Archive for the ‘Contractor Misconduct’ Category

Waterboarding and Price Gouging

Thursday, December 11th, 2014

inquisitionThe shameful revelations in the Senate Intelligence Committee report on the CIA torture program are, as the New York Times editorial board put it, “a portrait of depravity.” At the same time, they constitute one of most serious federal contracting scandals of all time.

Although it sounds like an idea dreamed up by the writers of the TV series Homeland, it turns out that the creation of the “enhanced interrogation” system was left to a pair of contractors, neither of whom, as the report states, “had any experience as an interrogator, nor did either have specialized knowledge of al-Qa’ida, a background in counterterrorism, or any relevant cultural or linguistic expertise.”

The contractors had previously worked with the U.S. Air Force’s Survival, Evasion, Resistance and Escape (SERE) school, which was created to helped military personnel deal with coercive interrogation techniques to which they might be exposed if taken prisoner by a country that did not adhere to the Geneva Convention. That was before the U.S. became one of those countries.

Referred to in the report by the pseudonyms Dr. Grayson Swigert and Dr. Hammond Dunbar, the two are psychologists whose real names are reported to be James Mitchell and John “Bruce” Jessen. Their firm, Mitchell, Jessen & Associates of Spokane, Washington, is said to have been paid $81 million by the CIA for its dubious services. The agency thoughtfully provided the firm “a multi-year indemnification agreement to protect the company and its employees from legal liability arising out of the program.”

Among the brutal methods promoted by Mitchell and Jessen was waterboarding, which the report says they described as an “absolutely convincing technique.”

It may have been the case that the water used for that torture was provided by another rogue contractor. The Justice Department recently announced that Supreme Group BV would pay $288 million in criminal fines and a $146 million civil settlement in connection with allegations that it grossly overcharged the federal government while supplying food and bottled water to U.S. personnel in Afghanistan, one of the countries where the torture took place.

Supreme Group, which is based in the Netherlands but has its main operating base in Dubai, had been awarded an $8.8 billion supply contract that was extended twice before coming to an end in 2013. The fraud was uncovered thanks to a whistleblower inside the company. Despite the egregious nature of the charges and the hefty penalties, Supreme is not, according to the Wall Street Journal, being barred from seeking new federal business.

The abuses of Mitchell and Jessen deserve to be judged more harshly than those of Supreme Group, but they are both examples of the loose morals of many of the parties selling their services to the federal government. Each in its own way serves as a rebuttal to those who extol outsourcing and the superiority of the private sector.

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New in Corporate Rap Sheets: a profile of Newmont Mining and its record of environmental and human rights controversies around the world.

Handouts for Corporate Tax Deserters

Thursday, July 31st, 2014

moneybags_handoutPresident Obama says “I don’t care if it’s legal—it’s wrong.” Even Fortune magazine calls it “positively un-American.” But will Congress do anything to block the brazen moves by a growing number of large U.S. companies to reincorporate abroad to dodge federal taxes?

One group of Democratic lawmakers is trying to discourage the trend by tightening the restrictions on federal contract awards to so-called inverted companies, but such firms still receive another form of financial assistance from Uncle Sam.

The lawmakers have drafted a bill with the appropriately provocative title of No Contracts for Corporate Deserters Act. It would bar contract awards to reincorporators which are at least 50-percent U.S.-owned and which do no substantial business in the country in which they are nominally based.

Tougher rules are definitely necessary. Although Congress pats itself on the back for the restrictions first enacted during an earlier wave of reincorporations, some of the inverted companies have managed to find loopholes allowing them to continue to enjoy the benefits of extensive federal contracting. Ingersoll-Rand, which purports to be an Irish company but derives 60 percent of its revenue from the United States, has 80 percent of its long-lived assets in this country and has its “corporate center” near Charlotte, North Carolina, received $64 million in federal contracts in 2013. Eaton Corporation, which also claims to have become Irish, received $131 million that year.

In his July 24 remarks on the subject, President Obama also declared: “You shouldn’t get to call yourself an American company only when you want a handout from American taxpayers.” Such handouts are not limited to lucrative contract awards. Inverted companies are also receiving cash grants from the federal government.

Take the case of Eaton. In 2013 it received a $2.4 million grant from the Energy Department’s Conservation Research and Development Program. That was just one of eight grants it received from Energy that year with a total value of about $4 million.

Delphi Automotive, which claims to be based on the island of Jersey in the English Channel, has also received numerous grants from the Energy Department, including $5.1 million last year through the Fossil Energy Research and Development Program.

Grants have also gone to companies involved in recent inversion deals. Pfizer, which was seeking to undergo an inversion through a merger with AstraZeneca but which has dropped the bid for now, received $3.8 million in assistance this year from the Defense Department for work on nanoparticles.

These grants are part of a controversial practice by which the federal government underwrites commercial research activity by large companies in industries such as food processing, pharmaceuticals, aerospace and electric utilities. And this, in turn, is part of the larger sphere of federal financial assistance to business that also includes direct payments, low-cost loans, loan guarantees and the like.

These activities, often labeled corporate welfare, are a frequent target of criticism from both the left and the right. Conservatives are currently engaged in a campaign to eliminate the Export-Import Bank, which provides financing for deals benefiting corporations such as Boeing and Bechtel. Bipartisan efforts such as Green Scissors and the Toward Common Ground reports issued by U.S. PIRG and National Taxpayers Union have sought to end funding for the most wasteful programs.

Those efforts are usually driven by ideology (conservatives don’t want governments “picking winners”), by a desire to cut federal spending, or by other issues (progressives point out that many federal subsidies promote environmentally destructive practices). Now there’s another reason to be up in arms over corporate welfare.

The fact that some “corporate deserters” are getting grants from Uncle Sam could provide an additional form of pressure against the tax dodgers. Seeing these companies get contracts is bad enough; realizing that they may be getting direct handouts is even more infuriating.

Will Obama Help Contractor Employees Join a Union?

Thursday, June 19th, 2014

vail-good-jobs-nationAfter the passage of the Wagner Act in 1935, labor activists organized workers with the slogan: “The President wants you to join a union.” We haven’t seen much encouragement of collective bargaining from the White House during the past 75 years, but there is a move afoot to change that, at least with respect to employees of companies working for the federal government.

The Good Jobs Nation campaign, which has been highlighting the plight of low-paid employees of federal contractors and helped prod President Obama to issue an executive order that will boost the pay of those workers to $10.10, is raising the ante. It is now calling for another executive order that would pressure contractors to bargain with workers in exchange for a commitment not to strike.

While there would certainly be legal challenges to such an order, it is the logical next step in the effort to address poor working conditions among portions of the federal contractor workforce and to use those standards to promote better standards for the entire U.S. working population.

It’s already well documented that many contractors flout federal workplace regulations. A report issued last year by the majority staff of the Senate Health, Education, Labor and Pensions Committee showed that contractors were among the worst violators in areas such as wage and hour standards and occupational safety and health. A federally mandated wage increase will certainly help, but it is only through collective bargaining that contractor employees will get all the protections they need.

Good Jobs Nation is focusing on workers in fields such as foodservice and security, but how much unionization is missing from the overall contractor workforce? To begin to answer this question, I looked at what the largest contractors are saying (or not saying) about unions in their filings with the Securities and Exchange Commission.

I started with the list of 50 largest contractors in FY2014 shown on the USA Spending website. Excluding those that are privately held, foreign-owned or non-profit, I looked at each firm’s 10-K annual report, which is required to report the total number of employees and has traditionally been the place where companies indicate the extent to which those workers are covered by collective bargaining agreements. Since the main goal of the 10-K is to inform investors of potential risks that could affect the value of their holdings, the company is supposed to indicate whether a work stoppage is possible.

Back in the day when unions were stronger, most large companies had something to report on labor relations. These days many companies indicate that they are not a party to any collective bargaining agreements or don’t bother to say anything on the subject.

Numerous 10-Ks of the top contractors fall into this category. Healthcare companies such as McKesson (the 5th largest contractor), Humana (8th) and UnitedHealth (20st) say nothing about unions. Other firms such as Health Net (11th), telecom equipment maker Harris Corp. (33rd) and Orbital Sciences Corporation (43rd) proudly announced that their U.S. workforce is union-free.

The companies with the biggest union presence are leading Pentagon contractors. Shipbuilder Huntington Ingalls (9th) reports the highest figure I found: 50 percent. Boeing (2nd) reports 37 percent while General Dynamics (4th) and L-3 Communications (10th) each give a figure of 20 percent. The largest contractor of them all, Lockheed Martin, says its unionization level is 15 percent.

On the other hand, some of the aerospace contractors are only lightly unionized: the figure for Raytheon (3rd) is 8 percent and for Northrop Grumman (19th) only 5 percent. Once a heavily unionized firm, General Electric (22nd) says only 7 percent of its total workforce has collective bargaining, even though it has shifted more than half of that workforce overseas, where unions remain stronger.

In other words, not a single one of the companies profiting most from the bloated military budget has a workforce that is majority union, and some have kept the union presence to a bare minimum.

Unions are even more scarce among the large information technology firms that account for another substantial portion of federal contractor spending. Among the firms that don’t mention any union presence are: SAIC, Computer Sciences Corporation, Hewlett Packard, CACI International and IBM.

Employees at these firms are certainly better paid than those employed by contractors performing functions such as building maintenance, but the absence of unions among better treated workers makes it harder for everyone to organize.

Contractor Entitlement Reform

Thursday, December 12th, 2013

nn_thomp_refineryfire_050324.300wThe fiscal austerity crowd is preoccupied with the size of government, but what they rarely acknowledge is that more than $500 billion in annual federal outlays take the form of purchases of goods and services from the private sector. Uncle Sam’s role as the country’s biggest consumer means that federal agencies are in a good position to expect the highest standards of conduct from contractors.

A new report by the majority staff of the Senate Health, Education, Labor and Pensions Committee shows that the federal government is not doing a good job of enforcing such standards when it comes to working conditions at contractor companies. In fact, the report shows that violations of occupational safety and health regulations as well as wage and hour laws are rampant among the contractors.

Some key findings of the report:

  • Eighteen federal contractors were among those companies receiving the 100 largest penalties issued by the Occupational Safety and Health Administration between 2007 and 2012. Contractors accounted for 48 percent of the dollar value of those penalties.
  • Thirty-two federal contractors were among the companies receiving the large back-wage assessments ordered by the Wage and Hour Division (WHD) of the Department of Labor between 2007 and 2012.
  • The 49 federal contractors in these categories were found to have been cited for 1,776 separate violations and paid $196 million in penalties and assessments. In fiscal year 2012, these same companies were awarded $81 billion in federal contracts.

Misconduct by contractors is an old story, but legislation passed in 2008 was supposed to make it easier for federal agencies to identify bad actors and disqualify them from contract awards. The law provided for the development of an official database along the lines of the Federal Contractor Misconduct Database created by the Project On Government Oversight.

That database did come into being and is known as the Federal Awardee Performance and Integrity Information System, or FAPIIS. In its current state, FAPIIS is a big disappointment. The Senate report points out that of the 49 contractors on the lists of largest labor violations only one has such instances of misconduct included in its FAPIIS entry. As the report states with understandable outrage:

In perhaps the most astonishing example of the failures of FAPIIS, BP, despite the deaths, injuries, and massive environmental damage, as well as the billion dollar settlements resulting from the Deep Water Horizon incident, and despite the deaths, injuries and fines resulting from the Texas City refinery explosion [photo], and despite holding $2 billion in contracts in 2012, has no misconduct entries in FAPIIS.

The Senate report does not just point out the limitations of FAPIIS but also demonstrates how more aggressive information-gathering on companies can be done. Its authors delved into the enforcement databases of both OSHA and the WHD to identify which contractors were serial violators. The results are presented both in summary tables in the report and in a 448-page appendix with key data on several dozen of the worst offenders.

In the occupational safety and health category, it is no surprise that the company at the top of the list of violators is BP, which is a rare example of a large company that was actually debarred (albeit temporarily) from doing business with the federal government because of its misconduct.

On the wage and hour side, it is also not surprising that the company appearing most often in the list of the biggest back pay assessments is Wal-Mart, though the company does a miniscule amount of business with the federal government. Also on high up on the list are companies focused on government contracting, such as private prison operator Management & Training Corporation and Pentagon outsourcer IAP Worldwide Services (owned by the private equity company Cerberus Capital Management).

While the Senate report calls on the General Services Administration, which oversees FAPIIS, to clean up the database, it also urges the Department of Labor to do more to publicize the names of contractors that were found to be violators of federal labor laws.

But why stop with DOL? Shouldn’t every regulatory agency take pains to highlight bad actors and make sure federal procurement officials know who they are?

There is much talk of entitlement reform with regard to safety net programs. What we need instead is more attention on corporations that think they are entitled to receive contracts from the federal government even when they show little regard for federal regulations.

The Beltway Bandit Behind the Healthcare.gov Debacle

Thursday, October 10th, 2013

Healthcare.gov website downA January 2011 article in Canada’s Globe and Mail was headlined “CGI Spies Opportunity in Obama’s Call for Efficiency.” A new story in the same newspaper about the same company has the title “Canadian IT Firm at Centre of Obamacare Foul-Up Furor.”

U.S. critics of the Affordable Care Act are depicting the widespread computer problems that have accompanied the launch of the ACA’s online healthcare exchanges as a major government failure. To be more precise, it is a failure of government contracting. And the contractor at the center of the mess is CGI Group, a Canadian outsourcing corporation that is little known outside information technology circles.

According to a Government Accountability Office report published in June, CGI’s U.S. subsidiary CGI Federal received the largest share (totaling $88 million) of the contracts awarded for the creation of the Healthcare.gov website, the ACA enrollment portal in the 36 states that declined to create their own exchanges. That report, by the way, warned of possible “implementation challenges.”

The glitches in the ACA rollout are shining an unfavorable light on the widespread practice by governments at all levels of contracting out information technology to the private sector. The Washington Post just published a front-page story reporting that the federal government, which spends some $80 billion a year on outside IT services, ends up purchasing “outdated, costly and buggy technology.” This may be an indication of cluelessness on the part of federal IT procurement officials, but it is also a sign that the private sector is all too willing to take taxpayer dollars for inferior products.

It is not yet clear whether CGI tried to use sub-standard technology for Healthcare.gov or whether it just failed to meet the challenges of creating a complex new system. The company and the feds are saying little about the reasons for the glitches, preferring to issue assurances that everything will soon be running smoothly.

The Post notes that “Federal officials have not yet explained why CGI was given the contract or why it was awarded on a sole-source basis.” They might also want to explain why the contract was given to a company linked to some earlier contracting scandals.

CGI has built its U.S. operation in large part by acquiring existing federal contractors. One of those was Stanley Inc., which it purchased in 2010 for about $900 million. Two years earlier, Stanley found itself under fire when it was reported that some of its employees working on a contract with the U.S. State Department had improperly looked at the passport records of several Presidential candidates, including Barack Obama.

Stanley was also involved in a controversy over its labor practices at the 400-worker processing center of the U.S. Citizenship and Immigration Services in St. Albans, Vermont. As it was about to assume control over the facility, which handles citizenship applications, Stanley announced that it would change job classifications at the facility, resulting in a pay decrease of about 12 percent for up to half the workers. Vermont Sen. Bernie Sanders called on the Labor Department to investigate what he charged was a violation of the Service Contract Act.

Stanley’s move also prompted a union organizing drive by the United Electrical workers. UE official Chris Townsend told me at the time that Stanley was employing a variety of union-busting tactics—from hiring the union-avoidance law firm Seyfarth Shaw to forcing workers to watch propaganda videos. Townsend said workers were held in captive-audience meetings for up to one-quarter of their shifts in the period leading up to the elections—this at a time when the backlog of citizenship applications was a serious problem. Despite these obstacles, UE managed to win representation elections covering most of the workers. In 2011 the U.S. Department of Labor announced that Stanley (by then owned by CGI) and several subcontractors would pay nearly $2.9 million in back wages for workers who had been misclassified.

CGI itself has also had its share of scandals, including a 2007 furor over a C$400 million contract it received from the Canadian government at a time when the Public Works Minister was Michael Fortier, who had been an investment banker for CGI during his time working for Credit Suisse. A 2010 report by the Hawaii State Auditor found that what was supposed to be a five-year contract awarded in 1999 by the state department of taxation to a company later purchased by CGI had been repeatedly extended through non-competitive awards, costing the state far more than originally planned.

The federal government long ago chose to depend on contractors for its vast information technology needs. That decision periodically results in debacles like those surrounding the rollout of the ACA exchanges. It remains to be seen whether fiascoes will also mar the actual insurance coverage being provided through the ACA, which also relies on the supposedly efficient private sector.

UPDATE: I subsequently learned that in September 2012 the Toronto Star reported that the government of Ontario had canceled a C$46 million contract awarded to CGI to create a diabetes registry after the company failed to meet deadlines.

Aiming at Government and Hitting Big Business

Thursday, October 3rd, 2013

corporate_flag2-1The tea party caucus calling the shots in the U.S. House of Representative is gloating about having shut down the federal government while simultaneously claiming that technical problems in the rollout of the Obamacare health exchanges are a sign of the failure of the public sector. On both fronts the truth is a lot more complicated.

What the critics of big government tend to overlook is that the public and private sectors are so intertwined that it is difficult to tell where one ends and the other begins. The tea party crowd may have no concern about the hardships they are imposing on 800,000 furloughed federal workers, yet their shutdown is also threatening the well-being of the much larger number of contractor employees—once estimated at more than 7 million—who often work alongside those directly on the federal payrolls. USA Today quoted someone from the National Federal Contractors Association estimating that 250,000 to 300,000 workers could be affected.

It’s not only a labor issue. The employers of those contract workers are also being affected, some immediately and many more if the shutdown lasts more than a few days. The federal departments and agencies covered by the USASpending website together accounted for some $517 billion in contract spending in FY2012. The Defense Department, of course, was responsible for the bulk of that total ($361 billion), but other departments and agencies also make extensive use of contractors for goods and services; for example, Energy ($25 billion), HHS ($19 billion), Veterans Affairs ($17 billion), NASA ($15 billion) and Homeland Security ($12 billion). Another 15 each spent $1 billion or more.

Many large corporations eat heartily at this contracting trough. Businessweek reminds us that some depend on the feds for more than half of their revenue: Lockheed Martin (80 percent), Booz Allen Hamilton (71 percent) and Raytheon (59 percent), for instance. A Bloomberg story entitled “Businesses Often Opposed to Government Beg for Its Return,” quotes someone from the Aerospace Industries Alliance urging a resolution of the shutdown standoff: “You can’t run a business this way. The uncertainty is killing us.”

Despite the wrong-headed rhetoric on the Right about a government takeover of healthcare, the Affordable Care Act is also an example of the incestuous relationship between the public and private sectors. This begins, of course, with the fact that the ACA is creating millions of new customers for private insurance companies (while also extending Medicaid coverage to more lower-income families).

At the same time, a great deal of the administration of the ACA itself has been placed in the hands of contractors. The blame for the snafus in the new online healthcare exchanges rests with the companies hired to build the websites and the related call centers.

As I wrote about last year, the exchanges have been a goldmine for contractors such as Accenture, Xerox and Maximus.  Accenture got a $359 million contract just for the California exchange while Maximus got awards from states such as Minnesota and Connecticut as well as the District of Columbia.

The involvement of companies such as Maximus and Accenture do not bode well for the future of the exchanges. Both companies were involved in a major scandal involving the creation of a $900 million social services enrollment system in Texas, while Maximus has been at the center of contracting controversies in numerous states. In 2007 it had to pay $30.5 million to resolve Medicaid fraud charges related to its contract with the District of Columbia.

Another tainted company, Serco, got a contract worth up to $1.2 billion to help determine which users of the healthcare exchanges are eligible for federal subsidies. The firm’s parent Serco Group is being investigated by British authorities for irregularities relating to its contract to monitor offenders on parole and individuals released on bail. It was recently reported that the UK’s Serious Fraud Office is looking into allegations that some of the people Serco was charging the government for electronically tagging were either still in prison or dead.

What is commonly seen as a crisis of government is actually a pair of crises for the private sector — one in which the corporations feeding off the public sector face an interruption in their revenue stream and another in which some of those contractors failed to deliver, at least initially, on a high-profile project. The tea party contingent needs to face the fact that it is now impossible to take a swipe at Big Government without hitting Big Business.

Obamacare’s Dangerous Dependence on the Private Sector

Thursday, November 15th, 2012

After holding out as long as possible in the hope that Mitt Romney would be elected and the Affordable Care Act would be repealed, various red states are now being forced to decide whether they will set up the insurance exchanges mandated by the act or let the federal government do it for them. While this is a defeat for die-hard opponents of Obamacare, it is a windfall for a group of companies that regard the exchanges as a huge business opportunity.

Those companies are not just the private health insurance carriers, whose continued existence was guaranteed by Obamacare’s rejection of both single payer and the public option, and whose services will be hawked on the exchanges. It turns out that the creation of the exchanges, whether done under the auspices of a state or the feds, will involve private contractors.

Some of the states that have already opted to set up their own exchanges are doing so with the help of corporations that make a business out of government services. For example, California awarded a $359 million contract to consulting giant Accenture.  Xerox got a $72 million contract from Nevada, and Maximus was awarded $41 million by Minnesota.

Maximus is also reported to be among those companies competing for a federal contract that may be awarded to help the tardy states catch up. This would be in addition to several hundred million dollars in contracts already awarded by the Department of Health and Human Services to three contractors to help build the federal exchange.

While it is dismaying to see large amounts of taxpayer money going to the private sector for what is supposed to be a public service, it is even more dismaying to see which companies are at the front of the gravy train.

Take the case of Maximus, which was established in the 1970s but whose business really took off in the wake of the welfare “reform” of the 1990s. Among other things, the Personal Responsibility and Work Opportunity Act opened the door to state government use of contractors to administer public assistance and other social programs. The annual revenues of Maximus soared from $88 million in 1995 to $487 million in 2001.

That was great for its executives and shareholders, but taxpayers and participants in the social programs the company helped administer were often less enthusiastic. Maximus ended up at the center of one controversy after another as its performance faltered and its promises of vast savings from contracting-out frequently failed to materialize.

For instance, after Maximus took over In Connecticut’s program of child-care benefits for poor families in 1996, the system soon fell into such as state of disarray that the New York Times published an article about the situation headlined IN CONNECTICUT, A PRIVATELY RUN WELFARE PROGRAM SINKS INTO CHAOS.

In Wisconsin, where former Gov. Tommy Thompson put Maximus in charge of the state’s welfare-to-work program, a legislative audit found that the company was using public money for unauthorized purposes such as staff parties. At the same time, Maximus was found to be doing a poor job in getting clients into full-time jobs.

Maximus has also been accused of filing false claims with the federal government for its state and local clients. In 2007 the company had to pay $30.5 million to resolve Medicaid fraud charges related to its contract with the District of Columbia.

In Texas, Maximus was embroiled in a scandal relating to work directly relevant to health insurance exchanges. In 2005 the Texas Access Alliance, an entity formed by Accenture and Maximus, received a whopping $899 million contract from the state to develop a social services enrollment system. It turned out to be a disaster. There was a high volume of glitches in the computer system and poor performance by the related call centers. The Alliance eventually lost the contract and was sued by the state. The case was settled under a deal in which the Alliance agreed to forgo $70.9 million in payments and Maximus agreed to pay $40 million in cash and provide a $10 million credit against future work.

The rollout of the Obamacare insurance exchanges is already operating on a tight deadline. It is difficult to believe that the situation will get better by putting companies such as Maximus and Accenture in the picture. Using these contractors may instead provide more evidence of the Affordable Care Act’s dangerous dependence on the private sector.

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New in CORPORATE RAP SHEETS: a dossier on Dow Chemical and its sordid history of napalm, Agent Orange, dioxin and Bhopal.

If you’re focused on the BP settlement and want a reminder of the company’s long list of sins, see the fully updated BP Corporate Rap Sheet.

Corporate Rap Sheets

Thursday, October 4th, 2012

American Express is penalized $85 million for deceptive credit card practices. The Bear Stearns unit of JPMorgan Chase is sued for defrauding purchasers of mortgage-backed securities. These are just a single recent day’s contribution to the never-ending wave of corporate malfeasance—bribery, tax evasion, price-fixing, defrauding of government or consumers, environmental violations, unfair labor practices and much more. Given the frequency of these scandals, it is difficult to remember which corporation has done what.

A new feature of the Dirt Diggers Digest site (and that of the Corporate Research Project) will make it easier to keep track of these misdeeds. Corporate Rap Sheets are dossiers summarizing the most significant crimes, violations and other questionable activities of the world’s largest and most controversial companies. The rap sheets provide readable accounts of a company’s history on major accountability issues and, wherever possible, include links to key documents or other information sources.

These dossiers are not limited to formal legal actions and regulatory proceedings. They also look at the general behavior of the companies in areas such as environmental protection, labor relations, taxes and subsidies. They also list watchdog groups as well as books and reports about the company.

The Corporate Rap Sheets project is designed to contribute to the tradition of tabulating corporate misbehavior that began with Edwin Sutherland’s 1949 book White Collar Crime, resumed three decades later in works such as Everybody’s Business: The Irreverent Guide to Corporate America, and today is pursued on the web by sites such as the Project On Government Oversight’s Federal Contractor Misconduct Database and the Business & Human Rights Resource Centre. (I have prepared a fuller account of this tradition to go along with the rap sheets.)

I am launching the project with a set of 20 dossiers that focus on four industries known for their checkered accountability record: automobiles (General Motors, Ford Motor and the major Japanese and German producers); military contracting (Boeing, Lockheed Martin, Northrop Grumman and the like); mining (the big global resource companies such as BHP Billiton, Rio Tinto and Anglo American); and petroleum (the four remaining members of what used to be called the Seven Sisters: Exxon Mobil, Chevron, BP and Royal Dutch Shell).

In the months to come, I plan to add more rap sheets for the giants of other controversial industries such as pharmaceuticals, tobacco, agribusiness and banking. New rap sheets will be announced at the end of Dirt Diggers Digest weekly posts.

Here are some tidbits from the first batch of rap sheets:

HONDA. The company’s more fuel efficient cars have given it a relatively benign environmental reputation, yet in 1998 Honda had to pay up to $267 million to settle U.S. government allegations that it programmed millions of its cars to ignore spark-plug failures that could result in much higher emission levels. The company paid a civil fine of $12.6 million and $4.5 million to fund environmental projects, while spending up to $250 million to serve and repair the vehicles involved.

NORTHROP GRUMMAN. In April 2009 the company agreed to pay $325 million to settle federal charges that TRW, prior to its acquisition by Northrop, had failed to properly test parts (which turned out to be defective) used in spy satellites built for the National Reconnaissance Office.

ROYAL DUTCH SHELL. In 2004 the company admitted that it had overstated its proven oil and natural gas reserves by 20 percent. It later came out that top executives 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.

GENERAL MOTORS. In 2011 workers at GM’s subsidiary in India went on strike to protest a speed-up and unsafe conditions. In 2012 GM was confronted with worker protests over its move to eliminate jobs and cut costs at some of its operations in South America. In Colombia, a group of former workers staged a hunger strike, alleging that they were fired after sustaining serious injuries resulting from unsafe conditions on GM assembly lines.

BOEING. In 1999 the U.S. Labor Department accused Boeing of impeding an investigation into racial discrimination at the company. Boeing later agreed to pay $4.5 million to settle claims of both racial and gender discrimination involving more than 4,000 women and 1,600 minority employees in six locations. The settlement with the U.S. Labor Department was the first in which a firm committed to a company-wide program to eliminate discriminatory pay disparities. Nonetheless, Boeing was hit with a class action sex discrimination lawsuit that was settled in 2004 when the company agreed to pay up to $72.5 million in damages and to revamp many of its personnel practices. The settlement was preceded by reports that Boeing had suppressed evidence in the case.

BHP BILLITON. The company has been a frequent target of criticism over its treatment of communities displaced or otherwise affected by its mining operations. For example, in 2005 Survival International accused the company of exploring for diamonds in the Gana and Gwi Bushmen’s reserve in Botswana without their consent. In 2007 a complaint was filed with the Organization for Economic Cooperation and Development accusing BHP of using forced eviction and destruction of a town in Colombia to provide land for the company’s Cerrejon open-cut coal mine. To resolve the dispute, the company agreed to consult more closely with local communities and to spend more on local sustainability projects.

Read more at the Corporate Rap Sheets page.

Corporations are the Real Moochers

Thursday, September 20th, 2012

The firestorm over Mitt Romney’s closed-door comments depicting nearly half the U.S. population as parasites is coming mainly from those defending seniors, the poor and the disabled. But what’s really wrong with the Ayn Rand worldview Romney was parroting is that it ignores those who are the biggest moochers of all: giant corporations.

If, as Romney suggested, moocherism begins with the failure to pay federal income taxes, then that label can easily be applied to many of the country’s major companies. A November 2011 report by Citizens for Tax Justice and the Institute on Taxation and Economic Policy found that more than one-quarter of large companies paid zero taxes in at least one of the three years examined.

Quite a few of those companies arranged their affairs so that they had negative tax rates, meaning that the IRS sends them checks. And many of those that paid taxes did so at what CTJ and ITEP called “ultra low” rates of 10 percent or less.

Corporate tax avoidance is just the beginning of the story. The dependence on government that has Romney so upset is at the heart of the business plan for much of Corporate America. What libertarian types tend to overlook is that much of the public spending they disdain comes in the form of purchases from businesses. It’s estimated that more than $500 billion a year in federal outlays occurs via private-sector contracts.

Some companies rely so heavily on that spending that they are as government-dependent as any Medicaid or food stamp recipient. Aerospace giant Lockheed Martin, for example, derives more than 80 percent of its revenue from the federal government, especially the Pentagon; for its competitor Raytheon the figure is about 75 percent.

A large portion of what is called entitlement spending, especially in healthcare, ends up in the pockets of corporations, including drug makers, medical device manufacturers and for-profit hospital chains. The largest of the latter, HCA, gets more than 40 percent of its revenue from Medicare and Medicaid.

Corporations can get federal grants as well as contracts. The Commerce and Agriculture Departments have a slew of programs that assist businesses in marketing their products or that underwrite some of their costs. And, of course, a large portion of the billions paid each year in farm subsidies goes to agribusiness giants rather than family farmers.

Despite the recent Republican demagoguery on Solyndra, targeted federal spending to develop new energy technologies is nothing new. The Recovery Act’s billions for solar and wind companies was completely in line with federal programs that have subsidized everything from coal gasification to nuclear power plants. Before the Fukushima Daiichi disaster in Japan, the U.S. government was promoting a loan guarantee program to encourage the construction of a new generation of nukes by major utility companies.

Giant corporations also depend on the federal government to help them sell their goods abroad. The Export-Import Bank of the United States spends more than $30 billion each year providing various forms of insurance, loan guarantees and direct loans for the likes of Boeing, General Electric and Caterpillar. The federal government’s Overseas Private Investment Corporation helps U.S. companies do more business offshore by providing political risk insurance and other types of financial assistance.

Another form of corporate dependency on government  is the ability of natural resources companies to operate on public lands and pay either no royalties or artificially low ones . Mining corporations, for example, take advantage of an 1872 law that allows them to extract gold, silver and other hardrock minerals from public lands royalty-free.

Assistance from the federal government can be a matter of life and death for some companies, as in clear in the cases of General Motors and Chrysler as well as the banks that were brought back from the brink by the TARP bailout and then thrived on the influx of billions in essentially free money from the Federal Reserve.

Hearing all the ways in which the federal government makes life easier and more profitable for big business, a newly arrived Martian might expect giant corporations to be grateful boosters of the public sphere. Instead, as we know all too well, most large companies are disdainful of government and are constantly whining about regulation and taxes they can’t avoid paying.

To make things worse, many government-dependent companies are less than honest when it comes to their dealings with the public sector. The Project On Government Oversight’s Federal Contractor Misconduct Database identifies hundreds of examples of contract fraud and other offenses. Healthcare providers such as HCA, not satisfied with the vast amount of honest business they get from Medicare and Medicaid, have defrauded taxpayers out of billions more.

If Romney wants to find the real moochers—and often crooked ones at that—he can find them in the corporate world that is his natural habitat.

Making Honeywell Feel the Heat

Thursday, March 31st, 2011

How would you describe the situation of a corporation involved in union-busting, mishandling of radioactive waste, production of nuclear weapons and the effort to lower corporate tax rates while cutting Social Security and Medicare? If you are Barron’s, you’d say the firm is “in its sweetest spot in more than a decade.”

That’s the way the investment weekly describes Honeywell International in a recent article that gushes over the company’s financial results and predicts that its stock is “poised for liftoff.” Honeywell, a $33 billion transnational, is viewed differently in Metropolis, Illinois, where some 230 members of the United Steelworkers union have been locked out of their jobs for more than nine months.

Apologists for the attacks on public employees often try to disavow anti-union motivations by saying they have no problem with collective bargaining in the private sector. Honeywell is a glaring reminder that challenges to worker rights can be found among employers of all types these days.

The dispute in Metropolis—which calls itself the hometown of the fictional character Superman—brings together a variety of current hot-button issues, including unions, nuclear power, environmental protection, healthcare coverage and pensions. Honeywell’s plant is the sole facility in the country that converts uranium ore into the uranium hexafluoride gas used in the production of both nuclear power and nuclear weapons. This is a risky process that involves highly toxic materials.

These dangers were highlighted in December 2003, when an accidental release of toxic gas forced the evacuation of nearby residents and the shutdown of the plant for four months. The U.S. Nuclear Regulatory Commission (NRC) issued two violations relating to the way the company handled the incident.

Given such hazards, the members of Steelworkers Local 7-669 have long focused on safety issues, both for themselves and for the surrounding community. The union has been particularly concerned about the high rate of cancer among the workforce and thus has sought to negotiate good health coverage for active workers and retirees. During contract renegotiations last year, Honeywell sought to eliminate retiree health benefits, reduce pensions for new hires, cap severance pay and contract out maintenance. When the union balked but declined to strike, the company abruptly locked out the workers in June. And in a move made all the more reckless by the dangerous nature of the work, the company brought in poorly trained replacements to keep the plant operating.

In September, a loud explosion was heard at the plant but there were no reports of toxic releases. A Steelworkers report notes that the company was cited by the NRC for improperly coaching replacement working during on-site job evaluations by federal inspectors. Honeywell’s safety image was further tarnished just a few weeks ago, when the U.S. Justice Department and the EPA announced that the company had paid a criminal fine of $11.8 million to resolve a charge of illegally storing hazardous and radioactive materials in Metropolis.

The $11 million is the latest addition to the more than $650 million in fines and damages Honeywell has paid since 1995 in connection with 32 instances of misconduct collected by the Project On Government Oversight in its Federal Contractor Misconduct Database (the company ranks 17th in amount paid out).

Honeywell’s record of corporate irresponsibility goes back even farther. From the late 1960s through the late 1980s, the old Honeywell (prior to its 1999 takeover by AlliedSignal, which adopted the name) was targeted by antiwar activists because of its production of cluster bombs and land mines that were widely used in Vietnam and later because it was unwilling to take responsibility for clearing munitions that remained after the war was over.

Despite this checkered history, Honeywell has remained a large federal contractor. It is involved, for example, in both the clean-up of the Cold War-era Savannah River nuclear weapons complex in South Carolina and the construction of a new nuclear arms production facility in Kansas City.

And if all the above is not enough controversy, Honeywell CEO David Cote was named by President Obama (before the lockout) to the National Commission on Fiscal Responsibility and Reform, which issued a report in December that, among other things, proposed cuts in corporate tax rates. Cote issued a personal statement complaining that the report did not take a harder line on Medicare and Medicaid, and he recently called for cuts in Social Security. He also just told Bloomberg Television that he would love to see corporate income taxes entirely eliminated.

For many people, the Honeywell name is still associated with thermostats. But today, it is a poster child for much that is wrong with corporate America—mistreatment of workers, environmental recklessness, military profiteering, and unwillingness to pay a fair share of taxes. It should be made to feel more of the heat itself.