Archive for the ‘Government contracting’ 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.

Corporate America’s Government Bonanza

Thursday, November 20th, 2014

moneybagsontherunWe’re taught to believe that government is a system for protecting the country, ensuring justice and helping people pursue happiness. For large corporations, on the other hand, government amounts to a big investment opportunity.

One of the most detailed assessments of the return on that investment has just been produced by the Sunlight Foundation. Not surprisingly, it turns out that the interaction big business has with the public sector is very profitable. What’s amazing is Sunlight’s estimate of the magnitude of those gains.

In its report called Fixed Fortunes, Sunlight takes great pains in estimating both what 200 of the largest and most politically active firms spend on government – in the form of campaign contributions and lobbying expenditures – and what they receive in benefits. Sunlight puts those benefits in two categories: federal business and federal support.

The first includes federal contracts as well as foreign sales enabled by the Export-Import Bank and certain transactions involving commercial banks in the wake of the financial meltdown. Federal support includes grants, loans and loan guarantees as well as other forms of assistance to banks following the meltdown.

Sunlight finds that the 200 companies spent $5.8 billion on political influence during the period from 2007 to 2012 while receiving $1.3 trillion in federal business and $3.2 trillion in federal support. This shows, Sunlight says, that for every dollar spent on influencing federal policy, these corporations received $760 in benefits. And that’s just the average. Some of the big banks got vastly more. Goldman Sachs received about $229 billion in business and support combined, more than 6,000 times what it spent on influence. For Bank of America it was more than 10,000 times. These are rates of return even the most successful hedge funds couldn’t imagine.

In some ways, Sunlight’s benefit numbers are understated, since they do not include the payoff from lobbying for corporate income tax reductions. The report includes figures from Citizens for Tax Justice showing the low effective tax rates most large companies enjoy, but Sunlight does not attempt the probably impossible task of estimating the dollar value of the tax benefits individual companies have gained from their lobbying efforts. Sunlight points out other examples of unquantifiable benefits corporations receive from Uncle Sam, such as those deriving from the artificially low rates charged to petroleum companies for drilling on federal land.

Moreover, Sunlight acknowledges that its estimates apply only at the federal level, though in its summary list of the results for the 200 companies it includes links to the state and local subsidy totals my colleagues and I at Good Jobs First have assembled in our Subsidy Tracker database.

On the other hand, one could take issue with the way in which Sunlight calculates some of the categories of federal support. For loan and loan guarantee programs, for example, it apparently uses the face value of the funding, whereas the actual cost (except in cases of default) is much lower. It would have been helpful if Sunlight had listed the totals derived from each form of assistance; it is not always clear which numbers it used in the underlying spreadsheets it makes available.

Despite these quibbles, Sunlight has performed a great service in documenting the extent to which the federal government functions as a giant ATM for corporate America. We at Good Jobs First will soon be contributing to this effort by extending Subsidy Tracker to the federal level. We’ve been gathering data on many of the same programs examined by Sunlight, plus others, and we will be including entries for all companies, both large and small.

Let’s hope that as more light is shined on the ways government benefits corporations, we can shame elected officials into remembering who it is they are supposed to be serving.

Another Healthcare Website Contractor Mess

Thursday, October 2nd, 2014

big-pharma-pills-and-moneyThe Obama Administration’s struggle with healthcare information technology is once again on display, with the release of the first wave of disclosure mandated by the Affordable Care Act on payments by drug and medical device corporations to doctors and hospitals. These payments include consulting fees, research grants, travel reimbursements and other gifts Big Pharma and Big Devices lavish on healthcare professionals to promote the use of their wares — in other words, what often amount to bribes and kickbacks. The new Open Payments system is said to document 4.4 million payments valued at $3.5 billion for just the last five months of 2013.

This sleazy practice certainly deserves better transparency. Yet in announcing the data release, the Centers for Medicare & Medicaid Services (CMS) seemed to be sanitizing things a bit: “Financial ties among medical manufacturers’ payments and health care providers do not necessarily signal wrongdoing.”

Perhaps, but very often that is exactly what they signal. Let’s not forget that many of the big drugmakers have been prosecuted for making such payments as part of their illegal marketing of products for unapproved (and thus potentially dangerous) purposes. In 2009 Pfizer paid $2.3 billion and Eli Lilly paid $1.4 billion to settle such charges. Novartis consented to a $422 million settlement in 2010. That same year, AstraZeneca had a $520 million settlement. Illegal marketing inducements were among the charges covered in a $3 billion settlement GlaxoSmithKline consented to in 2012. The list goes on.

While the release of the aggregate numbers is useful, there are serious snafus in the rollout of the search engine providing data on specific transactions. As ProPublica is pointing out, the new site is all but unusable for such purposes. It is set up mainly to allow sophisticated users to download the entire dataset, yet even the wonks at ProPublica found that it did not function well in that way either.

Even if one overcomes these obstacles, the ability to analyze financial relationships between corporations and specific healthcare providers is limited by the fact that some 40 percent of the records — accounting for 64 percent of payments– are missing provider identities.

What makes the disappointing Open Payments rollout all the more infuriating is that it is being brought to us by the same infotech contractor, CGI Federal, that was primarily responsible for the much bigger fiasco surrounding the Healthcare.gov enrollment website a year ago. The contractor is part of Canada’s CGI Group, which as I noted in 2013, had a history of performance scandals both in its home country and in the United States.

Problems with the Open Payments site began even before its official public debut. Over the summer, the portion of the site through which providers could register to review the data attributed to them had to be taken offline during a critical period for nearly two weeks to resolve a “technical issue.”

As with Healthcare.gov, it is likely that the government bashers will succeed in putting most of the blame for the shortcomings of the Open Payments system on the CMS. Yet the real lesson of the websites, along with that of the U.S. healthcare as a whole, is that the dependence on for-profit corporations –whether they be pharmaceutical manufacturers, managed care providers or information technology consultants — is always going to generate bloated costs and plenty of inefficiency.

UnitedHealth Group Haunts Obamacare

Thursday, October 31st, 2013

unitedhealth_100121_mnKathleen Sebelius’s “hold me accountable” line at the latest House hearing on the botched rollout of Healthcare.gov was a deft political move. It flummoxed Republican interrogators who expected the HHS Secretary to pass the buck.

Yet the line was dismaying in that it continued the Obama Administration’s practice of deflecting most criticism away from the contractors that were responsible for building the portal, at a cost of hundreds of millions of dollars.

Not only have the contractors been shielded, but one of those at the center of the debacle was just chosen to head up the rescue of the project. In the world of government outsourcing, failure is no impediment to getting rehired with even more responsibility.

The anointed company is QSSI, previously an obscure player in the world of healthcare IT. What makes the kid-glove treatment of this firm all the more galling is that QSSI is owned by UnitedHealth Group, also the parent of UnitedHealthcare, one of the two behemoths (the other is WellPoint) of the private health insurance industry.

In other words, one of the large corporations that the Affordable Care Act is propping up (despite their abysmal record) is now profiting from cleaning up the mess that one of its unit caused in trying to create a system designed to help people enroll in plans sold by its own parent company and its competitors.

If this were not bizarre enough, it is worth recalling that this is not the first time a UnitedHealth subsidiary has been involved in a scandal involving a healthcare database. In 2008 the company’s Ingenix unit was the target of allegations that its tool for determining how much patients should be reimbursed for out-of-network medical expenses was seriously flawed. Then-New York Attorney General Andrew Cuomo brought suit against UnitedHealth, calling the widely used Ingenix database part of a scheme to “to deceive and defraud consumers.”

In 2009 UnitedHealth settled with Cuomo by agreeing to spend $50 million to build a new database and then agreed to pay $350 million to settle class action lawsuits that had brought over the issue. Ingenix subsequently changed its name to Optuminsight, which by the way is now the parent of QSSI.

Another UnitedHealth subsidiary, Lewin Group, has generated controversy of another sort: presenting itself as an impartial healthcare consulting company when it is part of a corporation with a big vested interest in the policy options Lewin evaluates. During the Congressional deliberations over healthcare reform in 2009 Lewin produced analyses concluding that the adoption of a public option would result in a mass exodus from private plans and jeopardize their future. A Lewin executive made the alarmist statement that the private insurance industry “might just fizzle out altogether” and helped to sway lawmakers to omit the option from the Affordable Care Act. Like QSSI, the Lewin Group is a unit of Optuminsight.

UnitedHealth is also tied to what is emerging as the new focus of anti-Obamacare rage: reports that insurance companies are cancelling large numbers of policies. This is being portrayed as a betrayal of Obama’s earlier promise that people with coverage would be able to keep it. Yet what is really going on is that insurers are complying with provisions of the ACA that bar them from continuing to sell substandard policies.

Those policies—with huge deductibles and big holes in coverage—were sold not only by fly-by-night companies. Aetna, for example, was pushing these bare-bones plans as early as 1999. UnitedHealth Group made a big push into this market in 2003 when it acquired Golden Rule Financial, which specialized in low-cost individual plans, for $500 million. The spread of such policies was one of the main justifications for healthcare reform.

The repeated appearances of UnitedHealth subsidiaries amid the tribulations of the ACA are reminders that the Obama Administration made a Faustian bargain with the private sector in designing healthcare reform. The question now is whether it can reclaim its soul.

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

The Outsourcing Customer is Always Wrong

Thursday, October 24th, 2013
Image from OptumInsight website

Image from OptumInsight website

The corporate executives who testified at a House hearing on the botched rollout of the federal healthcare portal apparently sprayed themselves with Teflon before heading to Capitol Hill. Blame for the fiasco did not stick to these contractors as Republican members of the Energy & Commerce Committee sought to implicate the Obama Administration and the Democrats focused on defending the Affordable Care Act.

Representatives from four contractors — CGI Federal, QSSI, Serco and Equifax — took advantage of the situation by denying any serious shortcomings on their part. In fact, they each claimed that their individual pieces of Healthcare.gov were working fine and claimed to be puzzled as to why the overall system was not working properly. When pressed, they implied that the federal agency that had commissioned their work — the Centers for Medicare and Medicaid Services — had not given them adequate time for testing. In other words, they acted as if they were innocent bystanders at someone else’s train wreck.

Yet these were companies that received the lion’s share of the lucrative contracts awarded by CMS for the creation of the federal portal. CGI and QSSI alone received a total of $143 million. They were not the people who delivered the Chinese food or emptied the wastebaskets while the real work was being done by others.

These contractors present themselves quite differently when touting their services. On its website, CGI brags: “With deep experience in developing and integrating business, clinical and IT solutions for public and private sector health organizations across Europe and North America, CGI helps clients anticipate challenges and achieve real transformation.” Speaking specifically about health insurance exchanges (HIX), the site says: “Because exchanges must provide many different functions, the soundest approaches bring together expertise and best practices in federal and state health programs, commercial insurance, data exchange, portals, e-commerce over the cloud, and financial management. CGI brings all of this expertise to the table, along with direct experience in developing sustainable HIX programs.”

Similar boasts are made by QSSI, which stands for Quality Software Services Inc.: “Bringing together the most talented personnel in the industry, QSSI collaborates with both the public sector and private sector to maximize performance and create sustainable value for our customers.” The website of QSSI’s parent OptumInsight declares: “We’re making the most of our leadership position in health and human services technology by helping to transform government agencies into efficient, cost-effective programs with decision support, informatics, and program analysis.”

There is a special irony in the presence of QSSI and OptumInsight at the center of this scandal. OptumInsight, which purchased QSSI last year, is a unit of UnitedHealth Group, whose UnitedHealthcare unit is one of the country’s largest health insurance providers.

In other words, one of the for-profit insurers that the Affordable Care Act went to such great lengths to preserve — despite their countless abuses — is closely linked to the mess surrounding the web portal that is supposed to help people in 36 states sign up for the coverage that it and its counterparts will provide.

Last year Iowa Sen. Chuck Grassley and House Energy Chair Fred Upton, both Republicans, raised questions about potential conflicts of interest in the wake of UnitedHealth’s purchase of QSSI, but that issue seems to have been forgotten in the quest to blame the Obama Administration for all the ills of Healthcare.gov. Also largely overlooked is the fact that the Inspector General of the Department of Health and Human Services has criticized QSSI, whose employees have access to sensitive information on individuals, for not sufficiently implementing CMS security protocols with regard to thumb drives.

In his testimony before the House Energy committee, Andrew Slavitt of QSSI’s parent company, said: “We do understand the frustration many people have felt since Healthcare.gov was launched,” yet he in effect denied any responsibility for causing that frustration.

So it goes in the world of outsourcing: the customer is always wrong and the company, whatever its shortcomings, gets off scot free.

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.

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.

Stealth Disclosure

Thursday, August 12th, 2010

The Congressional practice of quietly attaching an unrelated provision to a larger piece of legislation at the last minute has all too often been used to benefit powerful corporate interests. In two recent cases, however, the stealth amendment process has resulted in changes that will make it easier to monitor questionable business practices by energy companies and federal contractors.

Extractive industries are complaining about language (Section 1504) slipped into the new financial reform bill that will require them to report on royalties and other payments to governments. The aim is to make it harder for those corporations to conceal bribes and other illegal transfers used to obtain petroleum or mining concessions and that often prop up corrupt regimes such as the one in Equatorial Guinea. The provision, based on a bill that had been introduced by Senators Benjamin Cardin of Maryland and Richard Lugar of Indiana, applies to publicly traded oil, gas and mining companies whose shares trade in the United States.

The law is a victory for groups such as Publish What You Pay, which has long campaigned to increase the transparency of energy corporation dealings with governments around the world. The campaign has already succeeded in getting some firms to disclose the information voluntarily, but it will be much better to have it mandated and overseen by the Securities and Exchange Commission, which will write rules covering the inclusion of the information in financial statements.

That’s why trade associations such as the American Petroleum Institute and companies such as Exxon Mobil are grousing about the law. An API spokesperson told the Wall Street Journal that Russian and Chinese oil companies not subject to the requirement “could use the data to outfox U.S. companies in deals.”

Dubious complaints are also being heard from Beltway Bandit mouthpieces in response to a swift move by Sen. Bernie Sanders of Vermont to insert a provision in the recently passed supplemental appropriations bill giving the public access to a database about contractor performance – which in many cases means contractor misconduct.

The database is the Federal Awardee Performance and Integrity Information System (FAPIIS), which was mandated as a result of 2008 legislation enacted thanks to the efforts of groups such as the Project On Government Oversight (POGO), which has its own Federal Contractor Misconduct Database covering the 100 companies doing the most business with Uncle Sam. FAPIIS is supposed to make it easier for federal agencies to review the track record of a much wider range of companies bidding on new contracts worth $500,000 or more. In addition to contract performance information collected from various federal sources, FASPIIS includes data submitted by companies with more than $10 million in contracts or grants on any criminal, civil or administrative proceedings brought against them during the previous three years.

FAPIIS was an important step forward, but it was able to get through Congress only after its sponsors agreed to restrict access to the database. POGO tested the provision by filing a FOIA request with the Pentagon for its FAPIIS information but was shot down.

A short time later, however, it came to light that the Sanders amendment survived in the supplemental spending bill President Obama signed on July 29. The provision will give the public access to FAPIIS information about contractor track records, but unfortunately it excludes past contract performance reviews by federal agencies.

Already, the Professional Services Council, the leading trade association of federal contractors, is warning that making parts of FAPIIS public “could create a politically motivated blacklist of vendors.” The PSC seems to believe that the public should not have the ability to pressure the federal government to stop doing business with crooked companies.

Speaking of blacklists, the FAPIIS change comes on the heels of an announcement by the Obama Administration that it is creating a master Do Not Pay database covering individuals and businesses that should not be receiving payments from federal agencies. At a time of growing hysteria about the federal deficit, it is good to see that attention is being paid to ways of cutting costs that are truly wasteful.

ARRA as a Corporate Rescue Plan

Thursday, February 18th, 2010

A war of words is raging over the impact of the Obama Administration’s $787 billion stimulus program, which is now one-year old. Conservative members of Congress are mounting a relentless assault on what they see as an abject failure, even as many of them unabashedly promote and at least implicitly take credit for individual American Recovery and Reinvestment Act (ARRA) projects in their home districts.

Meanwhile, the office of Vice President Joe Biden has issued a report insisting that ARRA has created or saved 2 million jobs and has brought many states back from the brink of fiscal disaster. The stimulus effort, Biden insists, “is going well.”

The debate boils down to an age-old disagreement between those opposed to allegedly wasteful social spending and those who believe government has to reinforce the social safety net during a time of economic distress.

Both sides are ignoring the fact that ARRA, to a significant degree, is a rescue plan not just for unemployed workers and struggling state governments, but also for parts of corporate America. This goes far beyond the roughly $50 billion in business tax breaks that Republicans last year insisted be part of the plan.

The Recovery Act represents a big step in the direction of what was once called industrial policy. Billions of ARRA dollars are being used by the federal government to encourage the development of new industries in areas such as renewable energy and health information technology that are seen as the foundation of future economic growth. Billions more are being spent on traditional procurement contracts to boost private-sector activity.

Here are some examples of larger injections of ARRA funds going directly to the corporate sector:

ADVANCED ENERGY MANUFACTURING TAX CREDITS

Hemlock Semiconductor, a joint venture of Dow Corning (itself a joint venture of Dow Chemical and Corning Inc.) and two Japanese companies: $141 million for the production in Michigan of polycrystalline silicon used in solar panels.

Wacker Polysilicon North America LLC, a subsidiary of the German chemical company Wacker Chemie: $128 million for a plant in Tennessee that will produce polysilicon for solar cells.

United Technologies Corporation, the big military contractor: $110 million for new equipment at its Pratt & Whitney plants to help produce more energy-efficient jet engines.

Alstom, the big French power and transportation equipment firm: $63 million for a Tennessee facility that will produce the world’s largest steam turbines for nuclear power plants.

GRANTS FOR DEVELOPMENT OF ADVANCED BATTERIES FOR ELECTRIC VEHICLES

Johnson Controls: $299 million for work on nickel-cobalt-metal battery cells

A123 Systems Inc.: $249 million for work on nano-iron phosphate cathode powder and electrode coatings.

General Motors: $105 million for production of high-volume battery packs for the GM Volt.

“CLEAN” COAL POWER INITIATIVE

American Electric Power Company: $334 million for the development of a chilled ammonia process to capture CO2 at a power plant in West Virginia.

Southern Company Services: $295 million for the retrofitting of a CO2 capture installation at a coal-fired power plant in Alabama.

BROADBAND EXPANSION

ION HoldCo LLC, a partnership led by Sovernet Communications: a $39 million grant to expand fiber-optic broadband in rural areas of upstate New York.

Biddeford Internet Corp. (dba GWI): a $25 million grant to extend a fiber-optic network to rural and disadvantaged parts of Maine.

ENERGY LOAN GUARANTEES

Solyndra Inc.: a $535 million loan guarantee to support the construction of a commercial-scale manufacturing facility for cylindrical solar photovoltaic panels.

PROCUREMENT CONTRACTS

Lockheed Martin: $165 million to work on the crew vehicle for NASA’s Project Orion.

Clark Construction Group: $152 million to design and build a new headquarters for the U.S. Coast Guard in Washington, DC.

General Motors: $104 million to supply light trucks, station wagons and alternative fuel vehicles to the General Services Administration.

GlaxoSmithKline: $62 million from the Department of Health and Human Services to do research on the H1N1 flu vaccine.

To this list can be added the thousands of contracts that states have awarded to private companies to carry out ARRA-funded activities such as highway repair, school construction and environmental remediation.

It is surprising that there has been so little debate on the relative merits of all these projects and programs – as well as on the wisdom of providing direct subsidies to profit-making entities. Are these grants, contracts, tax credits and loan guarantees a smart investment in the future or nothing more than business boondoggles?

With a significant portion of the Recovery Act going to aid corporations, we also have a right to ask why they are not creating more jobs with the taxpayer funds they have received. It would also be helpful to know – though the limitations of ARRA data collection make this difficult – how good are the jobs that have been created (in terms of wages and benefits) and whether those jobs are being equitably distributed among different portions of the population.

If we are ever going to reach any meaningful conclusions about the whole stimulus endeavor, we’ve got to go beyond tired debates about Big Government versus the Free Market. Like the bailout of the banks and the auto companies, ARRA is changing the relationship between the public and private sectors. Now we need to know whether the new arrangement is working and who is reaping the benefits.