cases, most of which involve charges against Swiss banks for helping U.S. taxpayers keep their offshore accounts hidden from the IRS. Foreign Corrupt Practices Act cases brought by the Justice Department account for 53 cases, with the biggest penalty, $772 million, paid by the French company Alstom.

Other categories include serious food safety violations, market manipulation and failure to adhere to rules against doing business with countries deemed to be enemies of the United States.

The significance of the 473 cases is diminished by the fact that in 35 percent of them the companies weren’t really prosecuted. Instead, they paid a penalty and signed either a non-prosecution agreement or a deferred prosecution agreement. These are gimmicks that allow companies to avoid the consequences of a criminal conviction.

Of the 308 cases in which there was an actual guilty plea or verdict, 161 were environmental matters, many of which were brought against small companies for things such as toxic dumping. Relatively few large corporations were targeted.

The category with the largest number of big business convictions is price-fixing, which in recent times has often meant Asian automotive parts companies. Seven big U.S. and foreign banks (or their subsidiaries) have had to enter guilty pleas. In just two cases did U.S.  bank parent companies — Citigroup and JPMorgan Chase  — enter those pleas. These were in a case involving manipulation of the foreign exchange market. After their pleas, they and the foreign banks also charged got waivers from SEC rules that bar firms with felony convictions from operating in the securities business.

So here’s what it comes down to: Apart from when they engage in price-fixing, large corporations rarely face criminal charges. When they do, they are often allowed to settle without a formal prosecution. And when they do plead guilty, these can get waivers from the consequences of their conviction.

Keep this in mind the next time a corporate lobbyist complains about excessive regulation.

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Note:  Violation Tracker 2.0 will be released on June 28.

The Ongoing Business Watergate Scandal

June 16th, 2016 by Phil Mattera

It is often forgotten that the Watergate scandal of the 1970s was not only about the misdeeds of the Nixon Administration. Investigations by the Senate and the Watergate Special Prosecutor forced companies such as 3M, American Airlines and Goodyear Tire & Rubber to admit that they or their executives had made illegal contributions to the infamous Committee to Re-Elect the President.

Subsequent inquiries into illegal payments of all kinds led to revelations that companies such as Lockheed, Northrop and Gulf Oil had engaged in widespread foreign bribery. Under pressure from the SEC, more than 150 publicly traded companies admitted that they had been involved in questionable overseas payments or outright bribes to obtain contracts from foreign governments. A 1976 tally by the Council on Economic Priorities found that more than $300 million in such payments had been disclosed in what some were calling “the Business Watergate.”

While some observers insisted that a certain amount of baksheesh was necessary to making deals in many parts of the world, Congress responded to the revelations by enacting the Foreign Corrupt Practices Act in 1977, making bribery of foreign government officials a criminal offense under U.S. law.

That laws is still on the books, and despite all the talk of corporate social responsibility, quite a few corporations still get caught in its net.

As part of the forthcoming expansion of the Violation Tracker database I produce with my colleagues at the Corporate Research Project of Good Jobs First, I’ve been looking at recent FCPA data and have been struck by the enduring inclination of businesspeople to engage in foreign bribery.

Since the beginning of 2010 about 90 companies have been hit with either criminal charges brought by the Justice Department or civil charges filed by the SEC or both. The 53 companies charged by the DOJ had to pay nearly $4 billion to settle their cases, while the 72 firms targeted by the SEC had to pay $1.7 billion.

The companies involved in the cases include some very familiar U.S. corporate names, including: Alcoa, General Electric, Goodyear, Johnson & Johnson, Pfizer, Ralph Lauren and Smith & Wesson.

Yet some of the biggest penalties have been paid by foreign companies such as the French conglomerate Alstom ($772 million), British military contractor BAE Systems ($400 million), Italian petroleum company ENI ($125 million) and German automaker Daimler ($91 million).

That reflects the long reach of the law, which allows for cases to be brought against foreign corporations involving corrupt practices in third countries. For example, the Japanese trading company Marubeni was charged with paying bribes to high-ranking government officials in Indonesia to secure a lucrative power project. Germany’s Deutsche Telekom and its Hungarian subsidiary Magyar Telecom were charged with making illegal payments in Macedonia and Montenegro.

From the time the FCPA was enacted, corporate lobbyists have complained about the law and have sought to have it weakened or repealed. The smarter companies have realized that the bribery rules are not going away and that they simply need to clean up their act when doing business abroad.

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Note: Violation Tracker 2.0 — which will add banking offenses and cases involving price-fixing, money laundering, defrauding of consumers and export-control/sanctions violations as well as foreign bribery — will be released on June 28.

The (Price) Fix is In

June 9th, 2016 by Phil Mattera

Conventional economists and the policymakers who follow their advice continue to insist that the market is an inevitable force to which we must all pay homage. Belief in the power of the “invisible hand” is used to justify all manner of conservative policies, including resistance to living wage ordinances.

Yet there is plenty of evidence that influences other than supply and demand play a role in commercial activity, even when government is not involved. A key example concerns the setting of prices, which is supposedly the purest of free market activities but is frequently the result of collusion among supposed competitors.

Anyone who read Adam Smith in college may have been exposed to his observation that “people of the same trade seldom meet together even for merriment and diversion, but the conversation ends in a conspiracy against the public or some contrivance to raise prices.”

I was reminded of the enduring truth of that statement in the course of gathering data for the forthcoming expansion of the Violation Tracker database I oversee as part of my work for the Corporate Research Project of Good Jobs First. The bulk of that expansion will cover the many sins of the banking sector, but it will also include other commercial offenses such as price-fixing.

Since the beginning of 2010, the Antitrust Division of the Justice Department has resolved price-fixing cases against more than 80 companies. This is one of the few areas in which corporations routinely face criminal charges and usually have to enter guilty pleas rather than getting off with a deferred-prosecution or non-prosecution agreement.

Those 83 companies have had to pay a total of more than $4 billion in fines, with the individual amounts ranging as high as $500 million in the case of Taiwanese electronics company AU Optronics, which pleaded guilty to fixing prices of LCD displays used in computers and televisions in the United States. A federal jury found that the company conspired with its competitors during monthly meetings secretly held in hotel conference rooms, karaoke bars and tea rooms around Taiwan.

AU Optronics is one of five Taiwanese companies that have faced U.S. price-fixing charges in recent years, but the largest number of defendants in these cases come from Japan. Forty-nine Japanese companies have paid a total of $2.8 billion in penalties. Adding in the two defendants from South Korea and one from Singapore, Asian companies accounted for more than two-thirds of the cases and three-quarters of the penalties.

Price-fixing, however, is not an exclusively Asian proclivity. The list of defendants include 14 U.S. companies, seven from Germany, two from Switzerland and one each from Bermuda, Chile and Sweden.

The industry that has dominated U.S. price-fixing prosecutions in recent years is auto parts, which accounts for 42 defendants that have paid some $2.6 billion in penalties. More defendants come from the freight industry but the average penalties have been lower, totaling $449 million. The electronic components sector accounts for $583 million, mainly as a result of AU Optronics.

While many of the culprits are lesser known manufacturing and service companies, the list also includes corporations familiar to consumers. Among these are Bridgestone, Panasonic and Samsung.

Keep these cases in mind the next time someone insists that the market is sacrosanct

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Note: Violation Tracker 2.0 — which will add banking offenses, money-laundering, defrauding of consumers, foreign bribery and export-control/sanctions violations as well as price-fixing — is scheduled to be released on June 28.

Trump and the National Enquirer’s Mutual Admiration Society

June 2nd, 2016 by Phil Mattera

Donald Trump’s verbal assault on reporters who dared to ask question about his charitable activities displays a contempt for the media comparable to that of Richard Nixon and Spiro Agnew. Yet there is one media outlet for which the presumptive Republican nominee seems to have unbounded affection: the National Enquirer.

Much has been written about Trump’s fascination with the supermarket tabloid, usually with the assumption that it is simply an indication of low-brow reading habits. Yet there is more to Trump’s relationship with the current and former principals at the Enquirer that bears closer scrutiny.

Trump is apparently close with David Pecker, chief executive of American Media Inc., parent of the Enquirer and other tabloids. In 2010 New York’s Pace University announced that it would pay tribute to Pecker (an alumnus) and that the award would be presented by Trump, “a long-time friend and business associate.”

Last August, the New York Daily News, also noting the relationship between the two men, reported that the Enquirer had decided not to subject Trump to the kind of sensationalized reporting that it had used in the past to sink the presidential ambitions of John Edwards and Gary Hart. In fact, the Enquirer has published self-aggrandizing pieces written by Trump, attacked his Republican opponents and formally endorsed Trump, apparently the first time the tabloid has done so for a candidate.

American Media gained control of the Enquirer after the 1988 death of Generoso Pope Jr., who had purchased the publication in the early 1950s. The Enquirer had been founded in 1926 by William Griffin, a protege of William Randolph Hearst who shared the media baron’s isolationist views. Griffin was so outspoken in opposing U.S. involvement in World War II that he was among a group of people indicted in the 1940s for sedition and conspiring to impair the morale and loyalty of the armed forces. The charges against him were later dropped.

The Enquirer was struggling to survive when Pope acquired it, reportedly with the financial assistance of mobster Frank Costello, who was apparently close to Pope’s father, also named Generoso. The elder Pope was a political powerbroker in the Italian-American community as the publisher of the rightwing Italian-language newspaper Il Progresso. Until 1941 he was a supporter of Mussolini.

Along with his publishing enterprises, the elder Pope controlled Colonial Sand & Stone, which became the dominant ready-mix concrete provider in New York City. After his death, both Il Progresso and Colonial were taken over by his oldest son, Fortune Pope. Colonial retained its grip on New York’s construction industry until the 1970s and in all likelihood did business with Donald Trump’s father Fred and perhaps Donald himself during the early years of his career.

Meanwhile, Fortune’s eccentric brother Generoso turned the Enquirer into a thriving operation with a mix of sensationalism and scandal. It was not until American Media took it over that the publication began to dabble in political reporting and politics. Back in 1999, when Trump was considering his presidential bid, via the Reform Party, the Enquirer published a poll purportedly showing that the real estate developer would be a strong candidate. Trump, naturally, cited the poll in justifying his plans.

It is difficult to tell whether Pecker, who has made campaign contributions to prominent Democrats as well as Republicans, has been promoting Trump for ideological reasons or just because the colorful real estate developer and former reality TV star helps sell his publications. Pecker’s company used to publish Reality Weekly, which featured Trump during his “Apprentice” days. Earlier in his career, while at Hachette, Pecker published an in-house magazine called Trump Style that was distributed to visitors at Trump properties.

While the relationship between Pecker and Trump may have once been little more than matter of  cross-marketing, its role in the current presidential race is a lot more troubling.

Monsanto’s German Suitor Has Its Own Tainted Record

May 26th, 2016 by Phil Mattera

Monsanto, one of the most controversial corporations in the United States, now finds itself the target of a takeover campaign by German pharmaceutical and chemical giant Bayer. Would a change in ownership improve the behavior of the biotechnology company dubbed “Mutanto” by its critics?

Answering that question requires a look at Bayer’s own track record, which is far from unblemished. Most Americans associate Bayer with aspirin. The company created the analgesic in 1899, but during World War I the U.S. government seized Bayer’s American assets and allowed other firms to sell aspirin under the Bayer name until the German company bought back the rights in 1994.

In the 1920s Bayer was absorbed into the massive IG Farben cartel, which used slave labor and supported the Nazi regime. After the Second World War it re-emerged as one of the companies created through the break-up of IG Farben. During the 1950s it began to return to the U.S. market through efforts such as a joint venture with Monsanto (in its pre-agribusiness era) called Mobay Chemical.

As Bayer has stepped up its U.S. involvement over the past two decades it has gotten embroiled in one scandal after another. In 1997 one of its subsidiaries based in New Jersey pled guilty to criminal price-fixing and had to pay a $50 million fine. In 2000 Bayer had to pay $14 million to the federal government and the states to settle allegations that it inflated prices on drugs sold to the Medicaid program. In 2001 it was accused of price-gouging on the antibiotic Cipro, which was then in high demand because of the anthrax scare. It later had to pay $257 million to settle a federal lawsuit on Cipro overcharging.

In 2003 documents emerged suggesting that Bayer was aware of serious safety problems with its cholesterol drug Baycol long before the medication was withdrawn from the market. In 2004 Bayer had to pay a $66 million fine in another criminal price-fixing case. A 2008 explosion at a Bayer pesticide plant in West Virginia that killed two workers led to regulatory penalties including a $5.6 million settlement with the EPA. A report found that management deficiencies played a significant role in creating the conditions that caused the explosion.

That’s just the quick version of Bayer’s controversies. For more see the website of the Coalition against BAYER-dangers, a German watchdog group that has been monitoring the company for more than 30 years.

Perhaps most troubling is the fact that Bayer has already been active in the businesses in which Monsanto has gained its checkered reputation: agricultural chemicals and genetically modified seeds. Before the Monsanto bid, Bayer was in the news most often because of concerns that its pesticides were responsible for sharp drops in bee populations.

The chances that a Bayer takeover of Monsanto will get the U.S. company to clean up its act seem slim indeed. In fact, the combined company will probably be an even bigger threat.

President or Pitchman?

May 19th, 2016 by Phil Mattera

In submitting his new financial disclosure form to the Federal Election Commission, Donald Trump described it as “the largest in the history of the FEC.” Aside from being another example of his compulsive need to boast, the statement seems to demonstrate an astounding ignorance of what the disclosure process is all about.

It also raises questions as to what Trump’s entire candidacy is all about. Since announcing his bid for the Republican nomination last June, Trump has made countless statements about his supposed business prowess and the success of his various enterprises. He even insisted that multiple corporate bankruptcies were indications of shrewdness rather than failure, and he downplayed the long series of controversies and scandals that have marked his business career.

Trump is not the first candidate to try to use a business track record as the springboard to the presidency. Mitt Romney did essentially the same thing, though in his case he had already distanced himself from Bain Capital and had transitioned to the public sector by serving as the governor of Massachusetts.

Yet in Trump’s case, the objective seems to be more than simply asserting his qualifications based on past business activities. To a great extent, he has used his candidacy to promote his current endeavors. He uses every opportunity to tout his portfolio of businesses, and in March he literally put his wares on display by holding a news conference surrounded by piles of Trump Steaks, Trump Wine and other branded products.

He has also employed the campaign to promote the size of his personal fortune, demonstrating a preoccupation with asserting a net worth of $10 billion in the face of substantially smaller estimates by the likes of Forbes ($4.5 billion) and Bloomberg ($2.9 billion). A decade ago, Trump brought an unsuccessful $5 billion defamation lawsuit against an author who claimed that he was actually worth less than a billion.

Initially, it appeared that Trump’s unrestrained comments about Mexicans would harm his business interests as companies such as NBC Universal, Univision, Macy’s and Serta cut ties with him. Yet the newly released disclosure form suggests something different. The Washington Post concludes that “business has boomed in Donald Trump’s financial empire during the time he has run for president.”

This raises the question: Is Trump primarily interested in serving the country or serving his business interests? The candidate seems to have done little to separate himself from those interests during the campaign. In 1992 Ross Perot resigned as CEO of his computer services company while running for the presidency. Trump has made no secret of the fact that he continues to be involved in commercial endeavors.

Trump has not committed to selling off his interests should he reach the White House. He has suggested that his adult children would get more involved in managing those operations, but it is difficult to believe that he would recuse himself to any great extent. Moreover, Trump’s businesses are so bound up with him personally — his name, his image, etc. — that it is difficult to see how he could separate himself even if he wanted to.

This brings us back to the financial disclosure form. Trump apparently views it as an opportunity to “document” his net worth, but the real purpose, of course, is to identify possible conflicts of interest. In Trump’s case, with hundreds of companies under his control and licensing deals with many others, those potential conflicts are endless.

Trump appears to be oblivious to the issue. If his goal was actually to make the Trump Organization, his holding company, great again, he may very well have succeeded. It remains to be seen how the rest of the country fares.

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Note: Subsidy Tracker, the corporate welfare database I produce with my colleagues at Good Jobs First, has reached two milestones: 500,000 entries and $250 billion in taxpayer-funded giveaways.