Business and politics

Have Voters Killed the Crappy Coverage Comeback?

Democrats seized the House while Republicans increased their majority in the Senate, but the unambiguous and across-the-board winner in the election was regulation – specifically, regulation of the health insurance industry.

Rarely has the public sent such a clear message that it wanted government to rein in corporations and market forces in favor of consumer and public interest protections. The desire to retain provisions of the Affordable Care Act protecting those with pre-existing conditions was key to Democratic gains. Republicans responded by pretending they agreed with that principle, but few were fooled by this deception.

At the same time, voters in three deep red states – Idaho, Nebraska and Utah – approved ballot initiatives in favor of ACA Medicaid expansion. This amounted to an embrace not just of regulation but of out-and-out government-controlled health coverage.

All these results should put an end to the longstanding Republican crusade to repeal the ACA, but it remains to be seen whether there is also a termination of the Trump Administration’s effort to undermine the law through steps such as allowing wider sale of substandard policies.

One encouraging sign came even before the votes were counted. On November 2 a federal judge in Miami, acting at the request of the Federal Trade Commission, issued an order temporarily shutting down a Florida company called Simple Health Plans LLC, which along with related firms was selling policies the FTC called “predatory” and “worthless.”

The FTC complaint against the companies spells out a variety of deceptive practices meant to make customers think they were buying real coverage when in fact they were getting medical discount memberships of limited value.

It’s telling that one of the websites used by the firms is called Trumpcarequotes.com. Trumpcare is actually an appropriate term for the crappy coverage—both because Trump has been touting such plans and because the Trump name has been involved in previous scams such as Trump University. Let’s not forget that after his election Trump had to pay $25 million to settle litigation related to that venture, a step that the New York State Attorney General called “a major victory for the over 6,000 victims of his fraudulent university.”

The ACA’s provisions relating to protection for pre-existing conditions are inseparable from those setting minimum standards for coverage. Ensuring the right of patients to buy insurance is meaningless if they end up with plans that pay for next to nothing.

The proliferation of junk insurance through the efforts of companies such as Aetna was one of the dismal realities of the U.S. health insurance market that gave rise to the ACA. Republicans have been promoting similar low-cost plans as their solution to the supposed crisis of Obamacare. This is a cynical ploy to use a perverse form of consumerism to restore the old days of limited regulation. Let’s hope the election results have taught them a lesson about the consequences of messing with healthcare.

DOJ is also Defying Trump on Foreign Bribery

Millions of words have been published about Donald Trump’s feud with the Justice Department over the Mueller investigation. Little is being written about another way in which DOJ is thwarting the president’s will: the ongoing prosecution of foreign bribery.

Starting before he became a candidate for the White House, Trump has railed against the Foreign Corrupt Practices Act, the 1977 law that allows for both civil and criminal cases to be brought against officials that engage in bribery and related practices committed anywhere in the world as long as their company does business in or has securities trading in the United States. He continued to complain about FCPA’s supposed unfairness after taking office.

These complaints seem to have had little effect on DOJ or on the Securities and Exchange Commission, which enforces the civil side of the law. Data collected for Violation Tracker, including a forthcoming update, show that since Trump took office DOJ and SEC have announced more than a dozen case resolutions with total penalties of more than $1.5 billion.

Several of those resolutions have been announced during the past two months. In early July DOJ and SEC each announced cases with combined penalties of $76 million against Credit Suisse and one of its subsidiaries for improperly winning banking business by giving jobs to family members and friends of Chinese government officials. Just the other day, the SEC announced that the French pharmaceutical company Sanofi would pay $25 million to resolve allegations that its subsidiaries in Kazakhstan and the Middle East made corrupt payments to win business.

It is true that many of the cases announced under Trump have involved foreign companies. Others include Japan’s Panasonic, Sweden’s Telia, and Canada’s Kinross Gold. Yet the culprits have also included some U.S.-based companies. Last year, for example, Halliburton had to pay $29 million to resolve allegations relating to its actions in Angola. Earlier this year, Dun & Bradstreet paid $9 million in connection with two of its subsidiaries in China. Most recently, investment manager Legg Mason agreed to pay more than $34 million to settle allegations that one of its subsidiaries was involved in a scheme to bribe officials in Libya.

While DOJ and SEC seem to be carrying out their mission of investigating FCPA violations by a wide range of companies, it remains to be seen whether that includes the Trump Organization, which according to various media reports may have corrupt practices act liability in a variety of countries (see, for example, The New Yorker piece on Azerbaijan).

This may be another test of whether Trump – and his business interests – are exempt from the law, but for now it is good to see that Trump has not succeeded in undermining an important tool in prosecuting other corporate bad actors.

Trump’s Law and Order Campaign Skips the Workplace

The Trump Administration has left little doubt that one of its main missions is to roll back the regulatory initiatives of the Obama years, especially the Clean Power Plan and the Consumer Financial Protection Bureau. Although Trump has been less overt about it, his corporate-friendly approach also includes weakening rules that have been around for decades.

An important case in point concerns the Fair Labor Standards Act, the key federal wage and hour law that was signed into law 80 years ago by President Franklin Roosevelt. The culmination of decades of struggle over excessive workweeks, inadequate pay levels and child labor, the FLSA put the federal government in the business of combatting wage theft and other forms of workplace exploitation.

It accomplished that through a system of workplace investigations and the imposition of financial penalties on employers large and small. In a move that has received limited attention, the Trump Labor Department is seeking to replace rigorous enforcement with a system called Payroll Audit Independent Determination (or PAID) that puts employers on the honor system. Beginning with the dubious premise that wage and hour violations mainly derive from inadvertent mistakes made by managers, PAID will encourage employers to report irregularities on their own. When they do they will still have to pay back wages but will not be assessed damages or penalties.

Such a system makes a mockery of real enforcement. What makes matters worse is that PAID, which is being billed as a pilot program for now, is being pursued right after the U.S. Supreme Court’s disastrous Epic Systems ruling. That decision affirms the right of employers to compel workers to sign mandatory arbitration agreements that would severely curtail their ability to bring collective action lawsuits. As my colleagues and I at the Corporate Research Project and Jobs With Justice Education Fund showed in a recent report, these lawsuits have allowed workers to recover billions of dollars from large corporations.

PAID was featured in a recent NBC News feature on how the Trump Administration is relaxing regulatory enforcement in numerous areas. This prompted a group of Democratic Senators to express concern about PAID to the DOL, whose spokesperson responded that it was “premature to comment” on the program.

The controversy over PAID comes amid growing concern about the prevalence of wage theft. Some of those abuses apparently exist right inside the federal government. The Labor Department, which has not yet left the investigation business, is reported to be examining the practices of a company called Seven Hills, which manages the food court at the Pentagon.

Faced with the prospect of diminished DOL enforcement and restrictions on lawsuits, activists are looking to other solutions. Some of the most encouraging work is happening at the local and state levels. For example, Centro de Trabajadores Unidos en la Lucha (Center for Workers United in Struggle) is pressing Minneapolis Mayor Jacob Frey and the City Council to pass an ordinance dealing with wage theft.

In some parts of the country, law enforcement officials are taking the term wage theft literally and treating it as a criminal offense. For example, after a joint investigation by the Washington State Attorney General’s Office and the Department of Labor & Industries, a construction company and its owner pled guilty last month to a criminal charge of first-degree theft. Earlier this month, the New York Attorney General and the Inspector General of the Port Authority announced the arrest of a contractor for failing to pay prevailing wages at a publicly-funded construction project at LaGuardia Airport.

While it would be terrible to see DOL’s wage and hour enforcement system dismantled, there are other ways rogue employers can be brought to justice.

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.”

Corporate Impunity

In the early days of the Trump era, there was speculation that the new administration would be tough on corporate crime. Attorney General Jeff Sessions gave a speech in April 2017 in which he vowed that his Justice Department “will continue to investigate and prosecute corporate fraud and misconduct; bribery; public corruption; organized crime; trade-secret theft; money laundering; securities fraud; government fraud; health care fraud; and Internet fraud, among others.’ He added that DOJ has “a responsibility to protect American consumers.”

A new report from Public Citizen and the Corporate Research Project of Good Jobs First called Corporate Impunity shows just how hollow that promise was. Based on data from Violation Tracker, it shows that during the first year of the Trump Administration there was a substantial drop in regulatory enforcement and prosecution of corporate criminal offenses. In contrast to the zero-tolerance attitude toward migrants and refugees, the administration is showing considerable indulgence when it comes to corporate offenders.

In making a comparison to the previous administration, it is worth recalling the mixed record of the Obama years. That administration had a poor record with regard to holding top corporate executives personally responsible for serious offenses such as the abuses leading to the financial meltdown and the Deepwater Horizon oil spill disaster in the Gulf of Mexico. It continued the misguided policy of offering corporate miscreants deferred-prosecution and non-prosecution agreements.

Yet at least the Obama Administration took steps to increase the financial penalties levied on corporations for their misdeeds. For the first time, billion-dollar fines and settlements became a common occurrence.

Corporate Impunity judges the Trump Administration by that same measure—the level of monetary penalties imposed on companies. It finds, for example, that such penalties imposed by the Trump DOJ in its first year were less than one-tenth the level in each of the last two years of Obama.

The report limits its analysis of regulatory agencies to those which were headed by a Trump appointee for most of 2017. Of the 12 agencies examined, ten showed a decline in the number of enforcement actions. In some cases, those drops were steep. The Federal Trade Commission and the Securities and Exchange Commission had decreases of more than 40 percent, and five others dropped more than 25 percent.

For some agencies, the decline in the number of cases was much less severe than the drop in penalty amounts. At the Environmental Protection Agency, for example, the caseload in Trump’s first year was down 12 percent while the penalty total plunged more than 90 percent.

The results for Trump’s second year are likely to be even more dismal once results are tabulated for agencies such as the Consumer Financial Protection Bureau, which racked up an impressive record during the Obama years and attempted to do the same under Trump until the agency was captured in late 2017 by the White House and subsequently neutered.

Trump’s enforcement record shows that he really is a populist—a corporate populist creating a society in which large companies reign supreme and in many ways are above the law.

Turmoil On the Road to Autarky

Donald Trump got elected in 2016 essentially by promising everything to everyone except immigrants and environmentalists. In the economic realm he vowed to resurrect dying industries such as coal, to achieve trade supremacy over the rest of the world, to dismantle the regulatory state, and to bring about growth rates not seen for decades. Now those corporate executives who sold their soul to Trump are realizing he cannot deliver on all those promises.

This is most apparent with regard to trade. Companies such as Harley-Davidson and General Motors are complaining about the consequences of Trump’s ham-handed use of tariffs, which instead of bringing about concessions from U.S. trading partners are prompting retaliatory moves. A front-page story in the New York Times headlined “Industries in U.S. Feel Undermined by Trade Policies” states: “Even as the president’s pro-business stance is broadly embraced by the corporate community, in some significant cases the very industries that Mr. Trump has vowed to help say that his proposals will actually hurt them.”

This epiphany took a while to happen because most of Trump’s previous dubious initiatives were domestic in nature. Large corporations stood by as the administration and Congressional Republicans went after the Affordable Care Act because the main victims were individuals who did not get employer-sponsored coverage but were not poor enough to qualify for Medicaid. They went along with the tax bill because it enriched them handsomely even as it set the stage for future fiscal distress. They were largely silent as Trump’s plans to rebuild infrastructure and to address the opioid crisis fizzled out.

Yet trade involves other countries, whose leaders and citizens are a lot less in thrall to Trump and don’t seem to take his bullying routine very seriously. Even mild-mannered countries such as Canada are showing plenty of backbone. Meanwhile, countries such as China, which have engaged in unfair practices that should be addressed in a more coherent way, are able to take the moral high ground.

While Trump is not budging, this foreign resistance is starting to close markets and raise costs for a long list of domestic industries. Globalized companies cannot afford to follow Trump on the road to autarky. For some big firms the European market, for instance, is as important or even more important than the domestic one.

Yet it is not clear that Corporate America is willing to stand up to Trump in a major way. Rather than challenge the president directly, they may simply shift investment and sourcing to lessen the impact of the trade barriers. We need not worry too much about GM and Harley.

The problem is that the trade standoff will eventually take its toll on the U.S. economy as a whole, threatening the delicate balance of low unemployment and mild inflation while hastening the arrival of the next recession. And that will hurt Trump’s individual supporters a lot harder than his corporate backers.

The Skullduggery Continues

Donald Trump seems to live in a world in which there is global trade but no foreign direct investment. He recently denounced BMW imports at a South Carolina rally while ignoring the German automaker’s production facility a short distance away in Spartanburg, which has been in operation since 1994.

The president also seems to be less than fully informed when it comes to the foreign operations of U.S. corporations. He has been berating Harley-Davidson for announcing plans to shift some production to Europe to circumvent the tariffs the EU is imposing on selected American products in response to Trump’s trade policies. In his tweet tirade, Trump demand that Harleys “never be built in another country—never.”

In fact, Harley already has offshore production facilities. One of those is in India, which was originally announced in connection with President Obama’s November 2010 trip to that country to promote U.S. commercial interests. Republicans denounced the trip, not because of job offshoring but rather because of exaggerated reports of the cost of the delegation.

Harley initially used the Indian operation to assemble bikes shipped in knocked-down form from U.S. plants, but later it began using locally produced components. In 2012 Harley outsourced much of its IT work to the Indian company Infosys, some of whose employees on the account worked in the U.S. There were reports in 2014 that Harley IT workers were being asked to train Infosys employees on H-1B visas who were replacing them.

The company also has an assembly facility in Brazil and a manufacturing plant in Australia that produces high-finish wheels. In its 10-K filing Harley states: “The motorcycles assembled at the Company’s international facilities have the same authentic look, sound, feel and quality of a motorcycle manufactured by the Company’s U.S. facilities.” Moreover, Harley announced earlier this year that it is shifting some production from a plant in Kansas City to one in Thailand.

The Harley situation is just the latest in a series of tiffs between Trump and large corporations in which it is difficult to support either side. Harley certainly needed to be called out for engaging in more and more offshore outsourcing while continuing to promote an all-American image.

Trump’s criticism of the company, however, is far from coherent. It seems to be based mostly on his feeling that he was personally betrayed by a firm that he touted as a symbol of American greatness. Trump seems to have picked a fight with Harley in the same way he has gone after other companies, starting with Carrier soon after his election. He has done so mainly to burnish has own tough-guy image while in the end failing to extract any real concessions. The same goes for is supposed battles with pharmaceutical producers, aerospace manufacturers, automakers and others.

Trump’s objective is to give the impression he is taking a hard line against big business, while he is actually catering to every desire of corporate America when it comes to regulation and taxes. It is the flip side of his posture toward workers, in which he pretends to be their defender but is in reality undermining employment safeguards and labor rights. How long can the skullduggery continue?

Trump’s War on Workers

Donald Trump’s blue-collar supporters may like what they are seeing on Fox News, but when they arrive at work the MAGA revolution is nowhere to be found. Far from empowering labor, the Trump Administration’s employment policies are heavily skewed toward management.

The aspect of this I’ve been focusing on lately are wage and hour issues. Recently my colleagues and I at the Corporate Research Project and Jobs With Justice published Grand Theft Paycheck, a detailed look at wage theft by large corporations. We found that major employers in a wide range of industries continue to pay out large sums in collective action lawsuits, which indicates that they continue to violate the Fair Labor Standards Act by compelling employees to do off-the-clock work and denying them proper overtime pay.

Such litigation may soon be a thing of the past. There are signs that collective actions are failing in the wake of the U.S. Supreme Court’s Epic Systems ruling, written by Trump nominee Neil Gorsuch, affirming the right of employers to use mandatory arbitration to block group lawsuits. For example, a federal judge in California told a group of Domino’s Pizza drivers that they had to use arbitration rather than litigation to resolve their claims against franchise owners.

At the same time, instead of intensifying enforcement by the Wage and Hour Division, Trump’s Labor Department is promoting a new approach based on corporate self-audits and fewer fines. Allowing employers to operate on the honor system is just another way of weakening enforcement.

A new report from the National Employment Law Project shows that the Trump DOL is also reducing enforcement of workplace safety and health rules. NELP found that OSHA enforcement activity in FY2017 was down compared to the previous year. The decline was even more pronounced during the first five months of FY2018, when the number of enforcement units (the measure used by OSHA) fell by more than 7 percent. This trend is likely to worsen, since NELP notes that the number of OSHA inspectors has been declining.

Federal workers are facing an assault of their own. Trump recently announced plans to overhaul rules affecting more than two million employees, making it easier to discipline and fire them. The move also includes an attack on federal unions through stricter limits on the amount of time grievance officers and other activists can spend on union activity during working hours.

The next blow will come in the Supreme Court, which is expected to issue a decision soon in the Janus case that blocks the ability of public sector unions to collect fees from employees who decline to join but still benefit from collective bargaining agreements and other protections negotiated by those unions. Such a ruling could have a devastating financial impact on public unions.

As bad as all this sounds, it could boomerang on Trump and his corporate allies. More workers may follow the example of the teacher wildcat strikes and put their faith in self-organization rather than a demagogue.

Deep Corporate Conspiracy

Donald Trump and the rightwing fringe never tire of talking about supposed deep state plots. Yet if there is any conspiracy going on, it is the seeming attempt to remove any checks on the power of large corporations.

The latest evidence of this effort can be seen at the banking regulatory agencies and the Supreme Court. Only a decade after a financial crisis brought on by the excesses of the financial sector, the agencies are moving to eliminate the Dodd-Frank restriction on speculative trading practices by the large banks. The attack on the Volcker Rule ignores not only the role such practices played in the meltdown but the fact that the banks have been doing quite well despite the limitation. Last year JPMorgan Chase, for example, posted a profit of more than $24 billion.

Yet even more infuriating is seeing the Supreme Court justice nominated by a purported populist president cast the deciding vote and write the opinion in a ruling that will cripple the ability of workers to use the courts to address abusive employment practices.

The opinion by Justice Gorsuch in the Epic Systems case turns the clock back to a time of near total employer tyranny in the workplace by allowing corporations to mandate that disputes be resolved through the secretive and one-sided process of arbitration rather than class action lawsuits.

The ruling had a special significance for me, given that I have spent the past year doing extensive research about such lawsuits; specifically, wage and hour collective actions designed to combat off-the-clock work, denial of overtime compensation and other forms of wage theft. My colleagues and I will publish a report on the research next week, so I cannot provide the details now. Suffice it to say that the report is going to show that wage theft is a lot more pervasive in big business than is commonly understood.

When I began the research I thought I was documenting legal actions that would continue to be a key tool for addressing employment abuses. Now it may turn out that the report will be mainly of historical interest, describing the way large corporations used to be compelled to pay out substantial sums to compensate workers cheated out of their proper pay.

To make matters worse, the Supreme Court is expected to land another blow against the collective power of workers in its forthcoming ruling in the Janus case concerning public employee unions.

The weakening of regulation, class action litigation and unions provides an unprecedented boost in the ability of big business to call the shots in the workplace and in communities. The massive increase in profitability generated by the Republican tax bill makes large corporations even more mighty.

While this power grab is taking place, many corporations are trying to present themselves as part of the more enlightened sector of society. Walt Disney and Starbucks, for instance, want us to believe they are the anti-racist vanguard. This doesn’t always work: Wells Fargo, Volkswagen and Facebook face an uphill battle. Yet all too many firms have succeeded in projecting a benign image while engaging in corrupt behavior.

There is no easy way to remedy this situation, but we should not let the distractions emanating from the White House make us forget the larger problems.

Novartis and Cohen: Two of a Kind

“Yesterday was not a good day for Novartis.” That’s what the chief executive of the pharmaceutical giant told his staff in the wake of embarrassing reports that it was among a handful of large corporations that made questionable payments to President Trump’s personal fixer Michael Cohen. Novartis, which initially struggled to come up with a plausible explanation for its $1.2 million contract with Cohen, ultimately admitted it was a “mistake.”

If so, it was not quite a honest mistake. Novartis, like the rest of Big Pharma, was unnerved by the seeming populism of Trump on the issue of drug prices. Yet it also apparently realized this was an administration that was susceptible to outside influences, especially if they came via someone like Cohen, who in 2017 seemed to be a much more significant player than he turned out to be.

It should come as no surprise that Novartis would resort to dubious measures to promote its interests, which include getting federal blessing for its leukemia drug Kymriah, which costs nearly $400,000 for a course of treatment.

The Swiss company has a long history of improper behavior. For example, in 2010 it had to pay $422 million to resolve criminal and civil liability arising from charges that it engaged in illegal marketing of its epilepsy drug Trileptal, including the payment of kickbacks to doctors to get them to prescribe the medication for off-label purposes. In 2015 Novartis agreed to pay $390 million to settle a case brought by the U.S. Attorney in Manhattan accusing it of making illegal kickbacks to get specialty pharmacies to recommend two of its drugs, Exjade and Myfortic.

Novartis does not limit its illicit marketing to the United States. In 2016 the Securities and Exchange Commission announced that the company would pay $25 million to settle charges that it violated the Foreign Corrupt Practices Act when its China-based subsidiaries engaged in pay-to-prescribe schemes to increase sales.

While Novartis seems willing to make questionable payments to sell its products or gain regulatory favor, it has been less interested in paying some of its employees what they should have received in compensation. The company will be featured in a report on wage theft my colleagues and I will publish next month.

That’s because of a collective action lawsuit brought on behalf of the company’s sales representatives, who alleged that they were improperly classified as exempt from overtime pay. In 2012 Novartis paid $99 million to settle the suit.

In 2005 a group of women who had worked as sales reps for Novartis in the United States filed a lawsuit saying they were discriminated against in pay and promotions, especially after becoming pregnant. In 2010 a federal jury ruled in favor of the women, awarding them $3.3 million in compensatory damages and $250 million in punitive damages. Novartis appealed and then settled the case for $152 million.

All of this is to say that Novartis had long engaged in less than pristine business practices and got the impression it could go on doing so with the Trump Administration.