Punishments that Fit the Corporate Crime

May 28th, 2015 by Phil Mattera

gm-ignition-switch-accident-victims_0Now that several large banks have pled guilty to criminal charges, the next addition to the list of corporate felons could be General Motors, which is reportedly negotiating a settlement with the Justice Department to resolve an investigation of the company’s concealment of an ignition-switch problem that has been linked to more than 100 deaths.

Another criminal investigation is targeting Takata Corp., whose defective airbags recently prompted the record recall of 34 million vehicles. Its airbags can explode violently when activated, shooting shrapnel that has been tied to six deaths and more than 100 injuries.

In reporting the possibility of a plea by GM, the New York Times said the company is likely to be hit with a record financial penalty, suggesting that this will be the main punishment faced by the automaker. Presumably, Takata will also have to fork over a substantial sum.

Federal prosecutors have been extracting larger and larger amounts from companies in settlement deals, but are monetary penalties enough when it comes to corporate misconduct that results in serious physical injuries and loss of life?

Of course, there is a long tradition in the tort system of attaching dollar amounts to victims of business negligence, but when the wrongdoing is serious enough to warrant criminal charges, the culprits should not be able to buy their way out of jeopardy.

Ideally, such cases should also include the filing of charges against individuals, especially top executives, who could face the loss of their personal liberty. In most instances, however, prosecutors say it is too difficult to prove individual culpability.

How, then, could companies be punished beyond financial penalties (which are often easily affordable and tax deductible)? Short of using the corporate death penalty (charter revocation), which in the case of a large firm such as GM would cause economic upheaval, there are other options to consider.

It’s frequently said that corporations cannot be put in prison, but there are ways of restricting their freedom to operate. These involve excluding them from certain markets or putting restrictions on the scope or size of their business. Such penalties already exist in the form of debarment from federal contracting or disqualification from certain regulated activities.

The problem is that prosecutors and regulators are wary of making full use of these sanctions, as seen in the fact that the banks that recently pleaded guilty to criminal charges of rigging the foreign currency market were promptly given waivers by the SEC from rules that would have disqualified them from the securities industry.

Perhaps the bank offenses were too abstract to engender much public anger over the way they were allowed to escape some of the more serious consequences for their crimes. But I’d like to think that companies found to have caused death and dismemberment will be expected to do more than write a check.

Convictions Without Consequences

May 21st, 2015 by Phil Mattera

get_out_of_jail_freeIn the years following the financial meltdown, corporate critics complained that the big banks were not facing serious legal consequences for their misconduct. They were being allowed to essentially buy their way out of jeopardy through financial settlements under which they admitted no wrongdoing.

In 2012 the Justice Department gave in to the pressure and extracted a guilty plea, but it was made by an obscure subsidiary of a foreign bank, Switzerland’s UBS, to resolve a charge of felony wire fraud in connection with the long-running manipulation of LIBOR benchmark interest rates. The plea seemed to do little to impede UBS’s operations. The bank dodged one serious consequence when it received an exemption from the Labor Department from a rule that should have disqualified it from continuing to serve as an investment advisor for pension funds.

Things would be different, critics said, when a criminal conviction involved a parent company. Last year, that happened when another Swiss bank, Credit Suisse, pleaded guilty to conspiracy charges of assisting U.S. taxpayers in dodging taxes by filing false returns with the Internal Revenue Service. Subsequently, Credit Suisse applied for its own exemption from the Labor Department; a decision is pending but is likely to go in the bank’s favor.

Now, at last, the Justice Department has gotten major two major U.S. banks — Citicorp and JPMorgan Chase — to plead guilty to something, which turned out to be felony charges of conspiring to manipulate foreign exchange markets. Two foreign banks — Barclays and Royal Bank of Scotland — also agreed to guilty pleas in the case.

The four financial institutions will together pay criminal fines of just over $2.5 billion. Additional fines were assessed by their regulator, the Federal Reserve.

It’s not clear they will suffer much more than those easily affordable financial penalties. Along with likely exemptions from the Labor Department, the banks have already been granted waivers from SEC rules barring criminals from engaging in the securities business. The banks will be on probation for three years, but keep in mind that BP was on probation at the time of the Gulf of Mexico disaster.

A somewhat higher hurdle may be faced by UBS, which the Justice Department announced has entered a new guilty plea (this time by the parent company) after being found to be in breach of the 2012 non-prosecution agreement it signed when the Japanese subsidiary pleaded guilty.

While newly designated criminals such as Citibank and JPMorgan can claim they will never break the law again, UBS is already found to have violated its commitment to be law-abiding by participating in the foreign exchange conspiracy and engaging in other forms of misconduct.

Taken together, all these developments illustrate the farce that is law enforcement when large corporations are involved. For years they were freed from serious consequences through the use of deferred- and non-prosecution agreements. The size of the financial settlements they had to pay rose into the billions, but these were still affordable costs of doing business.

Now corporations are starting to plead guilty to felony charges, but the practical implications of those convictions are being undermined by regulatory agencies. Having a criminal record is not pleasing to corporations, but if they can continue to do business as usual, they will learn to live with that stigma.

When street crime was on the rise a few decades ago, public officials fell over themselves to enact harsh punishments. Now is the time for a serious discussion of how to get tough on crime in the suites.

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New in Corporate Rap Sheets: Peabody Energy. The “Exxon of Coal” fights CO2 regulation and pushes climate denial.

Shelling the Alaskan Coast

May 14th, 2015 by Phil Mattera

shellPresident Obama has taken pride in his “all of the above” energy philosophy, but it now seems that approach is so inclusive that it will allow a company with a horrendous safety record to proceed with plans to drill for oil in the treacherous Arctic waters of the Chukchi Sea off the coast of Alaska. Is it necessary to run the risk of another Exxon Valdez or Deepwater Horizon disaster just to prove that you’re not hostile to fossil fuels?

Abigail Ross Hopper, director of the Interior Department’s Bureau of Ocean Energy Management (BOEM) said the decision to give Royal Dutch Shell a green light came after the agency took “a thoughtful approach to carefully considering potential exploration in the Chukchi Sea.” Yet what has really changed in the two years since Interior Secretary Ken Salazar said “Shell screwed up in 2012″ in announcing that approval for the Arctic drilling was being withheld until the company cleaned up its act? The new permit is not final but it gives unwarranted momentum to Shell’s plan.

There are many reasons why the decision is a mistake, but they all come down to Shell’s less than sterling credibility and its tarnished track record.

Shell has had a troubled relationship with the truth at least since 2004, when it admitted overstating its proven oil and natural gas reserves by 20 percent. This prompted an investigation by the U.S. Securities and Exchange Commission and a decision by the twin boards of the company to oust chairman Philip Watts, who was replaced by Jeroen van der Veer. It later came out that top executives, including van der Veer, knew of the deception about the reserves back in 2002. The company ended up paying penalties of about $150 million to U.S. and British authorities.

In 2008 there were reports that Shell manipulated a supposedly independent environmental audit of a huge Russian oil and gas project in which it was involved to influence financial institutions considering funding for the $22 billion project.

That same year, reports released by the Inspector General of the U.S. Department of the Interior listed Shell as one of the companies that made improper gifts to government employees overseeing offshore oil drilling. The agency involved was the Minerals Management Service, which was dismantled as a result of the scandal and replaced by two entities, including the BOEM.

In 2011 a Shell pipeline off the coast of Scotland leaked some 1,300 barrels of oil in the worst North Sea oil spill in a decade.

The 2012 screw-up to which Salazar was referring included problems in the same area it wants to drill. In one incident a spill containment system failed during testing; later, a drilling rig owned by Shell broke loose from a tug that was pulling it to a maintenance facility and crashed into an uninhabited island off the Alaskan coast.

The company is even more notorious for its operations in Nigeria, which were marked by numerous pipeline ruptures and other environmental damage caused by practices such as extensive gas flaring. Ken Saro-Wiwa, a leading critic of the company, was hanged by the Nigerian military in 1995. Shell was widely blamed for propping up the regime, while a 2011 United Nations report estimated that an environmental cleanup of the area around Shell’s operations would cost $1 billion and take 30 years.

Shell’s environmental policy states: “Our approach to sustainability starts with running a safe, efficient, responsible and profitable business.” They’ve got the profitable part covered, but the rest is another matter.

Hiding Hazards

May 7th, 2015 by Phil Mattera

blindersWhen Stanley Works and Black & Decker announced merger plans in late 2009, the two firms made sure to describe themselves as producers of quality tools while claiming that their marriage would produce “significant cost synergies.” More than five years later, the combined company, Stanley Black & Decker, seems to be making progress on costs (and profits), but new revelations put into question its commitment to quality.

The federal Consumer Product Safety Commission and the Justice Department recently announced that the firm’s Black & Decker unit would pay $1.575 million to settle allegations that it “knowingly violated federal reporting requirements with respect to cordless electric lawnmowers that started spontaneously and that continued to operate after consumers released the lawnmower handles and remove the safety keys.” In other words, Black & Decker has been selling products with uncontrollable spinning blades.

While CPSC press releases are normally neutral in tone, the statement on Black & Decker was unusually harsh. Agency chairman Elliott Kaye was quoted as saying: “Black & Decker’s persistent inability to follow these vital product safety reporting laws calls into question their commitment to the safety of their customers.”

What had apparently ticked off Kaye was that this was the fifth time the commission had cited Black & Decker for reporting violations. The previous case was in 2011, when the company had to pay $960,000 to settle allegations that it failed to report a defect in one of its Grasshog trimmer/edgers that could cause parts to loosen and become projectiles.

Most CPSC civil penalties are brought against companies that fail to report defects and accidents in a timely manner: “That means within 24 hours, not months or years as in Black & Decker’s case,” Kaye stated with obvious annoyance. Assistant Attorney General Benjamin Mizer was also blunt: “Not for the first time, Black & Decker held back critical information from the public about the safety of one of its products.” The company was said to have received more than 100 consumer complaints and accident reports from lawnmower customers over a period of years before it decided to share the information and recall the products.

Black & Decker is not the only large “quality” manufacturer that has been accused of essentially covering up dangerous defects in its products. Earlier this year, General Electric had to pay the CPSC $3.5 million — one of the largest civil penalties in the commission’s history — to settle allegations that it failed to report “an unreasonable risk of serious injury” relating to some of its ranges containing connectors that could overheat and cause fires.

Large companies these days profess to be committed to transparency and accountability, but some are still inclined to hide their dirty (and dangerous) secrets.

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New in Corporate Rap Sheets: Barrick Gold and its environmental and human rights controversies on five continents.

Resisting Oligopoly

April 30th, 2015 by Phil Mattera

comcast-time-warner-cable-merger-is-deadComcast spent tons on lobbying and image-burnishing philanthropy while its CEO golfed with President Obama, yet the telecom giant was blocked from carrying out its anti-competitive $45 billion acquisition of Time Warner Cable. It’s encouraging to see that large corporations do not always get their way in Washington.

Another good sign came a few days later, when two of the largest semiconductor machinery producers, Applied Materials of the United States and Tokyo Electron of Japan, called off their planned merger after the U.S. Justice Department said the deal would restrict competition. Another problem was that Applied Materials planned to reincorporate in Japan after the acquisition to dodge U.S. taxes.

It would be nice to think that these aborted mergers are signs of an antitrust revival in the United States, but there is more evidence pointing in the opposite direction. Large, competition-inhibiting mergers are being announced all the time.

For example, Teva Pharmaceuticals recently made a $40 billion bid for its generic drug rival Mylan NV, seeking to trump a $28 billion offer Mylan had previously made for a third company, Perrigo. Berkshire Hathaway and Brazil’s 3G Capital, which took over Heinz in 2013, are seeking to merge the company with Kraft Foods. Earlier, Staples announced plans to acquire one of its few remaining competitors, Office Depot.

Last year, AT&T proposed to buy DirecTV for $48 billion, Halliburton offered $34 billion for Baker Hughes, and Reynolds American announced plans to buy competing tobacco company Lorillard for $27 billion. The list could go on.

It remains to be seen whether the Justice Department and the Federal Trade Commission will block these deals. Chances are that most of them will be allowed to proceed intact or with only limited concessions. The Wall Street Journal reported in March that the FTC, facing pressure from Republicans in Congress, was revising its procedures in a way that might make it easier for deals such as Sysco’s proposed purchase of US Foods, which the agency had challenged, to go through.

Ironically, while U.S. antitrust policy may be weakening, China is beefing up its enforcement. It February, U.S. telecom and chip company Qualcomm was fined the equivalent of $975 million for violating the Chinese anti-monopoly law.

The sad truth is that oligopoly is increasingly the norm in the U.S. economy, and consumers feel the consequences. The low rate of overall inflation has dampened the impact, but the signs are there. As Andrew Ross Sorkin of the New York Times pointed out, the decline of competition in the airline industry through deals such as American’s purchase of US Airways has kept air fares high despite the savings the carriers are enjoying from plummeting fuel costs. The proposed acquisition of Orbitz by Expedia would not help things.

To reverse the troubling trend, what happened with Comcast needs to become the norm rather than the exception.

Tarnished Heroes of the Drug Industry

April 23rd, 2015 by Phil Mattera

tevaGeneric drugmakers are supposed to be the heroes of the pharmaceutical business, injecting a dose of competition in what is otherwise a highly concentrated industry and thus putting restraints on the price-gouging tendencies of the brand-name producers.

Just recently, the Food and Drug Administration approved a generic version of Copaxone, paving the way for the first multiple sclerosis medication that is not wildly overpriced.

Yet some generic producers are acting too much like Big Pharma. Israel’s Teva Pharmaceuticals just announced a $40 billion offer for its rival Mylan NV, which had recently made its own bid for another drugmaker, Perrigo. A marriage of Teva and Mylan would create the world’s largest generic drugmaker with more than $30 billion in revenue from customers in 145 countries.

Bigger would not be better, at least for customers. A stock analyst told the New York Times: “Last year taxes were one of the main drivers,” referring to deals in which Mylan and Perrigo reincorporated abroad to avoid federal taxes and Pfizer sought to do the same. “Now the main driver is getting bigger. Getting bigger gives you better pricing and better leverage.”

Even before the Mylan deal, Teva’s shining armor has been getting tarnished. Recently, its subsidiary Cephalon agreed to pay $512 million to settle allegations that it made questionable payments to other generic producers to keep their cheaper versions of the narcolepsy drug Provigil off the market.

Last year the Federal Trade Commission sued Teva and AbbVie for colluding to delay the introduction of a lower-priced version of the testosterone replacement drug AndroGel. While AbbVie filed what the agency called “baseless patent infringement lawsuits,” it also entered into an “anticompetitive pay-for-delay” deal with Teva. Mylan’s record also has blemishes. It once had to pay $147 million to settle price-fixing allegations.

A weakening of the deterrent power of generics is troubling at a time when the brand-name producers remain sluggish in their introduction of new drugs and are doing everything possible to milk their existing offerings. Their idea of innovation seems focused these days on what are known as “biosimilars,” close copies of certain brand-name drugs that are somewhat less expensive but much more costly than traditional generics. In March the FDA approved the first biosimilar, a cancer drug called Zarxio made by Sandoz. Pfizer indicated its intention to compete in this arena by announcing plans to acquire biosimilar pioneer Hospira.

Rising drug costs are, of course, a concern not only for individuals but also for taxpayers. The Medicare program, which thanks to the Bush Administration and Congress cannot negotiate with pharmaceutical companies, now spends about $76 billion a year providing drug benefits.

To be fair, Part D costs in recent years have been lower than the Congressional Budget Office had previously projected, but the CBO attributed the difference in large part to the increased use of generics. If generic producers continue to consolidate — and collude with brand-name producers — those savings will evaporate and we will be completely at the mercy of Big Pharma.

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New Resource: Greenpeace has introduced the Anti-Environmental Archives, a collection of thousands of documents on the efforts of corporations and their surrogates to undermine the environmental movement and government regulation.

Color-Coded Cancer Sticks

April 16th, 2015 by Phil Mattera

colorcodedcigsAt the headquarters of Reynolds American (parent of R.J. Reynolds Tobacco) in North Carolina and the Virginia headquarters of Altria (parent of Philip Morris USA) time is apparently running backwards. The two companies just filed a lawsuit in DC federal court that reads like it was written in 1995, not 2015.

The target of the suit (15-CV-00544) is the U.S. Food and Drug Administration, which the companies apparently have forgotten was given authority by Congress in 2009 to regulate tobacco marketing, including the introduction of new products. That law came after years of vociferous opposition by Big Tobacco.

What has the companies up in arms is an FDA guidance document issued in March concerning review requirements for packaging changes. The agency takes the position that certain modifications in background color, logo and descriptors can be significant enough to trigger the stricter rules regarding new products.

Presenting themselves as victims of government overreach, the companies argue that their First Amendment rights are being violated: “FDA’s unlawful actions already have harmed Plaintiffs and threaten greater harms in the future by restricting Plaintiffs’ ability to modify their product labels without FDA preauthorization and by chilling and restricting protected speech.”

Although the case does not involve the federal warning labels that have been required for decades, it makes the puzzling argument that the FDA guidelines also violate the industry’s Fifth Amendment rights against self-incrimination.

While it is not unusual for big business to assert free speech rights to oppose regulations, this position is particularly galling when it comes from the tobacco industry. These are the companies, after all, that for decades concealed and denied the hazards of smoking, asserting it was their right to “believe” their products were non-addictive and did not cause cancer despite the mountain of evidence to the contrary. Their dishonest claims were made all the more fraudulent when documents came to light indicating that firms such as Brown & Williamson (now part of Reynolds American) knew about the dangers at least as far back as the early 1960s.

The issue of control over tobacco packaging was already fought, and the industry lost. In 2006 a federal court, finding that the industry had caused “an immeasurable amount of suffering,” ordered it stop labeling cigarettes with designations such as low tar, light and natural that gave the misleading impression that they were safe.

Tobacco companies began using techniques such as package coloring to get around the restriction. In 2010 a New York Times article on the practice quoted Prof. Gregory Connolly of the Harvard School of Public Health as saying the industry was “circumventing the law.” He added: “They’re using color coding to perpetuate one of the biggest public health myths into the next century.”

At the heart of the new case is the tension between public policies designed to discourage tobacco use and the continued existence of an industry which has to attract customers to survive. The industry’s lawsuit, with its assertion of free speech rights, proceeds from the assumption that producing and selling tobacco products is a legitimate activity. A more appropriate premise might be that tobacco is a public health menace that should be controlled as tightly as possible until the last smoker has kicked the habit and the companies can shut down.

Big Tobacco would do well to stop wrapping itself in the Bill of Rights and acknowledge that it is lucky it is still allowed to sell its deadly products at all.

Note: This piece draws from my new Corporate Rap Sheets on Reynolds American and Altria.

Smokeless Tobacco and Toothless Regulation

April 9th, 2015 by Phil Mattera

snusIt took decades for the federal government to overcome tobacco industry deception and adopt warning labels for cigarette packages in the 1960s. It took three more decades before the Food and Drug Administration was given the authority to regulate both the content of tobacco products and their marketing.

Now a branch of the industry is seeking to turn back the clock with regard to a specific product. Swedish Match is petitioning the FDA to drop the customary dire warning requirements for its smokeless tobacco called snus, which is sold as small packages that the user tucks between the lip and the gums.

Giving in to the Swedish Match proposal for a “light” warning that in effect says that snus is not as harmful as cigarettes would begin to differentiate the regulation of different types of tobacco products. It would be a coup not only for Swedish Match but potentially for makers of e-cigarettes, who also claim to be selling something safer than regular cancer sticks. Swedish Match, by the way, does not sell cigarettes, but it does produce cigars and chewing tobacco.

Yet perhaps the worst impact of granting Swedish Match’s request is that it would begin to restore credibility to an industry whose level of irresponsibility is perhaps unmatched in the world of business. Let’s recall the history.

Warnings about the harmful effects of smoking date back at least to the early 1950s, when Reader’s Digest published a widely discussed article on the subject. Rather than address the underlying issues, Big Tobacco started promoting filtered cigarettes, especially the R.J. Reynolds brand Winston, as a supposedly safer alternative. Reynolds also tried to give a healthier allure to its unfiltered Camels with an ad campaign claiming they were smoked by more doctors than any other brand. Lorillard promoted its Micronite filter as the greatest protection in cigarette history (much later it came out that the filter contained asbestos).

The same thing happened after the publication of the famous 1964 Surgeon General report on the dangers of smoking. While refusing to acknowledge the growing body of evidence, the industry stepped up its marketing efforts and introduced new products, such as Philip Morris’s low-tar Merit brand, that deceived consumers into thinking they were less deleterious.

Along with the warning labels, Congress banned cigarette advertising on radio and television, yet the tobacco companies used other channels. Reynolds egregiously sought to hook youngsters with its ads featuring a friendly cartoon character named Joe Camel.

Philip Morris, whose parent company is now called Altria, took another tack that was also in its own way pernicious. Once it became clear that federal regulation was coming, the company jumped on the bandwagon but slowed it down by pushing for oversight only on marketing to children. The well-funded argument that smoking was a legitimate adult activity slowed the push toward more comprehensive regulation and caused countless deaths.

Although the industry eventually had to accept such regulation in the United States, it is doing its best to thwart protections elsewhere, especially in smaller and poorer countries. Philip Morris International, which was spun off by Altria into a separate company, has tried to bully nations such as Uruguay and Togo into abandoning strong anti-smoking policies by threatening to drag them into expensive legal proceedings under the auspices of the World Trade Organization.

Swedish Match may protest that it has not been involved in many of these practices, yet it is a dominant player in the market for chewing tobacco, which like cigarettes is linked to cancer. It is also worth noting that the company was built by Ivar Kreuger, whose financial empire turned out to be a Ponzi scheme that collapsed during the Great Depression.

Whether or not there are significant differences between the health effects of cigarettes and snus, federal officials should do nothing to weaken a regulatory system that remains vitally important for public health.

Note: This piece draws from my new Corporate Rap Sheet on Altria and Philip Morris International as well as a soon-to-be-posted one on Reynolds American.

Uncle Sam’s Favorite Billionaires

April 2nd, 2015 by Phil Mattera

william-erbey_416x416Inequality is becoming so pronounced that presidential hopefuls of all ideological persuasions are acknowledging that something needs to be done. One issue they should consider is the extent to which the federal government itself contributes to the problem.

It’s clear that the federal tax code is structured in a way that favors wealthy individuals and corporations. But it turns out that Uncle Sam is also providing direct financial assistance to the billionaire class. The extent of that assistance can be estimated from the data my colleagues and I at Good Jobs First assembled for Subsidy Tracker 3.0, which we released recently.

We compiled 164,000 company-specific entries for federal grants, allocated tax credits, loans, loan guarantees and bailout assistance provided through 137 programs overseen by 11 cabinet departments and six independent agencies. These were added to 277,00 state and local awards in the database. Since 2000 the grants and allocated tax credits have amounted to $68 billion; the face value of the loans and bailouts, which we tally separately, have run into the trillions.

Along with the release of Tracker 3.0, we published a report called Uncle Sam’s Favorite Corporations that described the extent to which large corporations dominate federal subsidies. Some of those companies are owned in whole or in part by the country’s wealthiest individuals and families.

I subsequently matched the big federal subsidy recipients to the companies linked to members of the Forbes 400 list of the richest Americans. This exercise was an extension of an analysis my colleagues and I performed on state and local data for our December 2014 report Tax Breaks and Inequality.

Of the 258 companies controlled by a member of the Forbes 400, 39 have received federal grants and allocated tax credits. Their awards total $1.3 billion. The richest of the billionaires linked to these firms is Warren Buffett, whose Berkshire Hathaway conglomerate accounts for $178 million of the subsidies.

Two of the other companies are worth examining more closely, because they have also been embroiled in controversies over their business practices.

At the top of the list is Ocwen Financial, which received $434 million in subsidies through a provision of the Home Affordable Modification Program (a part of the TARP bailout) that provided incentives to mortgage servicers to revamp loans to homeowners whose properties were underwater or otherwise unsustainable.

Ocwen, which made extensive use of that program, was founded by William Erbey (photo), whose net worth was estimated at $1.8 billion in the most recent Forbes list, published when he was still chairman of the company. Subsequently, Erbey had to step down as part of a settlement the company reached with New York State financial regulators to resolve allegations of improper foreclosures and other abusive practices. Ocwen also had to provide $150 million in assistance to those whose homes had been foreclosed. It is also paying a smaller amount under a settlement with California regulators.

While Erbey is no longer running Ocwen, he may still be a major shareholder. As of last year’s proxy statement, he held the largest stake in the company (15 percent); this year’s proxy is not out yet.

The second largest subsidy recipient linked to a member of the Forbes 400 is SolarCity, which has received $326 million in grants and allocated tax credits, mostly through Section 1603 of the Recovery Act, which provides cash payments to companies installing renewable energy equipment. The chairman of SolarCity is Elon Musk, better known for his role in the electric car company Tesla Motors (which, by the way, got a $465 million federal loan and later repaid it). Musk, whose cousins Lyndon and Peter Rive are the top executives at SolarCity, has a net worth estimated by Forbes at $11.6 billion. Tesla Motors has business dealings with SolarCity.

It was recently reported that SolarCity is being investigated by Oregon prosecutors in connection with allegations that it used solar panels made by federal prisoners in renewable energy projects at two state university campuses for which it received $11.8 million in state tax credits designed to promote local employment.

Assuming the allegations turn out to be accurate, it is difficult to know where to begin in stating all that is wrong with this situation. A company chaired by the 44th richest person in the country that has received hundreds of millions of dollars in federal subsidies used prisoners paid less than a dollar an hour to install solar panels so that it can collect millions more in state subsidies.

Subsidies, whether federal or state, are by no means the largest contributor to inequality, but policymakers should try to find some way to limit their use by billionaires, especially those linked to shady business practices.

The Madness Continues

March 26th, 2015 by Thomas Mattera

confettiGuest blog by Thomas Mattera

When the dust settles from March’s biggest battle, one group of winners will emerge with unimaginable spoils while others come away empty-handed. There will be heartbreaking results, ruthless opponents, and at least one pathetic defense.

And sure, there will be some pretty good basketball as well.

This is because no mere buzzer beater or timely block can match the maddest part of March: the monetary exploitation of collegiate basketball players by large corporations and their own school administrators.

Yes, the NCAA Tournament is in full swing and nothing has changed. Once again, unpaid, logo-covered young men race up and down the court on every channel round the clock, creating billions in revenue for some, millions in salary for others and little for themselves.

Of course, this is far from a new revelation. The ludicrous injustice of big time college athletics has been uncovered, covered, and re-covered. And the tide of public perception is slowly but unmistakably shifting. More and more people are seeing college amateurism for what is has always been: a thinly veiled attempt to avoid paying workers compensation for injuries as well as compensation in the broader sense.

However, many current players are not interested in waiting for things to change slowly from the outside. Instead, they have taken matters into their own hands, showing their discontent with the NCAA by rallying under the “All Players United” banner.

Former Northwestern quarterback Kain Colter took this effort even further eleven months ago, arguing that college athletes are employees and should be able to unionize. His stance was supported by an NLRB ruling last March. Unsurprisingly, Northwestern appealed and the players’ ballots are trapped in a sealed box while the matter makes its way through a litigious obstacle course.

Though they are far from a permanent victory, Colter and his allies have clearly rattled some cages. Case in point: In 2014, Michigan Governor Rick Synder signed a provision pre-emptively banning athletes from being considered public employees who can collectively bargain. This step was especially galling given that just a few months earlier the flagship University of Michigan football program re-inserted a visibly concussed player back into a game after a vicious hit to the head. The university initially claimed it had done nothing wrong before eventually walking back its story and apologizing in the wake of public outrage.

Meanwhile, the National Basketball Association and the NCAA are currently considering a mutually beneficial agreement that would force players to wait two years after high school to be eligible to play in the NBA. Under the deal, the NCAA would get two years of unpaid labor on often unguaranteed scholarships from the best athletes in the world. For their part, the professional ranks get a free farm system to scout the players before investing in them. Of course, the NCAA’s “corporate champions” won’t be complaining either as they use teenage athleticism as filler between $1,500,000 a minute beer ads.

There has been some progress in the struggle for fairness even as the Northwestern ballots remain in limbo. The last year has seen improvements in NCAA scholarship policy, better player healthcare, and in the fight for athletes to see some profits from the selling of player-specific merchandise. Yet this is far from enough

It is March once again, a year after college players took a stand and were vindicated. However, the biggest event in collegiate sports looks and feels no different: They will work, we will watch, and someone else will get paid. What is madder than that?