Environment

The Limits of the Koch Charm Offensive

Charles and David Koch and their Koch Industries conglomerate, long known for an unapologetic defense of unfettered capitalism and hard-right politics, are said to be going soft. The brothers are taking pains to associate themselves with more progressive policies such as criminal justice reform, while their corporation has been running feel-good ads highlighting its purported commitment to enlightened principles such as sustainability.

At the same time, the Kochs are depicting themselves as backers of supposedly responsible Republican presidential candidates and shunning iconoclastic front-runner Donald Trump.

The Koch charm offensive does have its limits. A slew of groups funded by the billionaires are at the forefront of the campaign against the Obama Administration’s Clean Power Plan and are doing their best to defend fossil fuels. When it comes to environmental policy, the Kochs are still in the stone age.

That position is not merely a matter of ideology. Their opposition to environmental and other safety regulations amounts to a defense of the way the Kochs do business.

This was made clear to me in some work I’ve been doing on a new research tool called Violation Tracker that my colleagues and I at Good Jobs First are preparing. Patterned on our Subsidy Tracker, the new resource will take company-specific data on regulatory violations and link the individual entries to the parent corporations of the culprits. This will allow us to present violation totals for large firms and show which of them are the most frequent offenders.

The initial version of Violation Tracker, which will be released this fall, will cover data from the Environmental Protection Agency, the Occupational Safety & Health Administration and a few other federal health and safety agencies. Coverage on wage and hour violations, financial sector transgressions and other forms of corporate misconduct will come later.

A preliminary tally of EPA and OSHA data from the past five years indicates that units of Koch Industries have been hit with more than $3.5 million in penalties. The biggest amount comes from Flint Hills Resources, the conglomerate’s oil refining arm. For example, in 2014 the company had to pay $350,000 and sign a consent decree to resolve EPA allegations that it was violating the Clean Air Act through flaring and leaking equipment.

Georgia-Pacific, the Koch Industries forest products company, received more than $600,000 in penalties during the five-year period. These included $60,000 in penalties proposed in January by OSHA in connection with worker exposure to formaldehyde and other dangerous substances.

In 2013 the fertilizer company Koch Nitrogen had to pay $380,000 to settle allegations that its facilities in Iowa and Kansas violated the Clean Air Act.

Regulatory violations by Koch businesses began before the five-year period that will be initially covered in Violation Tracker.

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

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

In a third major environmental case against Koch that year, a federal grand jury in Texas returned a 97-count indictment against the company and four of its employees for violating federal air pollution and hazardous waste laws in connection with benzene emissions at the Koch refinery near Corpus Christi. The company was reportedly facing potential penalties of some $350 million, but in early 2001 the newly installed Bush Administration’s Justice Department negotiated a settlement in which many of the charges were dropped and the company pled guilty to concealing violations of air quality laws and paid just $10 million in criminal fines and $10 million for environmental projects in the Corpus Christi area.

In 2002 Koch Petroleum Group, the Koch entity involved in most of these environment problems, was renamed Flint Hills Resources. That name change was as cosmetic as the current charm offensive.

If the Kochs really want to improve their reputation, they should go beyond public relations and make fundamental alterations in their business practices.

Getting Tough with El Corpo

As part of my summer reading I’ve been taking another look at some of the key works of the past on corporate crime to consider their relevance for today.

One of the titles on my list is Russell Mokhiber’s Corporate Crime and Violence, which profiled three dozen of the most egregious cases of environmental, workplace hazard and defective product abuses that had occurred in the years leading up to the publication of the book in 1988. Among the culprits were Dow Chemical (Agent Orange), Occidental Petroleum (Love Canal), Johns Manville (asbestos), General Electric (PCBs) and Ford Motor (exploding Pintos).

Mokhiber, editor of the excellent newsletter Corporate Crime Reporter, also reviewed the debates on how to define and how to address corporate misconduct and presented his own “50-Point Law & Order Program to Curb Corporate Crime.”

What strikes me is how little has changed in the past 27 years. Now, as then, we are faced with a seemingly endless series of incidents in which large corporations have caused serious harm to communities, the environment, workers and consumers. BP has had to pay around $20 billion to settle the many charges and claims brought against it in connection with the Deepwater Horizon catastrophe in the Gulf of Mexico. An ignition switch defect that General Motors failed to correct has been linked to more than 100 deaths. Safety lapses by coal miner Massey Energy (now part of Alpha Natural Resources) allegedly led to a methane explosion that killed 29 workers.

One difference is that we now also have an epidemic of serious financial crimes by major banks. Bank of America, Citigroup, JPMorgan Chase and Wells Fargo have each had to pay billions to settle allegations relating to the sale of toxic securities in the period leading up to the financial, foreclosure abuses and other issues. European banks such as Credit Suisse, HSBC and UBS have paid billions more to U.S. and European regulators to settle issues such as tax evasion, violations of economic sanctions and manipulation of the LIBOR interest rate index.

As in 1988, there is little consensus these days on what to do about corporate miscreants. Mokhiber focused on the debate between two camps. On the one side were those who wanted to exempt corporations from criminal charges (because these non-human persons supposedly could not exhibit criminal intent or have a criminal state of mind) and instead use exclusively civil cases to extract more burdensome financial penalties.

On the other side were those, including Mokhiber, who called for applying criminal law more aggressively, arguing, among other things, that the stigma of a criminal conviction would serve as a powerful deterrent against corporate misconduct.

While the debate was never resolved, a quarter of a century later the remedies proposed by both camps have come to pass. Civil penalties have risen to unprecedented levels. Billion-dollar settlements are now commonplace in cases involving large corporations, and in a few cases such as BP, Bank of America and JPMorgan Chase, the payouts have reached eleven figures.

At the same time, settlements in which major corporations plead guilty to criminal charges are becoming more common. Responding to public pressure, the Justice Department first extracted such pleas from subsidiaries of foreign banks UBS and Credit Suisse; this year it got Citigroup and JPMorgan Chase to do the same in a case involving manipulation of foreign exchange markets.

The sad reality is that the application of penalties that seemed so bold in the 1980s seem to be doing little to chasten big business.

Corporations have adjusted to the big penalties, which in some cases are not as large as they seem because they may be tax deductible. The payments are seen as a cost of doing business, and even at their unprecedented levels, the costs are usually well below the financial benefits the culprit companies enjoyed from the illicit activity.

Being convicted felons has not changed things much for banks such as Citigroup and JPMorgan Chase. There is no sign that this stigma has cost them many customers, and their ability to continue to operate in regulated areas has been assisted by special waivers given to them by agencies such as the SEC.

Like the escaped Mexican drug lord called El Chapo, large corporations – El Corpo, so to speak – have an extraordinary and frustrating ability to neutralize measures designed to punish them for their misdeeds. If we are ever going to get corporate crime under control, we’ll have to get a lot more creative. Let’s hope it doesn’t take another 27 years to figure it out.

Subsidies and Bad Actors

Are corporate subsidies a right or a privilege? Should a company’s accountability track record be a factor in determining eligibility? These questions take on increased relevance in light of two new developments.

The first is that utility giant Duke Energy is being fined $25 million by environmental regulators in North Carolina. The penalty, the largest in state history, relates to the contamination of groundwater by coal ash from Duke’s Sutton power plant near Wilmington. Federal prosecutors are reportedly pursing a separate and broader case against Duke in connection with its large spill of toxic coal ash from another plant into the Dan River.

The other development is that my colleagues and I at Good Jobs First are about to make public a new version of our Subsidy Tracker that for the first time extends coverage to the federal level (the release date is March 17). Without giving away too much ahead of time, I can say that Duke Energy is among the ten largest recipients of grants and allocated tax credits (those awarded to a specific company) for the period since 2000, with a total in the hundreds of millions of dollars.

Duke got about half of its subsidies in the form of grants from Energy Department programs designed to promote renewable energy and smart grid development. The other half came from a Recovery Act provision that allows companies to receive cash payments for the installation of renewable energy equipment.

Like other large utilities, Duke has taken steps in the direction of renewables while still deriving most of its power from fossil fuels and nuclear. Are federal subsidies helping to wean Duke off dirtier forms of energy, or are they simply enriching a company that is still committed to dirty energy and has shown some serious lapses in its management of its fossil fuel facilities?

Duke is hardly the only major subsidy recipient with a tainted track record. Previously, I discussed the fact that both U.S. banks and foreign banks that received huge amounts of bailout assistance later had to pay billions of dollars to settle allegations on issues such as currency market manipulation and abetting tax evasion.

Federal officials may argue that they were not aware of these practices when the bailouts happened (though these banks hardly had spotless records as of 2008), or they may claim that they had no choice but to bail them out, since they were too big to allow to fail.

Yet the list of large federal subsidy recipients includes other major corporate miscreants. Take the case of BP, which the new database will show as having receiving more than $200 million in federal grants and allocated tax credits. Much of that money postdates its 2010 catastrophe in the Gulf of Mexico, and even more came after the 2005 explosion at its Texas City, Texas refinery that killed 15 workers and for which the company $60 million in fines to the EPA and $21 million to OSHA.

In the wake of the Deepwater Horizon disaster, BP was barred from receiving federal contracts, though the debarment was later lifted. Perhaps an even stronger case can be made for disqualifying regulatory violators from receiving federal subsidies, since they are more akin to gifts than payment for goods or services rendered. This is not likely to happen anytime soon, but the release of the new Subsidy Tracker will make it a lot easier to identify which bad actors have been enjoying Uncle Sam’s largesse.

A Crowded Corporate Hall of Shame

2015_PublicEye_KeyVisual_550x275 Over the past year, Chevron has had success in getting a U.S. federal judge to block enforcement of a multi-billion-dollar judgment imposed by a court in Ecuador, and the oil giant managed to pressure the U.S. law firm representing the plaintiffs to drop out of the case and pay the company $15 million in damages. Chevron has just had another significant win but of a less desirable kind.

The Berne Declaration and Greenpeace Switzerland recently announced that Chevron had received the most votes in a competition to determine the world’s most irresponsible corporation and thus was the “winner” of the Public Eye Lifetime Award.

For the past ten years, the two groups have countered the elite mutual admiration society taking place at the annual World Economic Forum in Davos, Switzerland by highlighting the misdeeds of large corporations. The previous awardees ranged from banks such as Citigroup to drug companies such as Novartis to Walt Disney, which was chosen because of its use of foreign sweatshop labor to produce its toys.

A few months ago, Public Eye sponsors decided to bring the project to a close but do so with a splash by naming the company that stood out as the worst. Activists from around the world promoted their choices from among six nominees: Dow Chemical, Gazprom, Glencore, Goldman Sachs and Wal-Mart Stores, along with Chevron. Amazon Watch, which led the Chevron effort, prevailed. Glencore and Wal-Mart were the runners-up.

Public Eye’s award ceremony featured the Yes Men satirical group, which in one of its rare un-ironic pronouncements stated: “Corporate Social Responsibility is like putting a bandage on a severed head – it doesn’t help”. This sentiment is especially appropriate in relation to Chevron, which has long sought to portray itself, through ads headlined WILL YOU JOIN US, as not only mindful of environmental issues but as a leader of the sustainability movement.

Given the prevalence of business misconduct, choosing the most irresponsible corporation is no easy matter. Even within the petroleum industry, Chevron’s environmental sins in Ecuador and the rest of its rap sheet must be weighed against the record of a company such as BP, infamous for the Gulf of Mexico oil spill disaster as well as safety deficiencies at its refineries that resulted in explosions such as one in Texas that killed 15 workers in 2005. Also worthy of consideration are Royal Dutch Shell, with its human rights abuses in Nigeria, and Exxon Mobil, with its own record of oil spills as well as climate change denial.

And what about the mining giants and their notorious treatment of indigenous communities around the world. A prominent activist once called Rio Tinto “a poster child for corporate malfeasance.” Then there is Big Pharma, made up of corporations that tend toward price-gouging and product safety lapses. And we shouldn’t leave out the auto industry, which in the past year has been shown to be a lot sloppier about safety matters than we could have imagined. Also not to be forgotten are the weapon makers, whose products are inherently anti-social.

Yet perhaps the biggest disappointment for corporate critics in the United States may be the fact that the Lifetime Award did not go to Wal-Mart. For the past two decades, the Behemoth of Bentonville has epitomized corporate misbehavior in a wide variety of areas — most notably in the labor relations sphere, but also promotion of foreign sweatshops, gender discrimination, destruction of small business, tax dodging, bribery (especially in Mexico) and the spread of suburban sprawl with its attendant impact on climate change. Yet perhaps the most infuriating thing about Wal-Mart has been its refusal to abandon its retrograde labor practices while working so hard, like Chevron, to paint itself as a sustainability pioneer.

It’s too bad that we will no longer have the annual Public Eye awards, but corporate misconduct will apparently be with us for a long time to come.

Paying for Protection from Protests

grasberg_mine_11 Responding to pressure from groups such as the International Corporate Accountability Roundtable, the Obama Administration has just announced that the United States will finally adopt a national action plan on combating global corruption, especially when it involves questionable foreign payments by transnational corporations that serve to undermine human rights. The White House statement notes that “the extractives industry is especially susceptible to corruption.”

True that. In fact, U.S.-based mining giant Freeport-McMoRan is an egregious case of a company that is reported to have made extensive payments to officials in the Indonesian military and national police who have responded harshly to popular protests over the environmental, labor and human rights practices of the company, which operates one of the world’s largest gold and copper mines at the Grasberg site (photo) in West Papua. There have been reports over the years that the U.S. Justice Department and the Securities and Exchange Commission were investigating the company for violations of the Foreign Corrupt Practices Act, but no charges ever emerged.

Here is some background on the story: Freeport moved into Indonesia in 1967, only two years after Suharto’s military coup in which hundreds of thousands of opponents were killed. The company developed close ties with the regime and was able to structure its operations in a way that was unusually profitable. Benefits promised to local indigenous people never fully materialized, and the mining operation caused extensive downstream pollution in three rivers.

Until the mid-1990s these issues were not widely reported, but then Freeport’s practices started to attract more attention. In April 1995 the Australian Council for Overseas Aid issued a report describing the oppressive conditions faced by the Amungme people living near the mine. It also described a series of protests against Freeport that were met with a harsh response from the Indonesian military. A follow-up press release by the Council accused the army of killing unarmed civilians. An article in The Nation in the summer of 1995 provided additional details, including an allegation that Freeport was helping to pay the costs of the military force.

In November 1995, despite reported lobbying efforts on the part of Freeport director Henry Kissinger, the Clinton Administration took the unprecedented step of cancelling the company’s $100 million in insurance coverage through the Overseas Private Investment Corporation because of the damage its mining operation was doing to the tropical rain forest and rivers (the human rights issue was not mentioned).

The company responded with an aggressive public relations campaign in which it attacked its critics both in Indonesia and abroad. Freeport also negotiated a restoration of its OPIC insurance in exchange for a promise to create a trust fund to finance environmental initiatives at the Grasberg site. Within a few months, however, Freeport decided to give up its OPIC coverage and proceeded to increase its output, which meant higher levels of tailings and pollution.

The criticism of Freeport continued. It faced protests by students and faculty members at Loyola University in New Orleans (where the company’s headquarters were located at the time) who called attention both to the situation in Indonesia and to hazardous waste dumping into the Mississippi River by Freeport’s local phosphate processing plant. Another hotbed of protest was the University of Texas, the alma mater of Freeport’s chairman and CEO James (Jim Bob) Moffett and the recipient of substantial grants from the company and from Moffett personally, who had a building named after him in return.

After its ally Suharto resigned amid corruption charges in 1998, Freeport had to take a less combative position. The company brought in Gabrielle McDonald, the first African-American woman to serve as a U.S. District Court judge, as its special counsel on human rights and vowed to share more of the wealth from Grasberg with the people of West Papua. But little actually changed.

Freeport found itself at the center of a new controversy over worker safety. In October 2003 eight employees were killed in a massive landslide at Grasberg that an initial government investigation concluded was probably the result of management negligence. A few weeks later, the government reversed itself, attributing the landslide to a “natural occurrence” and allowing the company to resume normal operations.

In 2005 Global Witness published a report that elaborated on the accusations that Freeport was making direct payments to members of the Indonesian military, especially a general named Mahidin Simbolon. In an investigative report published on December 27, 2005, the New York Times said it had obtained evidence that Freeport had made payments totaling $20 million to members of the Indonesian military in the period from 1998 to 2004. (A 2011 estimate by Indonesia Corruption Watch put company payments to the national police at $79 million over the previous decade.)

Reports such as these raised concerns among some of Freeport’s institutional investors. The New York City Comptroller, who oversees the city’s public pension funds, charged that the company might have violated the Foreign Corrupt Practices Act.

Back in Indonesia, protests escalated. In 2006 the military responded to anti-Freeport student demonstrations by instituting what amounted to martial law in the city of Jayapura. Around the same time, the Indonesian government released the results of an investigation by independent experts concluding that the company was dumping nearly 700,000 tons of waste into waterways every day. In 2006 the Norwegian Ministry of Finance cited Freeport’s environmental record in Indonesia as the reason for excluding the company from its investment portfolio.

In 2007 workers at the Grasberg mine staged sit-down strikes to demand changes in management practices along with improved wages and benefits. More strikes occurred in 2011. Two years later, more than two dozen workers were killed in a tunnel collapse at Grasberg. Indonesia’s National Commission on Human Rights charged that the company could have prevented the conditions that caused the accident.

Freeport’s questionable labor, environmental and human rights practices continue, yet aside from that OPIC cancellation two decades ago it has faced little in the way of penalties. It remains to be seen whether the new Obama Administration policy changes this sorry state of affairs.

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

The Environmental Prosecution Gap

With reports of a $16 billion Justice Department settlement with Bank of America following on the heels of other big payouts by misbehaving banks, it may seem that corporate crime these days is mainly an issue for the financial sector. The big banks have plenty of blemishes on their record, but then again so do other large corporations when it comes to areas such as environmental compliance.

After all, it was only four months ago that Anadarko Petroleum had to pay $5.1 billion to resolve federal charges that had been brought in connection with the clean-up of thousands of toxic waste sites around the country resulting from decades of questionable practices by Kerr-McGee, now a subsidiary of Anadarko. This settlement set a record for an environmental case, surpassing the $4 billion in penalties BP had to pay in 2012 as part of its guilty plea on criminal charges relating to the Deepwater Horizon disaster in the Gulf of Mexico.

Despite high-profile cases such as these, environmental offenses are being prosecuted in a less than vigorous manner. This problem is brought home in a recent analysis by The Crime Report website produced at the Center on Media, Crime and Justice at the John Jay College of Criminal Justice in New York.

In a review of enforcement data in the EPA’s ECHO database, The Crime Report found that the agency has become increasingly disinclined to bring criminal rather than civil charges against violators. In recent years, the report notes, fewer than one-half of one percent of violations trigger criminal investigations, which require the involvement of the Justice Department to proceed in court.

Part of the problem is that criminal cases are much more difficult to pursue. The Crime Report quotes attorney Mark Roberts of the non-profit Environmental Investigation Agency as saying: “I think a criminal prosecution will be defended much harder … If you’re in that tiny percentage that gets charged criminally, you want to win.”

While delivering the bad news about weak prosecution, The Crime Report makes it easier for researchers and activists to access data about environmental violations. It took data from ECHO and created an interactive map that provides summaries by EPA region and by urban area, and also allows zooming in on specific facilities. When an urban area is chosen on the map, a table appears below showing the largest penalties overall, with breakdowns by categories such as Clean Air Act violations and Clean Water Act violations.

This is especially useful for clusters of heavily polluting facilities such as those in what is informally known as Cancer Alley between Baton Rouge and New Orleans. Yet a look at the data for this area shows the limitations not only of the EPA’s criminal prosecutions but its enforcement activity in general. Drilling down shows dozens of facilities that were often found to be in non-compliance yet were hit with little or nothing in the way of penalties during the past five years.

There are some fairly significant fines, such as the $198,000 paid by PCS Nitrogen in Geismar and the $84,000 paid by the Total Petroleum Styrene Monomer Plant in Carville. Yet, for the most part, the data paint a picture that is a far cry from the right’s depiction of the EPA as a tyrannical force preying on defenseless businesses.

Whether it is in banking or petrochemicals, aggressive prosecutions are the only way to get large corporations to clean up their act.

Targeting the Climate Culprits

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

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

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

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

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

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

Chevron: 51.1 billion metric tons
Exxon Mobil: 46.7 billion metric tons
Saudi Aramco: 46 billion metric tons
BP: 35.8 billion metric tons
Gazprom: 32.1 billion metric tons
Royal Dutch Shell: 30.8 billion metric tons
National Iranian Oil Company: 29.1 billion metric tons
Pemex: 20 billion metric tons
ConocoPhillips: 16.9 billion metric tons
Petroleos de Venezuela: 16.2 billion metric tons

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

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

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

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

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

Freedom to Pollute

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

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

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

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

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

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

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

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

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

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

GE Dumps Workers as It Dredges the Hudson

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

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

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

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

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

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

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

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

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

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

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

The Kochs’ Stake in Pollution

Accountability_LATimesPuppets_300x250_FINALREVISED050813_2 Koch Industries and the billionaire brothers who run it are best known for their involvement in rightwing causes. The latest controversy is over the Kochs’ reported interest in purchasing the Los Angeles Times and other major newspapers owned by the Tribune Co. A campaign centered in L.A. is mobilizing opposition to such a deal among newspaper subscribers and Tribune shareholders, warning that a Koch takeover would create a new Fox News.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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