Archive for the ‘Environment’ Category

Targeting the Climate Culprits

Thursday, May 8th, 2014

CarbonMajorsImage1The new U.S. National Climate Assessment makes for sobering reading. In a document of more than 800 pages, it shows that climate change is not some possibility in the distant future but rather a crisis we are already beginning to experience. Extreme weather events linked to climate change, it states, are “disrupting people’s lives and damaging some sectors of our economy.”

Although it is forthright in stating the scientific evidence, the report, as an official government document, avoids assigning blame for the run-up in greenhouse gas emissions to specific parties, and it does not make specific proposals for mitigating the problem.

A very different approach is taken in research recently published by the Climate Accountability Institute, which as its name suggests is very much about naming names. The institute’s Carbon Majors project has accomplished the remarkable feat of estimating how much in the way of carbon and methane emissions can be linked to specific companies going back decades.

In a painstaking analysis, principal investigator Richard Heede has reconstructed the corporate lineage of the major fossil fuel and cement corporations,  assembled data on their historical output and estimated the greenhouse gas emissions caused by that output. In the case of Chevron, for example, the analysis goes back to 1912 and includes predecessor entities such as Standard Oil of California, Gulf Oil, Texaco, Getty and Unocal. The report also covers state-owned oil companies, which Heede notes have not done a good job of providing production statistics.

In all, Heede documents more than 900 billion metric tons of carbon dioxide equivalents and links them to 90 of the world’s largest oil, gas, coal and cement-producing entities. If contributing to the climate crisis can be considered an offense against the planet, these 90 entities are the biggest climate culprits.

So who are they? Table 11 of Heede’s report shows that the companies with the largest cumulative emissions are the following:

  1. Chevron: 51.1 billion metric tons
  2. Exxon Mobil: 46.7 billion metric tons
  3. Saudi Aramco: 46 billion metric tons
  4. BP: 35.8 billion metric tons
  5. Gazprom: 32.1 billion metric tons
  6. Royal Dutch Shell: 30.8 billion metric tons
  7. National Iranian Oil Company: 29.1 billion metric tons
  8. Pemex: 20 billion metric tons
  9. ConocoPhillips: 16.9 billion metric tons
  10. Petroleos de Venezuela: 16.2 billion metric tons

Pressuring these companies through a divestment campaign of the type that is beginning to take hold among U.S. universities (Stanford has just announced it will purge its portfolio of coal stocks) is a good start, but it will probably not be enough.

Other approaches are also being pursued. In an article in The Nation, Dan Zegart reports on efforts by environmental lawyers to mount a legal assault on fossil fuel companies like that used against Big Tobacco. It turns out that these lawyers are studying Heede’s research closely and are trying to figure out ways to use it in their suits.

Putting the industry on the defensive in the courts as well as in the streets is important, because the Carbon Majors will increasingly depict themselves as leaders of the effort to overcome the climate crisis rather than their true identity as key culprits in causing it to happen. I’m sure that Chevron is preparing a new version of its “Will You Join Us?” ad campaign of a few years ago, in which it painted a false picture of itself as part of the clean-energy vanguard.

The recent agreement by Exxon Mobil to insert warnings in its financial reports about the risks to its fossil fuel assets from possible stricter limits on carbon emissions is being hailed by environmentalists as a major transparency advance, but it could also be used by the company as a way of limiting future legal liability.

Another troubling sign of potential corporate maneuvering can be found in the National Climate Assessment itself. It is surprising to open Chapter 4 on Energy Supply and Use and find that one of the lead authors is Jan Dell of ConocoPhillips, one of Heede’s top-ten Carbon Majors. I, for one, would prefer not to see oil company representatives playing a role preparing key analyses of the climate crisis. The fossil fuel industry is a big part of that problem (to the tune of 900 million metric tons), not part of the solution.

Freedom to Pollute

Thursday, January 16th, 2014

freedomindustriesRecent news reports out of West Virginia sound like they were written as part of a parody of modern business: the company responsible for a chemical leak that contaminated the water supply of hundreds of thousands of people is named Freedom Industries and was cofounded by a two-time convicted felon.

The situation, however, is far from a joke. Freedom Industries spilled a substantial quantity of a substance called 4, methylcyclohexane methanol (MCHM) into the Elk River near the intake valve for a water treatment plant serving the Charleston area, sending more than 150 people to the hospital and forcing residents to use bottled water for drinking, cooking and bathing. The plume is now heading toward Cincinnati.

As is all too common in such incidents, it turns out that the 75-year-old facility where the rupture took place had not been visited by government inspectors for more than 20 years. In fact, as a storage rather than a production facility, it was subject to little in the way of federal or state oversight. So much for the idea of regulatory excess.

Given that MCHM is used to process coal, this accident adds to the heavy toll that mining has taken on West Virginia—from the Buffalo Creek flood in 1972 to the Upper Big Branch disaster in 2010 in which 29 miners were killed. It is also significant that Freedom Industries purchases MCHM, for which it serves as a distributor, from a subsidiary of Georgia-Pacific, which in turn is controlled by the rabidly anti-regulation Koch Brothers.

To all this can be added the fact that Freedom Industries was cofounded by an individual named Carl Lemley Kennedy II. As the Charleston Gazette has reported, Kennedy filed for personal bankruptcy in 2005 after he was hit with federal charges of tax evasion and failure to remit employee withholding taxes. He is reported to have admitted to diverting more than $1 million that should have gone to the Internal Revenue Service.

Kennedy’s involvement in Freedom Industries, the Gazette notes, does not seem to have been affected by the fact that he had once pleaded guilty to selling cocaine in connection with a scandal that involved the mayor of Charleston. The paper quotes the current mayor, who is said to have known Kennedy since the 1980s, as an “edgy guy.”

Another remarkable aspect of the story reported by the Gazette is that Freedom Industries was struggling in 2009, and its Elk River facility was able to go on functioning only after the Army Corps of Engineers dredged that portion of the river using federal stimulus funds.

To summarize: a tax evader and drug dealer helped to establish a largely unregulated chemical company that benefitted from the federal stimulus but apparently did little in the way of preventive maintenance and set the stage for large-scale drinking water contamination.

Large corporations such as Dow Chemical and Exxon Mobil have caused vast amounts of environmental damage, but it shouldn’t be forgotten that small-time operators such as Freedom Industries can also do substantial harm. And it is not just producers of hazardous materials but also distributors that can be the culprits. It was another small distributor, West Fertilizer, that was involved in the ammonium nitrate explosion in Texas last April that killed 15 people. Much of the reporting in the wake of that event, particularly with respect to holes in the regulatory system, could have been recycled for the new West Virginia accident.

As long as the illusion of regulation is perpetuated in place of the real thing, these accidents will continue to happen, and the right to pollute will trump the right to be safe from pollution.

GE Dumps Workers as It Dredges the Hudson

Thursday, October 17th, 2013

DUMP_YRD_SIGNFor 30 years, General Electric resisted calls to remove the toxic substances it had dumped into New York’s Hudson River over several decades. Now that the process is well under way, the company is striking back at the state by shutting its cleaned-up plant along the river and moving some 200 jobs to Florida. The workers slated to be laid off feel that they are now being dumped.

The site of the dispute is Fort Edward (about 200 miles north of New York City), where from the late 1940s to the mid-1970s GE produced electric capacitors using insulating material containing polychlorinated biphenyls (PCBs). Vast quantities of PCB-contaminated waste ended up in the river’s waters and riverbed.

By the 1970s PCBs were recognized to be a human carcinogen and their manufacture was banned in the United States.  In 1975 the New York State Department of Environmental Conservation ordered GE to cease its PCB dumping and negotiated a path-breaking settlement under which the company would help pay the cost of cleaning up the pollution that had closed the river to commercial fishing and become a national symbol of corporate irresponsibility.

As the projected cost of the clean-up escalated, GE resisted dredging the river’s sediment, which was estimated to contain more than 130 metric tons of PCBs, and instead proposed dubious alternatives such as using bacteria to try to break down the toxic wastes. The company continued this obstruction for years, even after the EPA ordered it in 2001 to pay an estimated $460 million to remove 2.65 million cubic yards of sediment. The legal battle finally ended in 2005, but it took until 2009 for GE to actually begin the dredging. The process is now in its fifth year.

The workers at the Fort Edward plant may not be around to celebrate the completion of the clean-up. A few weeks ago, GE announced that it planned to close the plant and move the operation to Clearwater, Florida. The Fort Edward workers have been represented by the United Electrical (UE) union for the past 70 years, while the Clearwater plant—as you might expect—is non-union.

The Fort Edward move is just the latest of a long series of actions by GE that have weakened the economy of upstate New York. The city of Schenectady, where Thomas Edison moved his electrical equipment operation in 1886, has alone lost tens of thousands of jobs through waves of GE downsizing.

GE also seems to feel no sense of obligation in connection with the economic development subsidies it has received from state and local government agencies in New York. The biggest giveaways have come downstate. In 1987, a year after it was acquired by GE, NBC pressured New York City to give it $98 million in tax breaks under the threat of moving its operations to New Jersey.  In 1999 investment house Kidder Peabody, then owned by GE, got its own $31 million package to stay in the city.

There have also been subsidies upstate. For example, in 2009 GE got a $5 million grant and a $2 million tax abatement for its operations in Schenectady. The company’s research center in Niskayuna, New York has received millions of dollars in local tax breaks.

When GE has not received enough subsidies for its satisfaction, the company sometimes tries to reduce its local tax bills by challenging the assessed value of its property. In 2002, for example, it sued to get the value of its turbine plant in Rotterdam, New York reduced from $159 million to $41 million. A compromise ruling gave GE some of what it wanted and forced the town to reimburse the company about $6 million. Not satisfied, the company later brought a new challenge and got the town to negotiate a payment-in-lieu-of-taxes deal.

And, of course, GE is notorious for its dodging in other states and at the federal level, where it also gets subsidized through agencies such as the Export-Import Bank and got TARP-related assistance for its GE Capital unit.

Members of UE Local 332 are vowing to fight the plant shutdown, but they are up against a company that has shown it is  willing to go to great lengths to get its way on environmental, labor and tax issues.

The Kochs’ Stake in Pollution

Thursday, May 30th, 2013

Accountability_LATimesPuppets_300x250_FINALREVISED050813_2Koch Industries and the billionaire brothers who run it are best known for their involvement in rightwing causes. The latest controversy is over the Kochs’ reported interest in purchasing the Los Angeles Times and other major newspapers owned by the Tribune Co. A campaign centered in L.A. is mobilizing opposition to such a deal among newspaper subscribers and Tribune shareholders, warning that a Koch takeover would create a new Fox News.

What often gets forgotten is that Koch Industries is not just part of the Koch ideological machine. It is a huge privately-held conglomerate with annual revenues of more than $100 billion and operations ranging from oil pipelines and refining to paper products (it owns Georgia-Pacific), synthetic fibers (it bought Lyrca and Stainmaster producer Invista from DuPont), chemicals, mining and cattle ranching.

I’ve just completed one of my Corporate Rap Sheets on Koch Industries, and it’s clear that the sins of the company go far beyond the political realm. The following is some of what I found.

In November 2011 the magazine Bloomberg Markets published a lengthy article entitled “The Secret Sins of Koch Industries” that made some explosive accusations against the company: “For six decades around the world, Koch Industries has blazed a path to riches—in part, by making illicit payments to win contracts, trading with a terrorist state, fixing prices, neglecting safety and ignoring environmental regulations. At the same time, Charles and David Koch have promoted a form of government that interferes less with company actions.”

What Bloomberg revealed for the first time were the allegations involving bribery and dealing with Iran. The article reported that the company’s subsidiary Koch-Glitsch paid bribes to secure contracts in six countries (Algeria, Egypt, India, Morocco, Nigeria and Saudi Arabia) and that it violated U.S. sanctions by doing business with Iran, including the sale of materials that helped the country build the world’s largest plant to convert natural gas to methanol used in plastics, paints and chemicals.

The environmental cases alluded to by Bloomberg had been previously reported and included the following.

In 1995 the U.S Justice Department, the Environmental Protection Agency and the United Stated Coast Guard filed a civil suit against Koch Industries and several of its affiliates for unlawfully discharging millions of gallons of oil into the waters of six states. In one of the largest Clean Water Act cased ever brought up to that time, the agencies accused Koch of being responsible for more than 300 separate spills in Alabama, Kansas, Louisiana, Missouri, Oklahoma and Texas.

In 1997 Tosco Corporation (now part of ConocoPhillips) sued Koch in a dispute over costs related to the clean-up of toxic waste at an oil refinery in Duncan, Oklahoma that used to be owned and operated by Koch. In 1998 a federal judge ordered Koch to contribute to those costs, and that ruling was upheld by an appeals court in 2000. The companies later settled the matter out of court.

In 1998 Koch agreed to pay $6.9 million to settle charges brought by state environmental regulators relating to large oil spills at the company’s Rosemount refinery in Minnesota. The following year it agreed to plead guilty to related federal criminal charges and pay $8 million in fines.

Also in 1998, the National Transportation Safety Board found that the failure of a Koch subsidiary to protect a liquid butane pipeline from corrosion was responsible for a 1996 rupture that released a butane vapor. When a pickup truck drove into the vapor it ignited an explosion that killed the driver and a passenger. In a wrongful death lawsuit a Texas jury awarded the father of one of the victims $296 million in damages.

In 2000 the U.S. Justice Department and the EPA announced that Koch Industries would pay what was then a record civil environmental fine of $30 million to settle the 1995 charges relating to more than 300 oil spills plus additional charges filed in 1997. Along with the penalty, Koch agreed to spend $5 million on environmental projects in Texas, Kansas and Oklahoma, the states where most of its spills had occurred. In announcing the settlement, EPA head Carol Browner said that Koch had quit inspecting its pipelines and instead found flaws by waiting for ruptures to happen.

Later in 2000, DOJ and the EPA announced that Koch Industries would pay a penalty of $4.5 million in connection with Clean Air Act violations at its refineries in Minnesota and Texas. The company also agreed to spend up to $80 million to install improved pollution-control equipment at the facilities.

In a third major environmental case against Koch that year, a federal grand jury in Texas returned a 97-count indictment against the company and four of its employees for violating federal air pollution and hazardous waste laws in connection with benzene emissions at the Koch refinery near Corpus Christi.

The Bloomberg Markets article reported that a former Koch employee said she was told to falsify data in a report to the state on the emissions.  The company was reportedly facing potential penalties of some $350 million, but in early 2001 the newly installed Bush Administration’s Justice Department negotiated a settlement in which many of the charges were dropped and the company pled guilty to concealing violations of air quality laws and paid just $10 million in criminal fines and $10 million for environmental projects in the Corpus Christi area.

With the purchase of Georgia-Pacific in 2005, Koch acquired a company with its own environmental and safety problems. For example, in 1984 a G-P plant in Columbus, Ohio had spilled 2,000 pounds of phenol and formaldehyde that reached a nearby community. Residents complained of health problems from that incident and from a huge industrial waste pond that the company continued to maintain at the plant.

In 2009 the U.S. Justice Department and the EPA announced that G-P would spend $13 million to perform clean-up activities at a Michigan Superfund site where it previously had a paper mill. In 2010 G-P was one of ten companies sued by the Justice Department over PCB contamination of the Fox River in Wisconsin. Unlike the other defendants, G-P had already settled with DOJ by agreeing to a $7 million penalty and to pay for the costs of a portion of the clean-up. One of the other defendants, Appleton Papers, called the settlement a “sweetheart deal.”

More recently, Koch Industries has been caught up in the controversy over the Keystone XL pipeline. In 2011 Inside Climate News reported that Koch already responsible for 25 percent of the tar sands oil being imported from Canada into the United States and stood to benefit greatly from the new pipeline. Koch denied its involvement, but Inside Climate News found documents filed with Canada’s Energy Board contradicting that statement.

An August 2012 report by the Political Economy Research Institute at the University of Massachusetts-Amherst identified Koch as being among the top five corporate air polluters in the United States.

The reason the Kochs rail against regulation is clear: they’ve got a big stake in pollution.

Note:  The full rap sheet on Koch Industries can be found here.

The Keystone Kop of Tar Sands Oil

Thursday, April 11th, 2013

KeystoneKopsEven if the Obama Administration decides against the Keystone XL pipeline, the rejection of that project would not put much of a dent in the output of environmentally destructive Alberta tar sands oil.  One reason is that tar sands producers are hedging their bets. They are also hoping to ship their product westward through another pipeline that will extend to the Pacific port of Kitimat in British Columbia.

What is particularly dismaying is that the company behind this Northern Gateway project is Canadian pipeline giant Enbridge, which has what is probably the worst safety record of any oil transportation company in the world. Among other things, it was responsible for the worst inland oil spill in U.S. history—the July 2010 accident that spewed more than 800,000 gallons of oil into Michigan’s Kalamazoo River, a major state waterway that flows into Lake Michigan.

The incident occurred only months after the company was warned that it was not properly monitoring corrosion on the pipeline.

The U.S. Pipeline and Hazardous Materials Safety Administration (PHMSA) later imposed a record civil penalty of $3.7 million against Enbridge, which it said exhibited a “lack of a safety culture.”  This was echoed in the findings of the National Transportation Safety Board, which determined that it was not until 17 hours after the spill started that Enbridge began to take steps to address the problem. The safety board chair was quoted in an agency press release as saying: “This investigation identified a complete breakdown of safety at Enbridge. Their employees performed like Keystone Kops and failed to recognize their pipeline had ruptured and continued to pump crude into the environment.”

Enbridge’s lack of attention to safety can be seen in its record both before and after the Michigan spill.

For example, in 2001 a seam failure on a pipeline near Enbridge’s Hardisty Terminal in Alberta spilled more than 1 million gallons of oil. The following year, a 34-inch-diameter pipeline owned by its affiliate Enbridge Energy Partners ruptured in northern Minnesota, contaminating five acres of wetland with about 250,000 gallons of crude oil.

In 2003 about 189,000 gallons of crude oil spilled into the Nemadji River from the Enbridge Energy Terminal in Superior, Wisconsin. Fortunately, the river was frozen at the time, so damage to the waterway was limited.

In 2004 the U.S. Pipeline and Hazardous Materials Safety Administration (PHMSA) proposed a fine of $11,500 against Enbridge for safety violations found during inspections of pipelines in Illinois, Indiana and Michigan. The penalty was later reduced to $5,000. In a parallel case involving Enbridge operations in Minnesota, an initial penalty of $30,000 was revised to $25,000.

In 2007 an Enbridge pipeline in Wisconsin spilled more than 50,000 gallons of crude oil onto a farmer’s field in Clark County. The following month another Enbridge spill in Wisconsin released 176,000 gallons of crude in Rusk County. That same year, two workers were killed in an explosion that occurred at an Enbridge pipeline in Clearbrook, Minnesota. The PHMSA later fined the company $2.4 million for safety violations connected to the incident.

In 2008 the Wisconsin Department of Natural Resources charged Enbridge with more than 100 environmental violations relating to the construction of a 320-mile pipeline across much of the state. The agency said that Enbridge workers illegally cleared and disrupted wooded wetlands and were responsible for other actions that resulted in discharging sediment into waterways. In January 2009 the company settled the charges by agreeing to pay $1.1 million in penalties.

In 2009 the PHMSA fined Enbridge $105,000 for a 2007 accident that released more than 9,000 gallons of crude oil. The following year, PHMSA proposed a fine of $28,800 against Enbridge for safety violations in Oklahoma.

Shortly after the Michigan accident, Enbridge experienced another spill at one of its pipelines in Romeoville, Illinois, a suburb of Chicago.

And in In July 2012, less than a month after the publication of the damning National Transportation Safety Board report on the Michigan accident, an Enbridge pipeline in Wisconsin ruptured and spilled some 50,000 gallons of oil. One member of the U.S. Congress responded by saying: “Enbridge is fast becoming to the Midwest what BP was to the Gulf of Mexico.”

These incidents are only the ones big enough to gain press attention and significant regulatory response. A profile of the company by the Polaris Institute put the number even higher—more than 800 spills between 1999 and 2010 in which some 6.8 million gallons of oil were spilled in the U.S. and Canada.

While Keystone XL and its sponsor TransCanada get the attention, Enbridge may be an even bigger threat.

Note: This piece draws from my new Corporate Rap Sheet on Enbridge, which can be found here.

Canada’s Other Tar Sands Villain

Thursday, April 4th, 2013

suncor_oil_sandsAs the Obama Administration nears its final decision on the Keystone XL pipeline, the oil industry should be on its best behavior. Yet the purveyors of petroleum can’t seem to help themselves. They keep having accidents that demonstrate the perils of Keystone.

Those perils are not limited to the disastrous contribution the pipeline would make to the climate crisis. Recent events show what a dangerous business it is to transport oil across vast distances, especially when that oil is of the exceedingly dirty variety produced in the tar sands of Canada.

Exxon Mobil has been the center of attention in recent days as the result of a leak of some 10,000 barrels of heavy Canadian crude in a residential area near Little Rock, Arkansas. The incident came only days after the federal Pipeline and Hazardous Materials Safety Administration proposed that the company be fined $1.7 million in connection with a 2011 pipeline rupture that spewed a large quantity of oil into the Yellowstone River in Montana.

The Arkansas spill came shortly after a Canadian Pacific freight train derailed, spilling some 30,000 barrels of tar sands oil in western Minnesota.

The U.S. press has paid less attention to yet another spill. This one took place right where tar sands oil is produced in Alberta, and the responsible party was Canadian oil giant Suncor Energy. And it turned out that the site of its toxic wastewater spill into the Athabasca River was the same place where a previously unreported spill occurred two years earlier.

Suncor, which is the subject of my latest Corporate Rap Sheet, tends to get less attention from U.S. tar sands activists than Transcanada, which is the company behind Keystone XL. Yet Suncor is one of a handful of operators that produce the tar sands oil that would flow through the pipeline.

It was Suncor, in its previous incarnation as a subsidiary of Sunoco, that pioneered tar sands production in the 1950s and went on to invest billions of dollars to develop the dirty business. Suncor has thus been a target of anti-tar sands protests by groups such as Greenpeace Canada.

The recent spill in Alberta and the belatedly reported 2011 incident are far from the only blemishes on the company’s safety and environmental record.

In 2008 there was a scandal over reports that a leak of nearly 1 million liters of waste water from a Suncor containment pond into the Athabasca River went unreported for up to eight months. Alberta Environment later charged the company with being out of compliance with its Water Act license but fined it only C$275,000.

In 2009 there was a bigger scandal over reports that a Suncor contractor, Compass Group Canada, had failed to properly treat human waste from a company work camp before dumping sewage into the same river. Suncor was fined C$175,000 for failing to properly supervise Compass, which was fined C$225,000 for failing to report the problem.

At the same time, Suncor was fined C$675,000 for failing to install pollution control equipment at its Firebag oil sands facility. In July 2009 Suncor was fined C$625,000 for excessive discharges of sulfur dioxide at its Sarnia oil refinery in Ontario.

In 2010 Environment Canada ordered Suncor to pay C$200,000 after it pleaded guilty to two violations of the Canadian Fisheries Act in connection with a 2008 incident in which wastewater overflowed from a containment pond into the Steepbank River in Alberta.

In December 2011 an accident at Suncor’s refinery in Commerce City, Colorado resulted in the seepage of hazardous waste into Sand Creek and the South Platte River. Tests by the U.S. Environmental Protection Agency found that the contamination included the carcinogenic substance benzene. The drinking water at the refinery was also found to contain high levels of benzene. Meanwhile, the refinery continued to spread contamination into surrounding groundwater sources. Six months after the spill, Colorado officials were saying that a complete clean-up could take years.

In April 2012 the Colorado Department of Public Health and Environment announced that Suncor would pay $2.2 million in negotiated fines in connection with airborne benzene releases at the Commerce City refinery unrelated to the accident.

In October 2012, the Canada-Newfoundland and Labrador Offshore Petroleum Board announced that Suncor had admitted to regulatory violations in connection with a spill of lubricating fluid at its drilling platform in the Jeanne d’Arc basin the year before; the company was ordered to pay C$130,000 in penalties.

Transcanada deserves all the criticism it gets for its Keystone plan, but companies like Suncor that actually produce the dirty oil that will travel through that system also need to feel the heat.

Read the full Corporate Rap Sheet on Suncor Energy here.

Corporate Power and the Second Obama Administration

Thursday, November 8th, 2012

The corporate lobby is dumbfounded. After spending billions of dollars to defeat President Obama and take Republican control of the Senate, business interests have nothing to show for their efforts.

By all rights, Thomas Donohue of the U.S. Chamber of Commerce, which went all-out for Republican candidates, should be handing in his resignation. The Big Business-loving editorial page of the Wall Street Journal should be exhibiting a bit of contrition.

Instead, Donohue issued a press release reiterating the Chamber’s laissez-faire position: “It is the private sector that drives economic growth and jobs, and it is the government’s responsibility to work on a bipartisan basis to pass policies that will unleash the private sector and help put Americans back to work.”  The Journal warns Obama not to “consider his reelection to be a mandate to repeat his first-term record of rejecting all GOP ideas and insisting on his priorities.” God forbid that a President returned to office with a resounding victory should seek to promote his own priorities.

Even with the election is over, conservatives cannot let go of their caricature of Obama as a radical leftist who refuses to compromise. This may have something to do with the fact that many of them are radical rightists who refuse to compromise.

After Obama was first elected in 2008, the Journal predicted that he would “seek middle ground with business on thorny issues.” You wouldn’t know it from the campaign, but that was often what happened during the past four years.  Far from being the Bolshevik envisioned in the fevered imagination of his critics, Obama led Democrats in pursuing an agenda that was solidly middle-of-the-road or, in some respects, conservative, by earlier standards. Let’s recall that Obama:

  • Promoted and got enacted a healthcare reform plan that preserves the private insurance industry;
  • Enacted a stimulus plan that, among other things, funneled billions into subsidies, grants and contracts for large corporations;
  • Helped rescue the auto industry through a plan that forced workers to make major contract concessions and that took a hands-off approach to the management of companies such as General Motors and Chrysler that received tens of billions in federal aid;
  • Occasionally talked tough but ultimately did little to prosecute the financial institutions that were responsible for the near meltdown of the economy through predatory lending and reckless speculation;
  • Enacted a financial reform bill that allowed venal megabanks such as Citigroup to remain in existence and then did little to challenge Republican efforts to stonewall implementation of its consumer protection provisions;
  • Abandoned, in the face of Republican opposition, the pro-union Employee Free Choice Act and cap-and-trade legislation;
  • Continued the practice of allowing corporate criminals to escape real punishment through deferred prosecution agreements;
  • Continued to promote the myth of “clean coal” and adopted a weak or inconsistent position on dangerous energy practices such as offshore drilling and fracking;
  • Went along with the wrong-headed notion that corporate income tax rates are too high;
  • Claimed to be reducing the influence of corporate lobbyists but chose as a senior advisor someone who also serves as a strategist for clients such as military contractor Pratt & Whitney and Keystone XL pipeline developer TransCanada;
  • Declined to directly criticize large profitable companies that have refused to rehire adequate numbers of U.S. workers; and
  • Chose executives from union-unfriendly offshore outsourcers such as General Electric to advise him on job creation.

The list could go on. By any reasonable assessment, this record could be considered business-friendly or at least not overly hostile. The problem is that business groups are comparing the reality of Obama to a fantasy of token regulation, minimal taxation, vanished unions—in other words, totally unfettered corporate power—and thus feel frustrated.

Unfortunately, left to its own devices, a second Obama Administration is likely to go on trying to placate corporate interests and the Right by promoting policies that will never satisfy them but will dilute critical progressive goals.  Wouldn’t it be great if the President felt he needed to try that hard to satisfy the other end of the political spectrum?

Wal-Mart’s Other Sins

Thursday, October 25th, 2012

The job actions taking place at many Wal-Mart locations around the United States have brought new attention to the abysmal labor practices of the country’s largest private employer. More than any other company, Wal-Mart depends on low wages, meager benefits, overtime abuses and gender discrimination to keep its labor costs artificially low while quashing any efforts by workers to rectify those conditions.

Two weeks ago, I used this blog to recount Wal-Mart’s labor and employment track record. Here I want to remind readers of some of the company’s many sins outside the workplace, using information I assembled for the new 5,000-word Wal-Mart entry in my Corporate Rap Sheets series.

Corruption. Wal-Mart doesn’t seem to mind its hardline reputation on personnel matters, but it has tried to otherwise paint itself as a squeaky-clean operation. That image was shattered last spring, when the New York Times published an 8,000-word front-page exposé about moves by top management to thwart and ultimately shelve an investigation of Foreign Corrupt Practices Act violations, focusing on extensive bribes paid by lower-level company officials as part of an effort to increase Wal-Mart’s market share in Mexico.

That story made a huge splash and reportedly undermined the company’s urban expansion efforts. A major public pension fund, the California State Teachers’ Retirement System, sued the company for breach of fiduciary duty in connection with the bribery scandal. It and other institutional investors showed their discontent with top management by opposing the official slate of directors at Wal-Mart’s annual meeting. About 12 percent of the shares outstanding were voted against the slate, an unprecedented level of dissent by the company’s previously quiescent shareholders. The company, apparently still trying to deal with the fallout, has just announced an overhaul of its compliance department.

State income tax avoidance. In 2007 the Wall Street Journal published a front-page story revealing that Wal-Mart was using a real estate gimmick to avoid paying many millions of dollars in state corporate income taxes each year. It was doing this by putting many of its stores under the ownership of a real estate investment trust (REIT) controlled by the company. The stores would pay rent to the captive REIT and deduct those payments as a business expense.

This trick, essentially paying rent to itself, reduced the company’s taxable income and thus lowered its state tax bill (the REIT was structured so its income wasn’t taxed by any state). A report by Citizens for Tax Justice estimated that Wal-Mart had thereby avoided some $2.3 billion in state income tax payments between 1999 and 2005–an average of more than $300 million a year.

Local property tax avoidance.  A 2007 report by my colleagues and me at Good Jobs First found that Wal-Mart has sought to reduce its property tax payments by frequently and aggressively challenging the assessed value attached to its U.S. stores and distribution centers by local officials.  The report examined a 10 percent random sample of the stores and found that such challenges had been filed for about one-third of them; an examination of all of the distribution centers found challenges at 40 percent, even though many of the latter had been granted property tax abatements when they were built.

Sales tax “skimming.” In a 2008 report by Good Jobs First entitled Skimming the Sales Tax, we found that Wal-Mart was receiving an estimated $60 million a year as a result of the little-known practice in some states of compensating retailers for collecting sales taxes and calculating the amount of that compensation based on total sales. This, in addition to the estimated $130 million in sales-tax-based economic development subsidies, means that Wal-Mart is depriving hard-pressed state and local governments of at least $73 million each year. This is just a small part of the more than $1.2 billion in state and local subsidies that Good Jobs First has documented on our website Wal-Mart Subsidy Watch.

Environmental violations. Wal-Mart has tried very hard in recent years to depict itself as a pioneer of sustainability by wide-ranging initiatives with regard to energy efficiency and the addition of organic foods and other green products to its shelves. Wal-Mart is largely silent about the environmental impact of the millions of customers who in most cases must still drive to the company’s retail outlets. It also wants us to forget that the company itself has had its share of environmental violations. For example, in 2004 the U.S. Department of Justice and the Environmental Protection Agency announced that Wal-Mart would pay a $3.1 million civil penalty and take remedial action to resolve alleged violations of the Clean Water Act in connection with storm water runoff from two dozen company construction sites in nine states. The following year, the company agreed to pay $1.15 million to the state of Connecticut to settle a suit alleging that it had allowed rain water to carry fertilizer, pesticides and other harmful substances stored outside its retail outlets into rivers and streams. It also signed a consent decree with the EPA to resolve charges relating to diesel truck idling at its facilities.

Undocumented Workers. When talking about Wal-Mart it is difficult to avoid the workplace entirely. Aside from its mistreatment of its own employees, the company takes advantage of exploited contract workers. For example, in 2003 a federal racketeering suit was filed against Wal-Mart by lawyers seeking to represent thousands of janitors who cleaned company stores and were reported to be working seven days a week and not receiving overtime pay. The filing took place 18 days after federal agents raided 60 Wal-Mart stores in 21 states to round up about 250 janitors described as undocumented aliens. In 2005 Wal-Mart agreed to pay $11 million to settle federal immigration charges. Documents later emerged suggesting that Wal-Mart executives knew that the company’s cleaning contractors were using undocumented immigrants.

“Dead Peasant” Insurance. Wal-Mart has not only worked people to death but also continued exploiting them after their demise. The mega-retailer is one of the large companies that engaged in the repugnant practice of secretly taking out life insurance on low-paid employees and making itself the beneficiary. The polite term for this is corporate-owned life insurance, though critics have labeled it “janitor’s insurance” or “dead peasant insurance.” In 2004 Wal-Mart settled one case brought in Houston for an undisclosed amount. Two years later it agreed to pay $5.1 million for a class action brought by the estates of former employees in Oklahoma, and in 2011 the company agreed to pay just over $2 million in a class-action suit filed in Florida.

The list could go on. In fact, it is difficult to find a form of corporate misconduct Wal-Mart has not exhibited. Yet it is probably the labor arena that counts the most in determining whether the company will be reined in. Support your local Wal-Mart “associates” in their efforts to stand up to the bully of Bentonville.

Through A Corporate Glass, Darkly

Thursday, July 19th, 2012

Conventional wisdom has it that we live in an age of hyper-transparency. That’s true if you look at what people are willing to reveal about themselves to Facebook, but it’s another story for large corporations and the 1%.

The Republican filibuster of the DISCLOSE Act and Mitt Romney’s reluctance to release more of his income tax returns are strong reminders of how those at the top of the economic pyramid seek to hide the ways they accumulate their wealth and influence public policy.

The current preoccupation with disclosure issues makes this a good time to step back and review the state of corporate transparency. Do we know enough about the workings of the huge private institutions that dominate so much of modern life?

Of course, the answer is no. Yet the quantity and quality of disclosure vary greatly depending on the structure of a given company and the aspect of its operations one chooses to examine. Depending on which piece of the business elephant we touch, corporations may seen somewhat translucent or completely opaque.

It’s also worth remembering that there are two main forms of disclosure: information that companies, especially those whose stock is publicly traded, are compelled to reveal and the data that government agencies collect about firms and release to the public. What corporations release on their own initiative is, given its selective nature, self-serving spin rather than disclosure.

Most of what U.S. companies are required to disclose is contained in the financial filings required by the Securities and Exchange Commission. It’s great that the SEC makes these documents readily available via its EDGAR online system, but the information required from companies is meant to serve the needs of investors rather than those of us concerned with corporate accountability. There is thus an abundance of data on financial results and a meager amount on a company’s social impacts. Here’s a rundown and critique of disclosure practices regarding the latter.

LEGAL PROCEEDINGS. Each company filing a 10-K annual report has to include a section summarizing significant litigation and other legal proceedings in which it is involved. For some companies, these sections can go on for pages, which says a lot about the corporate tendency to run afoul of the law. Even so, these sections are often incomplete, since companies are given discretion in deciding which cases are “material,” meaning that fines and other penalties could have a significant impact on earnings.  To get a fuller picture of corporate legal entanglements, you need to search the dockets on the PACER subscription service, which for large companies will be voluminous, or use the free summaries on the Justia website.

EXECUTIVE COMPENSATION. The annual proxy statements filed by publicly traded companies provide exhaustive details on the salaries, bonuses and other compensation received by top executives (and directors).  Designated in the EDGAR system as Form DEF14A, these documents seem to try to drown the reader in details to downplay the impact of lavish pay packages. Note that what is called the Summary Compensation Table does not include essential information such as the amount (shown elsewhere) that an executive realized from the exercise of stock options.

EMPLOYMENT ISSUES. Companies are required to disclose their total number of employees but do not have to provide a geographical breakdown. Some do so voluntarily, but many others can hide the tendency to create many more jobs in foreign cheap-labor havens than at home. Because the penalties are usually small, companies tend not to disclose violations of federal rules regarding overtime pay, the minimum wage and other Fair Labor Standards Act issues.  Fortunately, the Department of Labor has included wage and hour compliance information in its new enforcement website.

OCCUPATIONAL SAFETY AND HEALTH. Companies also rarely mention violations of occupational safety and health, for which penalties are also meager. The U.S. Occupational Safety and Health Administration, to its credit, makes available a database of all workplace inspection results going back to the creation of the agency; the DOL enforcement website provides access to this as well. Unfortunately, there are no summaries of the compliance records of large companies across their various establishments.

LABOR RELATIONS. Companies are required to report on labor relations issues only if there is a likelihood of a work stoppage that could affect corporate profits. With the decline of unions in the U.S. private sector, many companies do not bother to mention labor relations at all. Disputes that result in a formal ruling by the National Labor Relations Board will show up on that agency’s website.

ENVIRONMENTAL COMPLIANCE. Companies frequently discuss environmental regulation in the 10-K filings and will mention major enforcement actions. Yet these accounts are usually incomplete.  The Environmental Protection Agency fills in the gaps with its Enforcement and Compliance History Online (ECHO) database.

TAXES. Buried in the notes to the company’s financial statements is a section with details on how much it paid (or in many cases did not pay) in the way of taxes. This information is presented with a high degree of obfuscation, so it is fortunate that Citizens for Tax Justice publishes reports that summarize the extent to which large U.S. companies engage in flagrant tax avoidance.

SUBSIDIES. Corporate filings usually say little or nothing about the subsidies received from government, and it is often impossible to learn from other sources what those amounts may be when it comes to subsidies that take the form of federal tax breaks. There is much more company-specific data available on subsidies from state governments. In my capacity as research director of Good Jobs First, I have collected that data and assembled it in the Subsidy Tracker database.

GOVERNMENT CONTRACTS. Companies will report on government contracts only if they make up a substantial portion of their total revenue. Thanks to the work of OMB Watch in creating the FedSpending database, which the federal government adapted for its USASpending tool, it is possible to learn a great deal about how much business a given firm is doing with Uncle Sam. Data on contracts with state governments can often, though not always, be found via state procurement websites.

LOBBYING AND POLITICAL SPENDING. Corporations are not eager to disclose their efforts to shape public policy, and the SEC does not require them to do so. The Center for Political Accountability, on the other hand, was created to put pressure on companies to be more open about their political spending. The group has succeeded in getting about 100 corporations to adopt political disclosure. The inadequate information that gets disclosed at the behest of the Federal Election Commission can be found on websites such as Open Secrets, while state-level electoral data is summarized on the Follow the Money site. Both also provide access to the available data on lobbying.

Inadequate political disclosure by corporations is not limited to the United States. A recent study by Transparency International on 105 of the world’s large companies found that only 26 engaged in satisfactory reporting of political contributions. That was just one component of an analysis that looks at a variety of transparency measures that relate broadly to anti-corruption initiatives. Some of the worst results concern the simple matter of whether firms provide full country-by-country data on their operations and financial results.

The latter shows how disclosure issues of concern to investors and financial analysts can intersect with those relating to corporate accountability. When a company is allowed to use excessive forms of aggregation in its reporting, it may be hiding either poor management or corporate misconduct or both.

Note: The information sources discussed above as well as many others are discussed in my guide to online corporate research.

Corporate Capture in Rio and at Home

Thursday, June 21st, 2012

The 50,000-person United Nations conference on sustainable development in Rio de Janeiro is bound to be followed by recriminations about what the nations of the world failed to accomplish. Perhaps the real story is what the planet’s giant corporations did accomplish in Rio — to advance their own interests.

Rio +20 is following what is now a familiar pattern in which governments drag their feet while major companies try to give the impression that they are the vanguard of environmental reform. The extent to which the United Nations — whose Centre on Transnational Corporations was once somewhat critical of big business — has embraced this dynamic can be seen on the website Business.UN.org, whose tagline is “Partnering for a Better World.” Corporations can post their sustainability goals on the site under the misleading category of Commitments. Whether the various goals are timid or ambitious, they are all, of course, voluntary in nature and thus unenforceable by the UN or any other body.

More is at work here than simple image-burnishing by many of the planet’s biggest polluters. According to a report issued for Rio +20 by Friends of the Earth International, large corporations and business associations have in effect hijacked the UN’s policymaking process: “There is increased business influence over the positions of national governments in multilateral negotiations; business representatives dominate certain UN discussion spaces and some UN bodies; business groups are given a privileged advisory role.”

“An even greater cause of concern,” the FOEI report goes on to say, “is the emergence of an ideology among some UN agencies and staff that what is good for business is good for society. This is reflected in a shift away from policies and measures designed to address the role of business in creating many of the problems that we face, towards policies that aim to define these problems in terms dictated by the corporate sector, meeting their needs without tackling the underlying causes of the multiple crises.”

All of this constitutes what FOEI calls “corporate capture” of the UN, a phrase that echoes the term “regulatory capture” used to describe what happens when the interests of corporations come to dominate the proceedings of government oversight agencies. FOEI has issued a statement with other NGOs decrying the excessive corporate influence over UN deliberations that has been endorsed by more than 400 groups from around the world.

It’s heartening that so many groups are willing to speak out, but it’s discouraging to realize that the same criticisms have been made for more than a decade, to little avail. At the time of the 2002 UN earth summit in Johannesburg, CorpWatch issued a report called Greenwash +10 that was already warning about the risks of the UN’s increasing commitment to corporate partnerships. It noted that one of those partnerships, Global Compact, claimed to be promoting business support for UN sustainability goals yet included among its members companies such as mining giant Rio Tinto with atrocious environmental records.

Rio Tinto is one of the companies singled out in the new FOEI report for continuing to engage in the same kind of hypocrisy. The mining company is also one of the main targets (along with BP and Dow Chemical) of the Greenwash Gold campaign, which  accuses the companies of covering up environmental destruction “while pretending to be a good corporate citizen by sponsoring the Olympic games” being held this summer in London.

Undue corporate influence over climate policy is also the theme of a recent report by the Union of Concerned Scientists.  While acknowledging that some U.S. companies have taken “consistent and laudable” actions in support of science-based climate reforms, it finds that others have worked aggressively to undermine such progress.

Most interesting is its finding that some large corporations have taken contradictory positions depending on the circumstances. For example, some companies are found to make legitimate statements of concern over climate change on their websites and in their filings with the Securities and Exchange Commission while misrepresenting the state of climate science in their comments submitted to Environmental Protection Agency proceedings. Companies that fall into the contradictory category — such as Alcoa, ConocoPhillips and General Electric — are said to be standing in the way of meaningful change.

Whatever positions corporations take, there will always be tension between their interests and the common good. The fact that those two goals may occasionally coincide does not justify the outsized role that corporations now have in policymaking at both the national and international levels. Progress on climate change and many other fronts will be a lot easier when we are free from corporate capture in all its forms.