Environment

Foreign-Owned Regulatory Violators Found Among PPP Recipients

The massive Paycheck Protection Program was depicted as a necessary measure to save American small businesses, yet the list of recipients of the forgivable loans released by the Treasury Department contains numerous companies that are neither small nor American.

These include firms such as Jindal Saw USA LLC and JSW Steel (US) Inc., two affiliates of the Jindal Group, a multi-billion-dollar conglomerate owned by one of India’s wealthiest families. JSW Steel’s investments in the United States have been touted by Donald Trump, though the company later sued the U.S. Commerce Department when it was denied permission to import steel from India without paying a steep tariff.

Continental Carbon Company, owned by Taiwan’s International CSRC Investment Holdings Company (formerly China Synthetic Rubber Corporation), received a PPP loan worth between $5 million and $10 million.

These are two examples that have emerged from an examination of the PPP recipient list my colleagues and I have been doing as part of the integration of the data into our Covid Stimulus Watch website. Here are some others:

Giti Tire Manufacturing (USA) Ltd and Giti Tire (USA) Ltd, subsidiaries of Singapore’s Giti Tire.

Sekisui Voltek, LLC, a subsidiary of Japan’s Sekisui Chemical.

The U.S. subsidiary of Korean Air Lines (owned by the Hanjin Group).

Asahi Forge of America Corporation, a subsidiary of Japan’s Asahi Forge.

It does not come as a complete surprise that foreign-owned companies appeared on the PPP list. There was discussion of this possibility at the time the program was debated and enacted.

The issue then was whether such entities would be eligible for the loans if they were part of foreign companies with a workforce that surpassed the PPP employee limits. The muddled guidance provided by the Trump Administration has apparently allowed funds to go to firms linked to foreign corporations that are far from small businesses.

Another concern has come to light as we match PPP recipients to the data my colleagues and I have assembled for our other database, Violation Tracker: some of these foreign companies getting PPP loans have a history of misconduct.

The U.S. operations of Jindal Group have paid more than $1.4 million in penalties, mostly resulting from workplace safety and health violations.

Continental Carbon has paid over $2 million in penalties, nearly all of which involved Clean Air Act violations. Giti Tire, Sekisui, and Asahi Forge have also paid penalties to OSHA and/or the EPA.

In 2007 Korean Air Lines had to pay a $300 million criminal fine to the U.S. Justice Department after pleading guilty to conspiring to fix the prices of passenger and cargo flights. In 2018 Hanjin Transportation Co. Ltd., also part of the Hanjin Group, paid more than $6 million to the Justice Department to resolve allegations relating to a bid-rigging conspiracy that targeted contracts to supply fuel to United States Army, Navy, Marine Corps, and Air Force bases in South Korea.

In creating the Paycheck Protection Program, Congress probably did not intend to provide assistance to entities that are owned by large foreign companies and that had a track record of repeated regulatory violations and other serious misconduct.

Now that there is consideration of extending and expanding PPP, the question is whether such companies will continue to benefit from the largesse of American taxpayers.

Getting Tough on Corporate Killing

The lead story on the front page of a recent edition of the Wall Street Journal was about the former chief executive of a Brazilian mining company not widely known in the United States. The Journal’s editors probably realized their readers would be shaken by the news that Fabio Schvartsman has been charged with homicide in the deaths of 270 people in a mining dam collapse last year.

The decision by prosecutors in the state of Minas Gerais to bring such charges against Schvartsman as well as other former executives at Vale SA shows the depth of anger in Brazil at the giant iron ore company over the accident in which a torrent of waste swept away people, submerged houses and created a large toxic wasteland (photo).

Vale and a German consulting company, five of whose officials were also hit with homicide charges, are alleged to have long known about a critical safety flaw in the tailings dam but failed to act.

Although Brazil does not have a death penalty or life sentences for civilian offenses, the filing of homicide charges against corporate executives is an aggressive measure that has rarely been applied in that country or anywhere else.

There are more precedents when it comes to corporate manslaughter, which is the idea that a business entity can be prosecuted for causing the death of employees or other persons. For example, in 2007 the United Kingdom enacted the Corporate Manslaughter and Corporate Homicide Act, though that law has not been enforced as rigorously as many advocates had hoped.

In the United States there is no such federal statute, though the principle of corporate criminal liability is well-established, and numerous companies have faced criminal charges, though they frequently end with deferred prosecution or non-prosecution agreements.

The Violation Tracker database has more than 1,600 criminal cases (compared to 395,000 civil matters). Many of these are financial in nature or involve violations of environmental laws such as the Clean Water Act that are deemed negligent or deliberate but usually don’t involve loss of life.

A much smaller number involve corporate killing, including notorious cases such as BP’s role in the Deepwater Horizon disaster or the Upper Big Branch disaster at a coal mine owned by Massey Energy.

In these matters, however, the corporations, as in civil cases, mainly paid financial penalties and their executives faced no personal liability. One exception was former Massey CEO Don Blankenship, who was convicted of conspiring to violate federal mine safety standards and was sentenced to a year in prison. Otherwise, the Justice Department has shown little interest in prosecuting corporate executives for environmental or workplace fatalities.

There has been a bit more of such activity at the local level, especially on the part of the Manhattan District Attorney’s Office. It has brought criminal charges against both companies and individuals in connection with workplace and other accidents. For example, in November 2019 a building owner, a plumber and a contractor were convicted of manslaughter by causing a 2015 explosion resulting from unauthorized natural-gas connections installed in a rental building.

Three years earlier, the Manhattan DA won a conviction against a construction supervisor accused of ignoring warnings about unsafe conditions on a building site that resulted in a fatal accident.

The approach of the Manhattan DA and the prosecutors in Brazil points to a promising way forward in the handling of corporate misconduct that results in serious harm or death. If they know they may end up behind bars for a long time, corporate executives and managers may become more serious about their responsibility to abide by health and safety laws.

The 2019 Corporate Rap Sheet

While the news has lately focused on political high crimes and misdemeanors, 2019 has also seen plenty of corporate crimes and violations. Continuing the pattern of the past few years, diligent prosecutors and career agency officials have pursued their mission to combat business misconduct even as the Trump Administration tries to erode the regulatory system. The following is a selection of significant cases resolved during the year.

Online Privacy Violations: Facebook agreed to pay $5 billion and to modify its corporate governance to resolve a Federal Trade Commission case alleging that the company violated a 2012 FTC order by deceiving users about their ability to control the privacy of their personal information.

Opioid Marketing Abuses: The British company Reckitt Benckiser agreed to pay more than $1.3 billion to resolve criminal and civil allegations that it engaged in an illicit scheme to increase prescriptions for an opioid addiction treatment called Suboxone.

Wildfire Complicity: Pacific Gas & Electric reached a $1 billion settlement with a group of localities in California to resolve a lawsuit concerning the company’s responsibility for damage caused by major wildfires in 2015, 2017 and 2018. PG&E later agreed to a related $1.7 billion settlement with state regulators.

International Economic Sanctions: Britain’s Standard Chartered Bank agreed to pay a total of more than $900 million in settlements with the U.S. Justice Department, the Treasury Department, the Federal Reserve, the New York Department of Financial Services and the Manhattan District Attorney’s Office concerning alleged violations of economic sanctions in its dealing with Iranian entities.

Emissions Cheating: Fiat Chrysler agreed to pay a civil penalty of $305 million and spend around $200 million more on recalls and repairs to resolve allegations that it installed software on more than 100,000 vehicles to facilitate cheating on emissions control testing.

Foreign Bribery: Walmart agreed to pay $137 million to the Justice Department and $144 million to the Securities and Exchange Commission to resolve alleged violations of the Foreign Corrupt Practices Act in Brazil, China, India and Mexico.

False Claims Act Violations: Walgreens agreed to pay the federal government and the states $269 million to resolve allegations that it improperly billed Medicare, Medicaid, and other federal healthcare programs for hundreds of thousands of insulin pens it knowingly dispensed to program beneficiaries who did not need them.

Price-fixing: StarKist Co. was sentenced to pay a criminal fine of $100 million, the statutory maximum, for its role in a conspiracy to fix prices for canned tuna sold in the United States. StarKist was also sentenced to a 13-month term of probation.

Employment Discrimination: Google’s parent company Alphabet agreed to pay $11 million to settle a class action lawsuit alleging that it engaged in age discrimination in its hiring process.

Investor Protection Violation: State Street Bank and Trust Company agreed to pay over $88 million to the SEC to settle allegations of overcharging mutual funds and other registered investment company clients for expenses related to the firm’s custody of client assets.

Illegal Kickbacks: Mallinckrodt agreed to pay $15 million to resolve claims that Questcor Pharmaceuticals, which it acquired, paid illegal kickbacks to doctors, in the form of lavish dinners and entertainment, to induce them to write prescriptions for the company’s drug H.P. Acthar Gel.

Worker Misclassification: Uber Technologies agreed to pay $20 million to settle a lawsuit alleging that it misclassified drivers as independent contractors to avoid complying with labor protection standards.

Accounting Fraud: KPMG agreed to pay $50 million to the SEC to settle allegations of altering past audit work after receiving stolen information about inspections of the firm that would be conducted by the Public Company Accounting Oversight Board. The SEC also found that numerous KPMG audit professionals cheated on internal training exams by improperly sharing answers and manipulating test results.

Trade Violations: A subsidiary of Univar Inc. agreed to pay the United States $62 million to settle allegations that it violated customs regulations when it imported saccharin that was manufactured in China and transshipped through Taiwan to evade a 329 percent antidumping duty.

Consumer Protection Violation: As part of the settlement of allegations that it engaged in unfair and deceptive practices in connection with a 2017 data breach, Equifax agreed to provide $425 million in consumer relief and pay a $100 million civil penalty to the Consumer Financial Protection Bureau. It also paid $175 million to the states.

Ocean Dumping: Princess Cruise Lines and its parent Carnival Cruises were ordered to pay a $20 million criminal penalty after admitting to violating the terms of their probation in connection with a previous case relating to illegal ocean dumping of oil-contaminated waste.

Additional details on these cases can be found in Violation Tracker, which now contains 397,000 civil and criminal cases with total penalties of $604 billion.

Note: I have just completed a thorough update of the Dirt Diggers Digest Guide to Strategic Corporate Research. I’ve added dozens of new sources (and fixed many outdated links) in all four of the guide’s parts: Key Sources of Company Information; Exploring A Company’s Essential Relationships; Analyzing A Company’s Accountability Record; and Industry-Specific Sources.

De-Enforcement

For the past two years, the Trump Administration has sought to give the impression it is dismantling large parts of the federal regulatory system. The effort is not only wrong-headed – it has largely been unsuccessful. Many of the moves to eliminate rules have been thwarted by court challenges.

Yet the administration has found another way to advance its goal of allowing rogue corporations to operate with much lower levels of oversight: it is reducing the ranks of federal employees whose job it is to enforce the regulations that remain on the books.

A recent overview by the Wall Street Journal found that staffing at the Environmental Protection Agency is down by about half since its height during President Obama’s second term. The Occupational Safety and Health Administration was said to have the fewest workplace inspectors in decades.

Fewer inspectors means fewer inspections and lower levels of penalties imposed for infractions. Last year, Public Citizen and the Corporate Research Project, using data from Violation Tracker, published a report showing how penalty levels were sinking at virtually all the key agencies. The evidence suggests that the trend is continuing.

Some of the staffing decline is due to attrition. Many regulatory agency employees have retired or resigned because they can no longer bear to work to see their mission undermined by the political appointees Trump has installed. More than 700 left the EPA in first 12 months after the administration took office.

Trumpworld is no longer depending entirely on attrition to hollow out the EPA. Now the administration is engaged in a direct attack on the remaining employees at the agency. EPA management has just informed the American Federation of Government Employees, the largest union at the EPA, that it will unilaterally impose changes in working conditions on 9,000 staffers.

The changes, which AFGE is challenging with an unfair labor practice filing, would, among other things, bar employees from telecommuting and would severely limit the amount of time rank-and-file union representatives can spend on grievances and other workplace matters. AFGE reps would also be evicted from the office space at the agency currently being used for union activity. Grievance and arbitration rights themselves would also be put in jeopardy.

The moves by EPA management appear to be an indirect way of implementing harsh policies that Trump tried to implement through executive order last year, but which were blocked by a federal judge. “In the Trump world, there is no bargaining, only ultimatums,” stated Tim Whitehouse, executive director of Public Employees for Environmental Responsibility and a former EPA enforcement attorney. “Under these rules, important safeguards against political purges within the civil service would be removed.”

Trump has received a great deal of deserved criticism for his attacks on federal prosecutors and Congressional oversight, given the corrosive effect on the rule of law. The administration’s actions against staffers at agencies such as the EPA are just as dangerous for our system of regulatory enforcement.

Oligopolies and Regulatory Compliance

There is growing awareness of the dangers posed by Amazon’s ever-increasing market clout, but the concentration of economic power is not limited to that online retailer. More and more U.S. industries have become oligopolies, and in some sectors the top two companies now have a market share in excess of 50 percent.

This concentration is made clear to me each time I revise the parent-subsidiary data in Violation Tracker. In the just-completed quarterly update, which will be posted next week, I had to make adjustments to reflect about three dozen instances in which one of the companies in our universe of some 3,000 parent companies completed the acquisition of another.

Among these deals: the purchase of Aetna by CVS Health, the acquisition of Express Scripts by Cigna, and the purchase of industrial gas giant Praxair by its competitor Linde.

But the one that stood out to me was the acquisition of oil refiner Andeavor by Marathon Petroleum. Andeavor is the name adopted last year by Tesoro, one of the largest petroleum refiners in the country. Over the last two decades it has bought refineries from large corporations such as Shell and BP, and in 2016 it purchased all of Western Refining.

Marathon Petroleum, which was spun off from Marathon Oil in 2011, has grown through previous deals such as the takeover of the infamous BP refinery in Texas City, Texas, the site of a 2005 explosion in which 15 workers were killed.

The marriage of Marathon and Andeavor will create the largest oil refiner in the United States, but at the same time it will join together two companies with very checkered environmental, safety and labor records.

Marathon’s operations, including those previously owned by BP in Texas City, have amassed more than $920 million in penalties, according to Violation Tracker. This total includes a $334 million settlement with the EPA and the Justice Department covering air pollution at refineries in five states, along with two dozen OSHA penalties.

Andeavor has accumulated $467 million in penalties, most of which comes from a single giant settlement with the EPA in 2016. It also has had about two dozen significant OSHA fines.

The combined company’s page in the updated Violation Tracker, which will include other new data, will show a total of nearly $1.4 billion in penalties. This will put Marathon in the dubious club of only a few dozen mega-corporations that have racked up ten-figure totals in Violation Tracker. It will put the company higher on that list than the long-time environmental miscreant Exxon Mobil.

Aside from the economic consequences, growing concentration may also be weakening regulatory compliance. As industries become increasingly dominated by large corporations with a history of breaking the rules, it is likely that those violations will become even more common. That’s another reason to get tough on oligopolies.

Fake Environmental Regulation?

The Trump Administration likes to play with fire. Now it may be playing with a fire-resistant material that is also a deadly carcinogen. After years of receding as a public health threat, asbestos could make a comeback.

When Donald Trump joined his father in the New York real estate business in the late 1960s, the use of asbestos in high-rise construction was widespread. Yet within a few years it was revealed that the substance was highly dangerous for those who mined it, those who processed it and those who applied it. The hazard had actually been known for decades but had been kept secret by companies such as Johns-Manville in one of the most egregious corporate deceptions of the 20^th Century. Paul Brodeur’s 1985 book on the subject was called Outrageous Misconduct.

Asbestos producers and users were hit with tens of thousands of lawsuits, which forced Manville and other companies into bankruptcy. Use of the material was largely eliminated and vast sums were spent to remove existing asbestos from countless buildings.

Donald Trump appears to be ignorant of this history. In 2012 he tweeted his support for asbestos, claiming that if it had been more widely used in the old World Trade Center the Twin Towers would have survived the 9/11 attack. He did not mention that asbestos fibers were present in the dust clouds generated by the disaster and are believed to be among the causes of the high rate of cancer among first responders and Ground Zero workers.

In recent days there have been reports suggesting that Trump’s Environmental Protection Agency might be putting the president’s pro-asbestos sentiments into action. In early July the EPA issued what is known as a significant new use rule (or SNUR), inviting manufacturers to petition the agency to seek approval for asbestos products. An article in Fast Company sounded the alarm, stating that the EPA “has made it easier for companies to begin using asbestos again.”

The EPA is vehemently denying that is the case, insisting that it is actually strengthening asbestos regulation. An agency scientist told CNN that “the SNUR is really a good news story for public health protection.” The argument is that the rule would allow the EPA on a case-by-case basis to impose restrictions that may not currently exist. Unfortunately, it’s true that the United States, unlike many other countries, never fully banned the use of asbestos.

It is difficult to believe that the EPA, which has engaged in a deregulatory frenzy since Trump took office, will suddenly abandon its industry friends and embrace public health considerations in responding to new asbestos proposals.

One industry player, the Russian asbestos producer Uralasbest, apparently does not think so. The company, encouraged by the EPA’s reluctance to push for a total ban on the material, is decorating its shipments with a seal of approval containing Trump’s face and the statement “Approved by Donald Trump, the 45^th President of the United States.”

Bayer and Monsanto: Another Dubious Chemical Industry Marriage

If the chemical industry spent as much time on product safety as it does on corporate restructuring, the world would be a healthier place. In 2015 DuPont spun off a bunch of its operations with tainted environmental and safety records into a new company called Chemours. Then DuPont engineered a merger with its longtime rival Dow Chemical, which had its own checkered history, to form DowDuPont. The combined company is now making more structural adjustments.

More changes are in the works in connection with the recently completed merger of German chemical giant Bayer and Monsanto. This is another case of a marriage between two highly controversial corporations.

Bayer was one of the German companies that combined in the 1920s to form IG Farben, which would go on to use slave labor during the Nazi period and was then split up after the Second World War. The largest of the resulting companies were Bayer, BASF and Hoechst (now part of Sanofi).

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

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

Monsanto, now absorbed into Bayer, was long one of the most hated corporations in the United States, due to the hardball tactics its employed in marketing genetically modified seeds and Roundup herbicides to farmers. It brought aggressive lawsuits against farmers accused of violating its patents. The company somehow managed to avoid antitrust charges, but in 2016 it was fined $80 million by the Securities and Exchange Commission for accounting violations relating to Roundup.

Bayer’s pursuit of Monsanto is part of its effort to brand itself as a life sciences company rather than merely a chemical producer. Its three main divisions are Crop Science, Pharmaceuticals and Consumer Health (the latter being what used to be known as over-the-counter medications such as aspirin, which Bayer is credited with inventing).

Of these, the most problematic is crop science. Bayer, along with DowDuPont and ChemChina (which bought Syngenta), increasingly dominate world markets for seeds, pesticides and related agribusiness products, giving them unprecedented control over the global food supply. This may give us a headache no amount of aspirin can relieve.

Big Polluters and Big Penalties

At a moment when there is all too much talk in Washington about deregulation, a helpful counterpoint has arrived from the Political Economy Research Institute in the form of the latest edition of the Toxic 100, a compilation of the companies responsible for the highest volumes of industrial pollution.

The project, which has been providing this information since 2004, now has rankings on three kinds of pollution: air, water and greenhouse gases. The lists include environmental justice indicators that highlight the disproportionate effect on low-income and minority communities.

The companies on these lists represent some of the biggest threats to the physical well-being of the people of the United States.

The top tier of the air pollution list, which is based on data from the EPA’s Toxics Release Inventory, contains the kind of industrial giants one might expect: DowDuPont, General Electric, Royal Dutch Shell and Arconic (a spinoff of Alcoa). Yet number one is the less well known Zachry Group, an engineering company that operates dirty manufacturing facilities in North Carolina and Texas. Also in the top ten is Berkshire Hathaway by virtue of its ownership of companies such as Johns Manville, Pacificorp and MidAmerican Energy.

The top tier of the greenhouse gas list, based on other EPA data, is dominated by companies operating lots of fossil fuel power plants: Southern Company, Duke Energy, American Electric Power and NRG Energy. These are the companies Trump is aiding with his attack on the Obama Administration’s Clean Power Plan.

Berkshire Hathaway is the only parent company in the top ten on both the air and greenhouse gas lists; it ranks 21^st in water pollution.

I could not resist the temptation to check where the companies that rank high on the Toxic 100 lists show up in Violation Tracker. This is partly because Rich Puchalsky, who serves as the data management specialist for the Toxic 100, has also played an essential role in the construction and expansion of Violation Tracker.

Rich kindly created for me a spreadsheet combining rankings from the two projects. Looking first at the Toxic Air 100, I see there are unsurprising overlaps with the 100 most penalized companies in Violation Tracker—BP, Exxon Mobil, Royal Dutch Shell, Phillips 66, etc. Yet there are some very large air polluters that have faced much smaller penalties, including the Zachry Group cited above and TMS International, a steel industry service company. The EPA should take note.

As for the Greenhouse 100, there are expected overlaps with the Violation Tracker top 100—such as Duke Energy, American Electric Power, FirstEnergy, etc. But there are some discrepancies. Large CO2 emitters such as Energy Future Holdings, Great Plains Energy, and OGE Energy have not received substantial penalties. The EPA might want to check these as well.

Beyond the specifics of individual companies, there is a broader issue here: what is the connection between fines and emissions? Although the releases reported in the Toxic 100 are technically not illegal, those companies are likely to be creating unsanctioned emissions as well. Fines could bring about reductions in both categories. Yet many big polluters treat the penalties as a tolerable cost of doing business and fail to do enough to clean up their facilities. That suggests the need for newer and more effective forms of enforcement. Deregulation is not one of them.

Who Pays the Penalties for Volkswagen’s Crimes?

It’s refreshing to see the book thrown at a corporate criminal, but it would have been even better if federal prosecutors had aimed higher.

Oliver Schmidt, who had once been a mid-level manager at VW’s engineering and environmental office in Michigan, was sentenced to seven years in prison for his role in the company’s long-running scheme to defraud the federal government in diesel emissions testing. The charges against him included conspiracy and violations of the Clean Air Act. He was also fined $400,000.

Schmidt, who was arrested when he foolishly came to the United States for a family vacation, must be pissed off at having to pay such a severe personal price while higher ranking VW officials back in Germany will probably remain unscathed. Appearing at his sentencing hearing in a prison jumpsuit with his wrists shackled, Schmidt admitted culpability and did not point the finger at any company superiors. However, he did not let VW completely off the hook.

In a letter to the judge overseeing his case, Schmidt said he felt “misused” by the company and that he was following VW talking points when he met with a California air pollution official in 2015 and concealed the existence of the software that made the cheating possible.

Schmidt could not have participated in a conspiracy all by himself. Yet the Justice Department does not appear to have tried very hard to land any bigger fish (though at least one person senior to Schmidt is being prosecuted in Germany).

Instead, the DOJ took the typical route of bringing a case against the company as a whole and letting it buy its way out of the entanglement. In 2015 the DOJ, along with the Federal Trade Commission and the State of California, agreed on a civil settlement under which VW had to spend up about $10 billion to compensate customers and $4.7 billion on pollution mitigation.

That was followed by a criminal case in which VW had to pay a $2.8 billion penalty. At least this involved a real criminal plea rather than one of those deferred-prosecution or non-prosecution shams, but it is unclear what consequences VW has faced beyond the payout.

The company is technically on probation and has a compliance monitor, but that will probably not mean much. Even before these cases, the company had already been under federal supervision because of a consent decree stemming from a 2005 case also involving emissions irregularities.

Given the severity of the VW cheating and the fact that it was in effect a repeat offense, the DOJ should have done more to prosecute top executives, and the case against the company itself should have had more than financial consequences.

Whereas strict limitations are placed on the activities of individual felons, VW has been able to go on operating as if the scandal had never happened. A case can be made that the company should have been shut out of the U.S. market, but instead it has been advertising heavily and seeking to regain market share. The main challenge is that it can no longer promote its vehicles under the banner of “clean diesel.” Presumably, VW is working on a new way to deceive the public.

Should Taxpayers Foot the Bill for Rebuilding the Gulf Coast’s Petrochemical Industry?

Much of the Gulf region remains flooded, people are still being rescued, and the full magnitude of the damage is not yet known. But soon the center of attention will be the rebuilding effort and how to pay for it.

Texas Gov. Greg Abbott is talking about the need for a federal aid package well in excess of $100 billion. Whatever the amount turns out to be, the critical issue will be how the money is distributed.

It’s already clear that the petrochemical facilities clustered in southeastern Texas have been hard hit by the flooding, and there will no doubt be calls to use both federal and state financial resources to help repair these plants.

While there should be no hesitation about using public funds to help the people of the Gulf rebuild their lives, we shouldn’t automatically do the same for the petro giants.

The first reason is that these companies can well afford to rebuild on their own dime. Exxon Mobil, which owns the giant refinery in Baytown, earned more than $130 billion in profits during the past five years. The Motiva refinery in Port Arthur, another massive facility, is owned by Aramco, which in turn is owned by the fabulously wealthy government of Saudi Arabia.

Second, taxpayers made enormous financial contributions to the construction and operation of these facilities. As shown in Subsidy Tracker, the Motiva refinery was awarded a $257 million state and local subsidy package in 2006 to help underwrite its expansion. Earlier this year, Exxon and SABIC, another Saudi company, were granted a $460 million package to jointly build a petrochemical plant near Corpus Christi.

Apart from being subsidized, many of the Gulf region’s petrochemical plants have horrible compliance records regarding toxic emissions and worker safety. The most notorious example is the refinery in Texas City between Houston and Galveston that was previously owned by BP and subsequently sold to Marathon Petroleum. In the wake of a 2005 explosion at the facility that killed 15 workers, BP was fined a then record amount of $21 million by OSHA for a pattern of egregious safety violations in Texas City. The company failed to make the necessary corrections and was later hit with an even larger penalty. BP also had to pay nearly $180 million to settle a federal environmental case involving the refinery.

As shown in Violation Tracker, in 2013 Shell Oil had to pay more than $117 million to resolve Clean Air Act violations at its Deer Park refinery outside Houston. The chemical plant in Crosby, Texas owned by the French company Arkema, where flooding has caused explosions, was fined $107,918 earlier this year by OSHA for serious safety violations (company later negotiated a reduction down to $91,724).

Providing more subsidies for these facilities would in effect negate the impact of the penalties the corporations paid for their negligence.

Finally, there is the difficult question of whether all these facilities should be rebuilt at all, especially if taxpayer funds are involved. The Gulf refineries play a significant role in an energy system that exacerbates the climate crisis, which likely contributed to the intensity of Harvey. We may not be free of fossil fuels yet, but does it make sense to use public resources to prolong the life of facilities linked to extreme weather events that threaten our future?