Corporate Crime

The Price Fix Is Still In

Free market ideologues love to quote Adam Smith, but one passage from The Wealth of Nations that they tend to downplay is Smith’s observation that “People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices.”

Americans today tend to think of price-fixing as a characteristic of the age of the Robber Barons and something that was dealt with by the Progressive movement. It is true that many anti-competitive practices were outlawed by the 1890 Sherman Act and the 1914 Clayton Act, but those laws did not put an end to attempts by corporations and their executives to keep prices artificially high.

Subsequent decades saw major revelations about price-fixing cartels, such as the big electrical equipment industry conspiracy of the 1950s and early 1960s in which companies such as General Electric were implicated. The 1990s saw, for example, the revelation of a conspiracy by companies such as Archer Daniels Midland to fix the price of the animal feed additive lysine. Unfortunately, what many people may recall of that case has now been colored by the comic way it was depicted in Steven Soderbergh’s 2009 film The Informant!

A spate of recent cases shows that, even at a time of purported hyper-competition, price-fixing conspiracies are still with us:

Furukawa Electric Co. Ltd. just agreed to plead guilty and pay a $200 million fine to the Justice Department for its role in a criminal price-fixing and bid-rigging conspiracy involving the sale of parts to automobile manufacturers. Three Furukawa executives, who are Japanese nationals, agreed to plead guilty and serve prison time in the United States ranging from one year to 18 months.

Former executives from Panasonic, Whirlpool and Tecumseh Products were recently indicted in federal court on charges that they conspired to fix the prices of refrigerant compressors. Earlier, Panasonic and a Whirlpool subsidiary pleaded guilty to related charges and were sentenced to pay a combined fine of $140 million.

Another Japanese company, Bridgestone, agreed recently to plead guilty and pay a $28 million criminal fine to the Justice Department for its role in conspiracies to rig bids and to make corrupt payments to foreign government officials in Latin America related to the sale of marine hose and other products.

More than a dozen carriers, including Singapore Airlines, have been caught up in an investigation of a conspiracy to fix air freight prices for shipments going to and from the United States.

Although Asian companies seem to have predilection for price-fixing, U.S. firms are not immune. During recent months the Justice Department has obtained guilty pleas from domestic firms such as aftermarket automobile light distributors in California and ready-mix concrete companies in Iowa.

As in the refrigerant compressor case cited above and the 1990s lysine case, U.S. firms often join with their foreign “competitors” in the conspiracies. The big European paraffin cartel that came to light in 2008 involved secret meetings at a moat-ringed French chateau with representatives of ExxonMobil, Royal Dutch Shell, Repsol of Spain and Sasol of South Africa. European antitrust officials fined Procter & Gamble along with Unilever earlier this year for fixing prices of laundry detergent.

At a time of modest inflation, including falling prices for some popular electronic products, it may be tempting to brush aside price-fixing as an insignificant problem. The fact that the conspiracies often involve industrial components means that consumers do not readily see the effects of anti-competitive practices.

Price-fixing does have an impact. A survey by John M. Connor of Purdue University found that over the long run price-fixing cartels result in overcharges of more than 20 percent.

The fact that price-fixing is still a frequent occurrence is yet another rebuttal to those libertarian and laissez-faire types who insist that government regulation of business is unnecessary and counter-productive. We can’t forget the lesson learned by the Progressive movement more than a century ago: Left to their own devices, large corporations will not act in the public interest and will even undermine the very principle of competition on which capitalism is supposed to be based.

Billionaires, Blowhards and Bribery

The bond between David Koch and Scott Walker is not the only relationship between a reactionary billionaire and a rightwing politician contaminating the U.S. political scene. Attention also needs to be paid to what’s going on between Sheldon Adelson and Newt Gingrich.

Adelson — the fifth wealthiest person in the United States, with a net worth estimated by Forbes at $23 billion — has made a major bet on Gingrich. Since 2006 he has contributed $7 million to Gingrich’s fundraising entity American Solutions for Winning the Future. Through this 527 vehicle (and a regular political action committee with the same name), Gingrich is raking in loads of cash as he teases the country about whether he plans to run for President while mouthing off with a variety of reckless policy pronouncements.

The American Solutions website has a section labeled Corruption. In January a post there announced a new feature called Corrupt Report that was supposed to monitor news of misbehavior “regardless of political party.” Somehow the site has failed to cover the recent disclosure by Adelson’s company, Las Vegas Sands, that it is being investigated by both the Securities and Exchange Commission and the U.S. Justice Department for possible violations of the Foreign Corrupt Practices Act. The Nevada Gaming Control Board is also said to be looking into the matter.

The investigations presumably involved Adelson’s four casinos in Asia — three in China-controlled Macao and one in Singapore — where Las Vegas Sands has branched out from its U.S. gambling operations.

It will be interesting to see how a gambling-related bribery scandal affects the political prospects of Gingrich, who already has the burden of reconciling his “family values” rhetoric with the fact that he has been twice divorced.

Adelson’s support for Gingrich is far from his only foray into conservative politics. Like a number of other billionaires, he seems to have built his reactionary views on a foundation of anti-union animus. This began in the late 1990s, after Adelson purchased the Sands hotel and casino in Las Vegas — the former hangout of Frank Sinatra and the Rat Pack — and tore it down to make way for the gargantuan Venetian gambling emporium.

The Sands had been a unionized operation, but Adelson refused to recognize the Culinary Workers at the Venetian. When union supporters picketed in front of the casino, he tried to have them arrested, setting off a legal battle that lasted for a decade. More recently, Adelson was an outspoken foe of the Employee Free Choice Act, and today the Las Vegas Sands brags in its 10-K filing that none of the workers at its casinos are covered by collective bargaining agreements.

In 2007 Adelson founded Freedom’s Watch, an advocacy group that tried to build support for the Bush Administration’s surge strategy in Iraq, beat the drum on what it called the “Iranian Threat” and which in 2008 was being touted as the right’s answer to MoveOn.org — a claim that somehow missed the distinction between a group funded by large numbers of small contributions and one bankrolled mostly by a single multi-billionaire. Despite that money, Freedom’s Watch was a short-lived flop.

Adelson also became active in Israel, where he started a conservative newspaper and became a leading backer of rightwing politicians, especially Prime Minister Benjamin Netanyahu. He has also been an apologist for the repressive Chinese government, which allowed him to build his lucrative casinos in Macao.

At times Adelson has been called the Right’s answer to George Soros. The difference is that Adelson’s political views serve his financial self-interest, especially when it comes to paying taxes. According to a 2008 profile of the gambling magnate in The New Yorker, Adelson once said to an associate: “Why is it fair that I should be paying a higher percentage of taxes than anyone else?”

It’s amazing that Adelson, whose only higher education came from a stint at the tuition-free City College of New York, can forget that progressive taxation (or what’s left of it) is what pays for the public institutions and infrastructure that help people like him succeed.

Even more dismaying than billionaires’ deluding themselves into thinking that they are completely self-made is the fact that they can now use large amounts of their undertaxed wealth to promote policies that make life ever more harsh for the rest of us.

An Indictment of the Financial Sector

The purpose of the traditional blue-ribbon government panel has to been to study a serious problem and issue a report with vague explanations of causes and mushy policy prescriptions. The new report from the federal government’s Financial Crisis Inquiry Commission is a refreshing exception to the rule.

In the place of such nebulous prose, the 600-page-plus document is filled with pointed analyses of who did what wrong when. In other words, it names names. The FCIC acknowledges that it needed to delve into arcane subjects such as securitization and derivatives, but the report’s preface states:

To bring these subjects out of the realm of the abstract, we conducted case study investigations of specific financial firms—and in many cases specific facets of these institutions—that played pivotal roles. Those institutions included American International Group (AIG), Bear Stearns, Citigroup, Countrywide Financial, Fannie Mae, Goldman Sachs, Lehman Brothers, Merrill Lynch, Moody’s, and Wachovia. We looked more generally at the roles and actions of scores of other companies.

To get a sense of the scope of the rogues’ gallery of financial players, take a look at the report’s index, which, interestingly, is not in the official PDF but can be found on the website of the publisher that is issuing the commercial version. There are dozens of entries for specific firms and even more for specific individuals. Goldman Sachs and Lehman Brothers, for instance, each have listings for about 40 different pages.

The FCIC does not just mention names; it assigns responsibility and soundly rejects the notion—expressed at commission hearings by major financial industry executives—that the crisis came as a complete surprise:

The crisis was the result of human action and inaction, not of Mother Nature or computer models gone haywire. The captains of finance and the public stewards of our financial system ignored warnings and failed to question, understand, and manage evolving risks within a system essential to the well-being of the American public.

It is satisfying that the report acknowledges the culpability of figures in both the private and the public spheres. Along with Wall Street villains, it fingers government institutions and officials, especially those with regulatory responsibilities:

The sentries were not at their posts, in no small part due to the widely accepted faith in the self-correcting nature of the markets and the ability of financial institutions to effectively police themselves. More than 30 years of deregulation and reliance on self-regulation by financial institutions, championed by former Federal Reserve chairman Alan Greenspan and others, supported by successive administrations and Congresses, and actively pushed by the powerful financial industry at every turn, had stripped away key safeguards, which could have helped avoid catastrophe.

Figures such as current Fed Chairman Ben Bernanke, former Treasury Secretary Henry Paulson and former SEC chair Christopher Cox are singled out for making misleading statements in 2008 about the gravity of the situation just before the crisis erupted. The report goes on to state:

Our examination revealed stunning instances of governance breakdowns and irresponsibility. You will read, among other things, about AIG senior management’s ignorance of the terms and risks of the company’s $79 billion derivatives exposure to mortgage-related securities; Fannie Mae’s quest for bigger market share, profits, and bonuses, which led it to ramp up its exposure to risky loans and securities as the housing market was peaking; and the costly surprise when Merrill Lynch’s top management realized that the company held $55 billion in “super-senior” and supposedly “super-safe” mortgage-related securities that resulted in billions of dollars in losses.

Finding that “a combination of excessive borrowing, risky investments, and lack of transparency put the financial system on a collision course with crisis,” the FCIC cites the high leverage ratios at the leading investment banks and the fact that “the leverage was often hidden—in derivatives positions, in off-balance-sheet entities, and through ‘window dressing’ of financial reports available to the investing public.”

The report continues: “When the housing and mortgage markets cratered, the lack of transparency, the extraordinary debt loads, the short-term loans, and the risky assets all came home to roost. What resulted was panic. We had reaped what we had sown.” One chapter, covering the explosion of risky financial instruments such as collateralized debt obligations is entitled “The Madness.”

Perhaps most damning is the FCIC’s finding of a “systemic breakdown in accountability and ethics” that “stretched from the ground level to the corporate suites.” For example, the report cites the case of the subprime lender Countrywide (later taken over by Bank of America):

As early as September 2004, Countrywide executives recognized that many of the loans they were originating could result in “catastrophic consequences.” Less than a year later, they noted that certain high-risk loans they were making could result not only in foreclosures but also in “financial and reputational catastrophe” for the firm. But they did not stop.

All in all, the FCIC report paints an incriminating picture of the U.S. financial industry as well as the government regulators and private entities such as credit rating agencies that are supposed to put some checks on the unbridled pursuit of profit. In fact, the document in many ways reads like a criminal indictment. We would all be better off if some actual prosecutors pursued these leads.

Note: The report, dominated by a section of more than 400 pages endorsed by a majority of commissioners, also contains a 125-page dissent from the minority as well as 80 pages of endnotes. But that’s not all. The document indicates that it is not the sole repository of what the FCIC found:

A website—www.fcic.gov—will host a wealth of information beyond what could be presented here. It will contain a stockpile of materials—including documents and emails, video of the Commission’s public hearings, testimony, and supporting research—that can be studied for years to come. Much of what is footnoted in this report can be found on the website.

A critical researcher’s dream.

It’s Not Paranoia if Dow Chemical Really is Breaking Into Your Office

Wall Street has been in a state of high alert over reports that the next big document dump by the transparency extremists at WikiLeaks will concern a major U.S. bank. The stock price of Bank of America recently plunged for a while on speculation that it was the target.

Yet the bigger espionage story of recent days is one in which a major U.S. corporation is alleged to be the culprit rather than the victim. Greenpeace has just filed a racketeering complaint in DC federal court alleging that Dow Chemical and a smaller chemical company – a North American subsidiary of South Africa’s Sasol Ltd. – conspired with a leading public relations firm, Ketchum Inc., and a smaller pr outfit called Dezenhall Resources Ltd., to spy on Greenpeace.

This is said to have occurred from 1998 to 2000, a period when Greenpeace was campaigning against the dioxin risks created by manufacturing facilities such as those run by Dow and Sasol North America, which at the time was known as CONDEA Vista and was owned by the German energy giant RWE.

What’s the big deal, you might ask. Don’t environmental groups monitor big corporations all the time? In fact, the web page on which Greenpeace presents its materials about the lawsuit contains a prominent link to its archive of its corporate investigations. Shouldn’t companies be able to keep tabs on their opponents?

The difference between what Greenpeace does and what Dow et al. allegedly did is the small matter of adherence to the law. The defendants are accused not of using legitimate information-gathering techniques but rather of engaging in illegal activities such as trespass, invasion of privacy, conversion (a form of theft) of confidential documents – even misappropriation of Greenpeace’s “trade secrets.”

The complaint alleges these firms hired private security consultant Beckett Brown International (BBI; later known as S2I Corporation) to do their dirty work. The now defunct BBI, at the time run and staffed by former employees of the Secret Service and federal intelligence agencies, is said to have hired subcontractors who broke all kinds of laws to get at internal information about the operations, strategic plans and finances of Greenpeace and apparently a number of other groups such as Friends of the Earth and the Center for Food Safety. Prominent environmental activists allied with Greenpeace, such as the legendary Lois Gibbs, are also said to have been spied on.

One of the most troubling allegations in the complaint is that BBI employed off-duty DC police officers to gain access to private premises (including locked areas in which Greenpeace kept its trash and recycling materials before they were collected) by showing their badges as if they were on official business. Greenpeace says it has recovered more than 1,000 pages of its internal documents – a fraction, it says, of what was taken. Greenpeace alleges that most of the papers came not from BBI incursions against its dumpsters but rather from direct break-ins at the group’s DC offices. Electronic surveillance is also charged.

BBI apparently did not have much of a reputation to protect, but the case is presumably a significant setback for Dezenhall Resources, which calls itself “the nation’s leading high-stakes communications consultancy.” Its principal Eric Dezenhall, a White House staffer during the Reagan Administration, has written several books (fiction and non-fiction) and frequently publishes commentaries in the Huffington Post and the Daily Beast. He helped Forbes compile its list of the year’s biggest corporate blunders.

Having worked for clients such as Michael Jackson and Enron executive Jeffrey Skilling, Dezenhall fancies himself a pr gunslinger; others have called him the “pit bull” of public relations. Now that he is on the hot seat himself, Dezenhall seems less inclined to take the offensive. When the Washington Post contacted him about the Greenpeace suit, his response was “no comment.”

That was also the response of spokespeople for Dow Chemical, Sasol and Ketchum. Dow, of course, has been no stranger to controversy from its role as a producer of napalm and Agent Orange during the Vietnam War to its refusal to adequately compensate the victims of the Bhopal tragedy after taking over Union Carbide. Just think of all the juicy secrets that would come out if WikiLeaks ever got hold of its archives. But for now the Greenpeace suit is shedding light on an egregious case of corporate misconduct.

The Corporate Crime PAC

Election day is upon us, but more than five million American citizens will not be able to go to the polls because they have been convicted of a felony and thus stripped of their voting rights. Yet there is another group of felons and other malefactors whose participation in the electoral process has been enhanced rather than curtailed: corporate criminals.

Corporations vote with their dollars, and thanks to the Supreme Court’s Citizens United ruling, they have more influence in elections than ever before. That includes corporations that have been convicted of crimes or regulatory violations, settled similar charges without admitting guilt or otherwise run afoul of the law.

Here are some of the leading corporate criminals that are active participants in the electoral process. The figures on their political spending are no doubt understated, given the various ways that companies can now invest in elections and keep it secret.

BP

Leaving aside this year’s disaster in the Gulf of Mexico, for which BP has not yet faced court action, in 2007 the British oil giant and some of its subsidiaries paid $370 million in fines and restitution for environmental criminal violations stemming from a fatal fire at a Texas refinery in 2005 and leaks of crude oil from its pipelines in Alaska. BP Products North America and British Petroleum Exploration (Alaska) Inc. were put on probation for three years.

In the current electoral cycle, according to the Open Secrets website, BP’s political action committee has spent more than $300,000.

Goldman Sachs

In July, Goldman Sachs paid $550 million to settle federal charges that it misled investors in connection with subprime mortgage securities.

In the current electoral cycle, the Goldman Sachs PAC has spent more than $850,000.

GlaxoSmithKline

British drug giant GlaxoSmithKline and a subsidiary together recently agreed to pay $750 million to settle criminal and civil charges relating to the knowing sale of contaminated and ineffective products.

In the current electoral cycle, the GlaxoSmithKline PAC has spent more than $1.5 million.

Hewlett-Packard

In August, Hewlett-Packard paid $55 million to settle charges that it paid kickbacks to win U.S. government business.

In the current electoral cycle, the Hewlett-Packard PAC has spent more than $350,000.

American Airlines

Also in August, the Federal Aviation Administration charged American Airlines with multiple maintenance violations and proposed a record fine of $24.2 million.

In the current electoral cycle, the American Airlines PAC has spent more than $550,000.

Dell

In July the computer maker Dell agreed to pay more than $100 million in penalties to settle charges of failing to disclose material information to investors and using fraudulent accounting methods.

In the current electoral cycle, the Dell PAC has spent more than $160,000.

Citigroup

In July, Citigroup paid $75 million to settle federal charges that it misled its own investors about the company’s exposure to risky subprime mortgage assets.

In the current electoral cycle, the Citigroup PAC has spent more than $390,000.

Lockheed Martin

We can’t forget about the big military contractors. Lockheed Martin, the largest of that fraternity, has 51 listings in the Project On Government Oversight’s Federal Contractor Misconduct Database, with total fines and settlements of some $577 million.

In the current electoral cycle, the Lockheed Martin PAC has spent more than $2.9 million.

I could go on and on. The political system in awash with direct contributions from corporations that have broken a wide range of laws and in many cases are using their campaign offerings to unduly influence federal policy so they can go on doing what they do – and perhaps face fewer prosecutions and enforcement actions in the future if their desired candidates are elected.

Corporations are persons, the Supreme Court tells us, and have Constitutional rights. Actually, corporations now have more rights than natural persons. They can break the law repeatedly and buy their way out of serious punishment.

The country would be a lot better off if individual ex-offenders got back their voting rights and corporate criminals were barred from spending lavishly to buy political influence.

The Dark Side of Family Business

Americans love entrepreneurship, and no form of it is more celebrated than the family business. Most of us distrust big banks and giant corporations, but who doesn’t have warm feelings about mom and pop companies or family farms? These are the types of firms that politicians of all stripes want to shower with tax breaks and other forms of government assistance.

The problem is that family enterprises, like pet alligators, may start out as small and cuddly but can grow into large and dangerous monsters. We’ve seen two examples of this recently in connection with the family-owned oil company Koch Industries and the egg empire controlled by the DeCoster Family.

Koch Industries and its principals David and Charles Koch are the subject of a detailed article in The New Yorker by Jane Mayer. Much of the information in the piece has previously come out in blogs, websites and muckraking reports by environment groups, but she does a good job of consolidating those revelations and presenting them in a prestigious outlet.

Mayer describes how the Kochs, who are worth billions, have for decades used their fortune to bankroll a substantial portion of rightwing activism and are currently the big money behind groups such as Americans for Prosperity that are helping coordinate the purportedly grassroots Tea Party movement. What makes the Kochs especially insidious is that they use the guise of philanthropy to fund organizations promoting policy positions – environmental deregulation and global warming denial – that directly serve the Koch corporate interests, which include some of the country’s most polluting and greenhouse-gas-generating operations. The Kochs also contribute heavily to mainstream philanthropic causes such as the Metropolitan Opera and the Sloan-Kettering Cancer Center to win influential allies and gain respectability.

The DeCosters, whose egg business is at the center of the current salmonella outbreak, are not in the same social circles as the Kochs, but they have an even more egregious record of business misconduct. Hiding behind deceptively modest company names such as Wright County Egg, the family, led by Jack DeCoster, has risen to the top of the egg business while running afoul of a wide range of state and federal regulations.

As journalists such as Alec MacGillis of the Washington Post have recounted, the DeCosters have paid millions of dollars in fines for violating environmental regulations (manure spills), workplace health and safety rules (workers forced to handle manure and dead chickens with their bare hands), immigration laws (widespread employment of undocumented workers), animal protection regulations (hens twirled by their necks, kicked into manure pits to drown and subjected to other forms of cruelty), wage and hour standards (failure to pay overtime), and sex discrimination laws (female workers from Mexico molested by supervisors).

Their lawlessness dates back decades. A November 11, 1979 article in the Washington Post about Jack DeCoster’s plan to expand from his original base in Maine to the Eastern Shore of Maryland states that he was leaving behind “disputes over child labor, union organizing drives and citations for safety violations.” In 1988 the Maryland operation was barred from selling its eggs in New York State after an outbreak of salmonella. In 1996 the Occupational Safety and Health Administration fined the DeCosters $3.6 million for making its employees toil in filth. Then-Labor Secretary Robert Reich said conditions were “as dangerous and oppressive as any sweatshop we have seen.”

The DeCosters were notorious enough to be featured in a 1999 report by the Sierra Club called Corporate Hogs at the Public Trough. The title referred to the fact that concentrated animal feeding operations (CAFOs) such as those operated by the DeCosters were receiving substantial federal subsidies despite their dismal regulatory track record.

Articles about Jack DeCoster invariably describe him as self-made and hard-working. “Jack doesn’t fish, he doesn’t hunt, he doesn’t go to nightclubs,” a farmer in Maine told the New York Times in 1996. “He does business — 18 hours a day.” He was recently described as a “born-again Baptist who has contributed significant amounts of money to rebuild churches in Maine and in Iowa.”

Like the Kochs, DeCoster apparently thinks that some philanthropic gestures will wipe away a multitude of business transgressions. Yet no amount of charitable giving can change the fact that these men grew rich by disregarding the well-being of workers, consumers and the earth. Such are the family values of these family businessmen.

Villainous Visionaries

It is tempting to refute the new book on business ethics by Andy Wales, Matthew Gorman, and Dunstan Hope with two letters; BP. The oil giant’s record of negligence in connection with the Gulf of Mexico disaster, its refinery accidents and its pipeline leaks in Alaska flies in the face of the thesis of Big Business, Big Responsibilities: that large corporations are in the vanguard of efforts to address the planet’s most pressing environmental and social problems.

The text of the book appears to have been completed before the blow-out of BP’s Macondo well this spring, but it is likely that the incident would not have merited mention if the timing had been different. Wales, Gorman and Hope seem to live in a world in which corporations act nobly and business crimes such as bribery, price-fixing, toxic waste dumping, mistreatment of workers and disregard for safety norms are either a thing of the past or are rare enough to ignore.

The authors – two of whom work for large corporations while the third (Hope) is on the staff of Business for Social Responsibility – would have us believe that many major companies have in a short period of time evolved from villains to visionaries.

To their credit, Wales, Gorman and Hope do not claim that this transformation happened spontaneously. They fully acknowledge the role of environmental and social justice campaigns in highlighting harmful and unfair business practices. Yet they fail to address corporate resistance to these campaigns, making it seem as if top executives promptly renounced pollution and exploitation as soon as an objection was raised.

Wales, Gorman and Hope admit that the initial boardroom motivation was to protect brands damaged by aggressive campaigners, but they insist that many large companies have gone beyond that defensive posture and are now engaged in a “proactive search for opportunities to improve social well-being and achieve corporate financial success at the same time.”

Their outlook is representative of the new corporate utopianism – the notion that the profit motive can be made to align perfectly with the public good, thus making global companies the perfect vehicle for reshaping the world.

It is easy to see why Wales, Gorman and Hope, who have built their careers on promoting corporate social responsibility, would embrace this view, and its appeal among the companies they advise is obvious.

But it is not clear why those of us with no vested interested in corporate canonization should go along. Even if we admit that some companies are doing some socially beneficial things, what took them so long? Are we expected to forget their decades of rapacious behavior?

It is also unclear how far should we trust companies that began to act responsibly only after being pressured to do so by outside forces, which according to Wales, Gorman and Hope include not just corporate campaigns but also growing consumer preference for ethical and sustainable goods and services. The only internal impulse that seems to be at work in socially responsible companies is the desire to make a buck from these new market opportunities.

So let me get this straight: responding to external pressures, giant corporations are doing the right thing, which turns out to be highly profitable – and we are supposed to believe this is some kind of great moral awakening?

Before passing judgment on the intentions of companies professing a commitment to social responsibility, perhaps we should take a step back and ask how real is the purported transformation. And this brings us back to BP, which is repeatedly praised by Wales, Gorman and Hope for its forward-thinking stance on issues such as climate change.

Given what we now know about BP’s reckless actions, as opposed to its high-minded principles, it is likely that its commitment to social responsibility is a smokescreen. Wales, Gorman and Hope don’t consider the possibility that many of the laudatory policies adopted by BP and other corporate leviathans are nothing more than greenwashing.

Big Business, Big Responsibilities could be dismissed as a work of corporate propaganda, but what makes it more insidious is the appeal the authors make to non-governmental organizations. The last page of the book calls on NGOs to be less suspicious of corporations and to accept them as full partners in environmental and social campaigns. I read this as an effort to bring about a unilateral ceasefire by watchdogs groups, which would lose their independence and start functioning as appendages of corporate public relations departments.

While a few NGOs have already moved in this direction, it would be foolhardy for serious campaigners to abandon their adversarial posture toward corporations. Without such pressure, big business would inevitably return to all its old tricks.

Stealth Disclosure

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.

Obama’s Oil Magic

BP has been selling off small pieces of itself to help pay for its liability costs in the Gulf of Mexico. Here’s another way it can economize: eliminate its public relations staffers and outside consultants such as the well-connected Podesta Group. The oil giant doesn’t need them any longer, now that the Obama Administration has taken over responsibility for burnishing the image of the beleaguered oil giant.

BP’s new mouthpieces include Carol Browner, whose official title is Director of the White House Office of Energy and Climate Change Policy, and Jane Lubchenco, head of the National Oceanic and Atmospheric Administration. Browner has taken to the airwaves to deliver the mind-boggling message that the BP mess — which had just been declared by federal scientists to be the largest oil spill in history — has largely disappeared: “The vast majority of the oil is gone,” she told NBC’s Matt Lauer. “It was captured. It was skimmed. It was burned. It was contained. Mother Nature did her part.”

Lubchenco presided over the preparation of a five-page report claiming that one-quarter of the 200 million gallons of crude released from BP’s Macondo well “naturally evaporated or dissolved”; another quarter was dispersed “naturally” or chemically; and a third quarter was either directly recovered, burned off or skimmed from the surface, leaving a “residual” of 26 percent, among which is whatever BP collects from the shore.

In other words: Abracadabra, the oil is gone.

If BP had tried this kind of magic trick, it would have been laughed off the stage. The administration, exploiting the legitimacy of NOAA and Browner, a former head of the Environmental Protection Agency, is being taken (somewhat) seriously. In doing so, it is acting as a sort of front group for BP, giving more credence to the company’s claims of having carried out an effective clean-up operation. The remarkable claims about evaporation and dissolution could also help to reduce BP’s ultimate liability costs.

At the same time, the White House is clearly trying to protect itself. The NOAA report can be seen as a justification for the administration’s capitulation to BP on the issue of chemical dispersants. Only a few days before the announcement of the NOAA calculations, the House Select Committee on Energy Independence and Global Warming had released documents showing that the Coast Guard had repeatedly approved BP requests to apply large quantities of Corexit, despite EPA’s claim to have ordered the company to restrict its use of the controversial chemicals.

It is difficult to avoid the impression that BP and the administration have conspired to disguise the full extent of the disaster through the use of the dispersant, which reduces the amount of sludge arriving on shore but is having as yet unknown effects on the ecology of the gulf. The White House is so compromised in this situation that it seems unable to recognize the dissonance between the President’s statement that this is the “worst environmental disaster America has ever faced” and the new message, which is essentially “don’t worry, be happy.”

The positive spin is giving ammunition to figures such as Rush Limbaugh, who have been claiming for some time that the impact of the BP spill has been exaggerated. By encouraging these disaster deniers, the administration is undermining the rationale for continuing the deepwater drilling moratorium and even for the transformation of the former Minerals Management Service into a real regulatory watchdog.

If spills — including gigantic ones such as BP’s — can be brought under control so easily with dispersants and Mother Nature, why bother to restrict offshore drilling? After an incident that should have discredited that activity once and for all, the Obama Administration has in effect paved the way for a return to “Drill, Baby, Drill.” Quite a magic trick.

The Right Way to Cut Federal Spending

Resembling a scene from Alfred Hitchcock’s The Birds, deficit hawks are taking over Washington. They held up an extension of unemployment benefits and are poised to attack Social Security, Medicare and other supposedly out-of-control forms of federal spending. At a time when government outlays, at least those of the safety net variety, should be expanding to address the ongoing economic crisis, Republicans and many Democrats alike have bought into the dubious idea that now is a time for fiscal austerity.

Apart from the battle over entitlements, there is more sensible effort under way to cut spending that benefits those who need it the least: large corporations. One welcome side effect of the Gulf of Mexico oil disaster is that increased attention is being paid to the ways that federal policies reward the likes of BP, Exxon Mobil, Chevron, Shell and ConocoPhillips. On the Fourth of July, the New York Times devoted part of its front page to a story on this largesse, writing: “oil production is among the most heavily subsidized businesses, with tax breaks at virtually every stage of the exploration and extraction process.”

According to a detailed analysis prepared by the Texas Comptroller of Public Accounts in 2008, total federal subsidies to the oil and gas industry in 2006 were about $3.5 billion. The Times article puts the current cost at about $4 billion. A recent Citizens for Tax Justice report points out that these tax breaks do little to benefit the public and serve mainly to fatten profits and enrich investors.

Efforts to eliminate these subsidies—including one pursued last month by Vermont Sen. Bernie Sanders—have generally come to naught, given the petroleum industry’s formidable influence in Congress. One of the more persistent initiatives is Green Scissors, a 15-year-old project that targets subsidies not only to the energy sector but also to agribusiness, mining and highways — challenging them on environmental as well as fiscal grounds. The Green Scissors 2010 report – just issued by Friends of the Earth, Taxpayers for Common Sense, Environment America and Public Citizen – tallies more than $31 billion in oil and gas subsidies that could be cut over the next five years. The total Green Scissors hit-list amounts to more than $200 billion for that period, with much of the remainder coming from subsidies to other energy sectors such as coal, nuclear and biofuels.

Attacking these costly and harmful subsidies is a noble endeavor, but it may be more effective not to take on the entire energy industry at once. Another significant feature of the Gulf of Mexico disaster is the breakdown of corporate solidarity. BP’s major rivals have taken pains to distance themselves from the British company, implicitly depicting it as a renegade on safety matters. Four of them just formed a rapid-response force to deal with future spills without involving BP in the planning.

In this context, it might make sense to focus on making certain companies, beginning with BP, ineligible for all or part of the federal energy subsidy banquet. Until now, the tax breaks and other benefits have been treated as entitlements, there for the taking by any company involved in certain activities.

Why not modify the Internal Revenue Code so that the subsidies are not available to companies with a poor safety or environmental record, especially those like BP that have paid criminal fines for violations in those areas? The federal government has an Excluded Parties List (albeit underused) for contractors that have been barred from doing business with Uncle Sam. Shouldn’t there be a similar list for subsidy recipients?

Even better would be the creation of good-behavior criteria for receiving those subsidies in the first place. If corporations were required to have a record free of significant violations of regulations relating to the environment, occupational safety and health, employment practices, antitrust, etc., then there would probably be a lot fewer recipients and it might be easier to do away with these giveaways once and for all.