Category: Mining Industry

Paying for Protection from Protests

grasberg_mine_11Responding 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.

Injustice Incorporated

Pages from pol300012014enIt’s been clear for a long time that oil drilling in Ecuador’s rain forests dating back to the 1960s caused severe environmental damage. Yet for more than two decades a lawsuit against the lead drilling company, Texaco, and its new owner, Chevron, has meandered through Ecuadoran and U.S. courts.

Chevron, fighting a $19 billion judgment against it in Ecuador (later reduced to $9.5 billion), has sought to turn the tables on the plaintiffs and their U.S. lawyer, Steven Donziger. Recently, a U.S. court ruled in favor of the company, bolstering its refusal to pay anything in compensation.

The challenges faced by the plaintiffs in the Chevron case are, unfortunately, the rule rather than the exception. It is often next to impossible to get a large transnational corporation to fully rectify serious environmental, labor or human rights abuses.

This frustrating reality is analyzed at great length in a new 300-page report from Amnesty International entitled Injustice Incorporated. The study begins with a primer on the relationship between corporations and international human rights law. Amnesty points out a key dilemma:

In some respects the corporate model is antithetical to the right to effective remedy; by admitting and addressing human rights abuses companies expose themselves to financial liability and reputational harm which shareholders (if not the directors and officers of the company themselves) see as entirely contrary to their interests.

Consequently, Amnesty points out, corporations tend to respond in ways that can compound the abuse: “deals with governments, denying victims access to vital information and using vastly greater financial means to delay and frustrate attempts to bring cases to court.”

Another problem highlighted by Amnesty is that large companies tend to be structured as a collection of separate legal entities whose liability is compartmentalized. While recognizing that it is not realistic to try to change this well-entrenched feature of corporation-friendly legal systems, Amnesty argues that “a counter-balance is needed to protect public interest and the international human rights framework.”

Amnesty amplifies its analysis through four detailed case studies. The first is the 1984 Bhopal catastrophe, in which a massive leak of toxic methyl isocyanate gas at a facility owned by a subsidiary of Union Carbide killed thousands and caused debilitating illnesses in tens of thousands more. Union Carbide paid what the victims considered grossly inadequate compensation while its CEO, with the help of the U.S. government, evaded extradition on criminal charges. Dow Chemical, which acquired Union Carbide in 2001, has refused to do anything more to help the victims.

The other situations examined in the Amnesty report are not as well known. The first is the Omai gold mine in Guyana, where the rupture of a tailings dam in 1995 spilled a vast quantity of effluent laced with cyanide and heavy metals into two rivers. The mining operation and the dam were run by Omai Gold Mines Limited, a company controlled at the time by Canada’s Cambior Inc. Soon after the accident, Cambior paid out modest amounts in compensation to local residents while vigorously contesting legal actions brought both in Guyana and in Canada. The company, which later merged with another Canadian firm, Iamgold, never paid out anything more.

Amnesty’s third case study deals with the Ok Tedi mine in Papua New Guinea, where for many years waste products were dumped into a river used by some 250 communities of indigenous people. In 1994 a lawsuit on behalf of local residents was filed in Australia, the home country of the company, Broken Hill Proprietary, which at the time was the primary operator of the mine. BHP, now part of BHP Billiton, eventually agreed to an out-of-court settlement that included the equivalent of $86 million in compensation but did not require it to build a long overdue tailings dam.

The final case study in the Amnesty report is also the most recent. In 2006 the Dutch oil trading company Trafigura signed a dubious agreement with a small firm in Ivory Coast that allowed it to dump petroleum waste products at various sites in the city of Abidjan. Thousands of residents exposed to the substances suffered from nausea, headaches, breathing difficulties, stinging eyes and burning skin. At least 15 were reported to have died. Trafigura reached a settlement that Amnesty labels as insufficient.

Amnesty finishes its report with an analysis of what it calls the three biggest obstacles in such cases: the legal hurdles to extraterritorial action, the lack of information needed to support claims for adequate reparations and the unwillingness of the governments of the countries involved to hold foreign corporations to full account. While offering a set of reforms aimed at alleviating these challenges, Amnesty harbors no illusions about the difficulty of bringing about such changes. Legal systems, it admits, exist primarily to protect powerful corporate interests.

Extraction and Disclosure

The U.S. Securities and Exchange Commission often behaves like a watchdog with no teeth, but it has just stood up to intense pressure from big business and finally approved two rules that will shine a light on dealings between some of the world’s largest corporations and the poor countries from which they extract vast amounts of natural resources.

One of the final rules will require companies engaged in resource extraction to report on all payments to foreign governments, such as taxes, royalties, fees and presumably bribes. The other will require companies to disclose their use of certain resources originating in the Democratic Republic of Congo, where warring groups that have committed frequent human rights violations finance themselves through the sale of what are known as conflict minerals, which can end up being used in the production of goods ranging from jewelry to iPhones.

These rules derive from some of the lesser known provisions of the 2010 Dodd-Frank financial reform legislation, which the corporate world has been seeking to undermine in the rulemaking process after losing in Congress. Business lobbyists have fought the same kind of rear-guard action against the disclosure requirements that they have mounted in opposition to the central portions of Dodd-Frank.

Comments submitted to the SEC by companies and trade associations were filled with the usual kneejerk criticisms of regulation and far-fetched claims about potential harm. The American Petroleum Institute warned that public disclosure of “unnecessarily detailed information” on foreign payments would place companies at a competitive disadvantage and “jeopardize the safety and security of our member companies’ operations and employees.”

Exxon Mobil seconded API’s positions but also threw in the preposterous argument that the disclosure rule could be harmful by “inundating and confusing investors with large volumes of data.” Chevron argued that the information should be submitted to the SEC on a confidential basis, and the agency would then make public only aggregate amounts by country. It also urged the SEC to limit reporting to payments of a “material” amount, which would have meant that only huge ones would be revealed.

It takes a lot of chutzpah on the part of Chevron and Exxon Mobil to resist greater transparency, given that predecessor companies of theirs were at the center of the scandals that first brought the issue of questionable foreign payments to national attention in the 1970s.

Congressional investigations of the Nixon Administration’s Watergate crimes also brought to light widespread corruption by major corporations in the form of illegal campaign contributions and payoffs to foreign government officials. Under pressure from the SEC, these companies investigated themselves and disclosed what they found.

Exxon (prior to its merger with Mobil) admitted to making more than $50 million in foreign payments that were illegal, secret or both. Gulf Oil (which later merged into what is now Chevron) admitted to more than $4 million in such payments, including $100,000 used to purchase a helicopter for one of the leaders of a military coup in Bolivia. Smaller oil companies also spread around the cash. Ashland Oil, for example, paid $150,000 to the president of Gabon to retain extraction rights.

Foreign payoffs were not unique to the oil industry. Aerospace giant Lockheed disclosed more than $200 million in questionable payments, while its competitor Northrop admitted to $30 million. The revelations extended to numerous other sectors as well.

These revelations seriously tarnished the image of big business and paved the way to the enactment of the Foreign Corrupt Practices Act. They were also a big part of the impetus for the modern corporate accountability movement, which has put expanded disclosure at the center of its reform agenda.

It is thus no surprise that corporate accountability and human rights groups—many of which participate in the Publish What You Pay coalition—promoted the inclusion of the disclosure provisions in Dodd-Frank and welcomed the SEC’s vote to move ahead with the rules. Yet there is frustration that on several points the agency caved in to industry pressure. Global Witness, for instance, said it was “extremely disappointed” that the final rule concerning conflict minerals gives larger companies two years and smaller ones four years to determine the origin of the minerals they use.

The SEC also acceded to the demands of giant retailers such as Wal-Mart and Target that they be exempt from conflict minerals reporting requirements relating to products sold as store brands but produced by outside contractors not operating under the retailer’s direct control.

Efforts by large companies to weaken the disclosure rules are yet another sign of how they resist serious regulation in favor of less onerous industry initiatives. Many of those arguing against the proposed SEC rules said they were unnecessary given the existence of the Extractive Industries Transparency Initiative. The EITI is laudable, but it is voluntary and less than fully rigorous.

Business never gives up on its effort to make us think that, despite the prevalence of corporate crime, it can police itself. It has never done so effectively and never will.

Toxic Legacies

Bunker Hill smelter circa 1984

In his novel Bleak House, Charles Dickens invented the interminable lawsuit Jarndyce and Jarndyce to satirize the dysfunctional British court system. A real-life Jarndyce case just settled in U.S. federal court illustrates the glacial pace at which hazardous waste cleanup disputes get resolved and undermines the arguments of those who want to weaken environmental enforcement.

Hecla Mining Company has agreed to pay $263 million plus interest to resolve a lawsuit dating back 20 years. In 1991 Hecla and other mining companies were sued by the Coeur d’Alene Tribe over damages to natural resources in Idaho’s Silver Valley caused by some 100 million tons of toxic mining waste released into local waterways over the decades.  A smelter used by the companies caused massive lead emissions that contaminated soil and showed up at high levels in the bloodstream of local children. The federal government joined the case in 1996.

The lawsuit was filed after years of efforts by the mining companies to evade responsibility for cleaning up one of the country’s most polluted areas, which was designed the Bunker Hill Superfund site in 1983. The federal government began spending several hundred million dollars on the cleanup—costs that the lawsuit was meant to recoup. (The eventual cost would surpass $2 billion.)

The corporate defendants made that recovery process as difficult and time-consuming as possible. One company, Gulf Resources and Chemical, went bankrupt in the 1990s, leaving little in the way of assets. Another, Asarco, also filed for bankruptcy in 2005 in an apparent attempt to sidestep huge environmental liabilities around the country, but the U.S. Justice Department was later able to get the company that took it over, Grupo Mexico, to pay $1.8 billion for cleanup costs at more than 80 toxic sites in 19 states, including $436 million for the Bunker Hill site.

The new Hecla settlement is welcome news, but the fact that it has taken nearly three decades from designation of the Bunker Hill site to this financial resolution indicates there is something seriously wrong with the Superfund system (and the courts).

Ironically, the Bunker Hill story is in many ways a best-case scenario in that the federal government was able—eventually—to recover a substantial portion of its cleanup costs.  In numerous cases, responsible corporate parties no longer exist or don’t have adequate assets.

Congress anticipated this problem when it established the Superfund program in 1980. It created a trust fund for the program that received revenues generated by excise taxes on two highly polluting industries—petroleum and chemicals—as well as a corporate environmental income tax. The sources boosted the trust fund balance to nearly $4 billion by end of 1996.

The authority for these “polluter pays” taxes expired in 1995, and the balance began to dwindle, reaching zero in 2004. In recent years, Congress has kept the fund alive through modest appropriations, but these are subject to political whims.

Last year the Obama Administration called for reinstatement of the Superfund tax, giving a boost to the lonely efforts of Oregon Rep. Earl Blumenauer and New Jersey Senator Frank Lautenberg. However, given the current composition of Congress, that proposal seems to be going nowhere.

Unfortunately, the choice is not simply between a Superfund program financed by polluting industries and one funded by the general public. If some conservative groups had their way, the Superfund program would be eliminated outright or weakened by transferring responsibility to the states.

Think how that would have played out in Idaho, where state officials kept their distance from the Bunker Hill case until the last minute, when they signed on to get a cut of the money from Hecla. For years, those officials (along with members of the state’s Congressional delegation) vilified the Environmental Protection Agency for aggressively pursuing the Bunker Hill cleanup while they said little about the companies that caused the mess.

That anti-EPA attitude is, alas, all too common today among corporate apologists both in Washington and in many states. The Superfund program, for all its limitations, remains one of our main tools for dealing with the legacy of corporate environmental irresponsibility. It needs to be on as firm a footing as possible.

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.

Corporate Overkill

There is so much corporate misbehavior taking place around us that it is possible to lose one’s sense of outrage. But every so often a company comes along that is so brazen in its misdeeds that it quickly restores our indignation.

Massey Energy is one of those companies. Evidence is piling up suggesting that corporate negligence and an obsession with productivity above all else were responsible for the horrendous explosion at the Upper Big Branch mine in West Virginia that killed at least 25 workers.

This is not the first time Massey has been accused of such behavior. In 2008 a Massey subsidiary had to pay a record $4.2 million to settle federal criminal and civil charges of willful violation of mandatory safety standards in connection with a 2006 mine fire that caused the deaths of two workers in West Virginia.

Lax safety standards are far from Massey’s only sin. The unsafe conditions are made possible in part by the fact that Massey has managed to deprive nearly all its miners of union representation. That includes the workers at Upper Big Branch, who were pressured by management to vote against the United Mine Workers of America (UMWA) during organizing drives in 1995 and 1997. As of the end of 2009, only 76 out of the company’s 5,851 employees were members of the UMWA.

Massey CEO Don Blankenship (photo) flaunts his anti-union animus. It’s how he made his corporate bones. Back in 1984 Blankenship, then the head of a Massey subsidiary, convinced top management to end its practice of adhering to the industry-wide collective bargaining agreements that the major coal operators negotiated with the UMWA. After the union called a strike, the company prolonged the dispute by employing harsh tactics. The walkout, marked by violence on both sides, lasted 15 months.

In the years that followed, Massey phased out its unionized operations, got rid of union members when it took over new mines and fought hard against UMWA organizing drives. Without union work rules, Massey has had an easier time cutting corners on safety.

Massey has shown a similar disregard for the well-being of the communities in which it operates. The company’s environmental record is abysmal. In 2000 a poorly designed waste dam at a Massey facility in Martin County, Kentucky collapsed, releasing some 250 million gallons of toxic sludge. The spill, larger than the infamous Buffalo Creek flood of 1972, contaminated 100 miles of rivers and streams and forced the governor to declare a 10-county state of emergency.

This and a series of smaller spills in 2001 caused such resentment that the UMWA and environmental groups—not normally the closest of allies—came together to denounce the company. In 2002 UMWA President Cecil Roberts was arrested at a demonstration protesting the spills.

In 2008 Massey had to pay a record $20 million civil penalty to resolve federal charges that its operations in West Virginia and Kentucky had violated the Clean Water Act more than 4,000 times.

And to top it off, Blankenship is a global warming denier.

Massey is one of those corporations that has apparently concluded that it is far more profitable to defy the law and pay the price. What it gains from flouting safety standards, labor protections and environmental safeguards far outweighs even those record penalties that have been imposed. At the same time, Massey’s track record is so bad that it seems to be impervious to additional public disgrace.

Faced with an outlaw company such as Massey, perhaps it is time for us to resurrect the idea of a corporate death penalty, otherwise known as charter revocation. If corporations are to have rights, they should also have responsibilities—and should face serious consequences when they violate those responsibilities in an egregious way.

A “Poster Child for Corporate Malfeasance”

One of the cardinal criticisms of large corporations is that they put profits before people. That tendency has been on full display in the recent behavior of transnational mining giant Rio Tinto, which has shown little regard for the well-being not only of its unionized workers but also of a group of executives who found themselves on trial for their lives in China.

The China story began last July, when four company executives — including Stern Hu, a Chinese-born Australian citizen — were arrested and initially charged with bribery and stealing state secrets, the latter offense carrying a potential death penalty. The charges, which most Western observers saw as trumped up, were made during a time of increasing tension between Rio and the Chinese government, one of the company’s largest customers, especially for iron ore.

Earlier in the year, debt-ridden Rio had announced plans to sell an 18 percent stake in itself to Chinalco, the state-backed Chinese aluminum company, for about $20 billion. Faced with strong shareholder and political opposition, Rio abandoned the deal in June 2009. The arrests may have been retaliation by the Chinese for being denied easier access to Australia’s natural riches.

Although Rio claimed to be standing by its employees, the case did not curb the company’s appetite for doing business with the deep-pocketed Chinese. Rio continued to negotiate with Beijing on large-scale iron ore sales. It seems never to have occurred to the company to terminate those talks until its people were freed. In fact, only weeks after the arrests, Rio’s chief executive Tom Albanese was, as Canada’s Globe and Mail put it on August 21, “trying to repair his company’s troubled relationship with China.”

Before long, Rio was negotiating with Chinalco about participating in a copper and gold mining project in Mongolia. One thing apparently led to another. In March 2010 — after its still-imprisoned employees had been officially indicted and were about to go on trial — Rio announced that it and Chinalco would jointly develop an iron ore project in the West African country of Guinea.

When that trial began a couple of weeks later, the Rio managers admitted guilt, but not to the more serious charge of stealing trade secrets. Instead, they said they had engaged in bribery — but as recipients rather than payers. While the four defendants may have been guilty of some impropriety, it is likely that the admissions were a calculated move to gain a lighter sentence in a proceeding whose outcome was predetermined. And that was the case in large part because their employer decided that its business dealings were more important than demanding justice for its employees.

Rio is no more interested in justice when it comes to its operations outside China. It has been accused of human rights violations in countries such as Indonesia and Papua New Guinea. And it has a track record of exploiting mineworkers in poor countries such as Namibia and South Africa while busting unions in places such as Australia. Recently, Rio showed its anti-union colors again in the United States.

On January 31 its U.S. Borax subsidiary locked out more than 500 workers at its borate mine in Kern County, California. The workers, members of Local 30 of the International Longshore & Warehouse Union had the audacity of voting against company demands for extensive contract concessions. The company wasted no time busing in replacement workers.

In a press release blaming the union for the lockout, U.S. Borax complained that ILWU members earned much more than workers at the company’s main competitor Eti Maden. The release conveniently fails to mention that Eti Maden’s operations are in Turkey.

Also missing from the company’s statement is the fact that the biggest driver of demand for boron – a material used in products ranging from glass wool to LCD screens – is the Chinese market. If U.S. Borax busts the ILWU in a way that keeps down boron prices, then the ultimate beneficiary may be Rio Tinto’s friends in China.

It is no surprise that mining industry critic Danny Kennedy once wrote that Rio Tinto “could be a poster child for corporate malfeasance.”

The Corporate Crime Fighting Budget

The call to boost taxes on the wealthy to start paying for healthcare reform is not the only refreshing thing about the budget outline just released by the Obama Administration. There is also a marked shift toward tighter regulation of business. Here are some features of what might be called the Corporate Crime Fighting Budget:

Cracking down on corporate polluters. The Environmental Protection Agency—a joke during the Bush Administration—is slated for a 34 percent increase in funding. This would result in a hike in the budget for core functions such as enforcement to $3.9 billion, an all-time high for the agency.

Cracking down on abusive employers. Obama wants the Department of Labor—another agency enervated by the Bush crowd—to get a smaller increase than EPA, but the additional funds are intended to rebuild DOL’s responsibilities in workplace monitoring. The budget document proposes to “increase funding for the Occupational Safety and Health Administration, enabling it to vigorously enforce workplace safety laws and whistleblower protections, and ensure the safety and health of American workers; increase enforcement resources for the Wage and Hour Division to ensure that workers are paid the wages that are due them; and boost funding for the Office of Federal Contract Compliance Programs, which is charged with pursuing equal employment opportunity and a fair and diverse Federal contract workforce.”

Prosecuting white-collar crooks. The section on the Justice Department in the budget document says that the Administration will seek [not yet quantified] “resources for additional FBI agents to investigate mortgage fraud and white collar crime and for additional Federal prosecutors, civil litigators and bankruptcy attorneys to protect investors, the market, the Federal Government’s investment of resources in the financial crisis, and the American public.”

Thwarting purveyors of tainted food. The Administration plans to “take steps to improve the safety of the Nation’s supply of meat, poultry and processed egg products and to ensure that these products are wholesome, and accurately labeled and packaged.” The proposed budget for the Agriculture Department “provides additional resources to improve food safety inspection and assessment and the ability to determine food safety risks. This will lead to a reduction in foodborne illness and improve public health and safety.” The Food and Drug Administration, which is under the auspices of the Department of Health and Human Services, would also get a hike in funding.

Restricting plunderers of national resources. The section of the budget document on the Interior Department outlines the Administration’s intention to rein in the windfalls long enjoyed by extraction companies with leases to drill and mine on public lands. The plan includes “a new excise tax on offshore oil and gas production in the Gulf of Mexico to close loopholes that have given oil companies excessive royalty relief” as well as the imposition of user fees and more realistic royalties for oil and gas drilling on federal lands.

Controlling drug and healthcare price gouging. The general framework for healthcare reform released by the Administration as part of the budget document contains plans to slow down the growth in Medicare costs. This includes a proposal to force providers of privatized coverage under the name of Medicare Advantage to participate in competitive bidding. Medicare drug costs would be reined in by tightening oversight of Part D spending and by preventing brand-name pharmaceutical companies from paying generic drug producers to keep their low-cost products off the market.

To these should be added tax proposals that would put an end to various boondoggles that have enriched oil companies, hedge funds and other anti-social elements. Some of Obama’s proposals (especially regarding healthcare) do not go nearly far enough, but the budget as a whole represents a major break from the priorities of the Bush Administration. Though you would hardly know that from the geeky, matter-of-fact way it is being promoted by Budget Dirtector Peter Orszag (photo).

Budget documents are, of course, merely wish lists conveyed by the executive to the legislative branch. In the short term, the main impact of Obama’s blueprint will be to launch a massive wave of business lobbying. Now it is up to Congress to resist the entreaties of those paid persuaders and make it clear that the days of unchecked corporate giveaways have come to an end.

The Ugly Chinese?

When we hear about poor third world workers being exploited by a rapacious foreign corporation, we tend to assume the company is based in the United States, Europe or Japan. An article in the new issue of Bloomberg Markets magazine is the latest indication that we probably need to add China to that mental list.

Young Workers, Deadly Mines is a remarkable exposé by Simon Clark, Michael Smith and Franz Wild about child workers in the Democratic Republic of Congo (DRC) in central Africa. The DRC, formerly Zaire, is a mineral-rich country that suffered for more than a quarter-century under the kleptocratic Mobutu regime and then endured years of civil war that involved several neighboring countries. Some foreign companies enabled the violence by continuing to purchase gold and diamonds from militia groups.

Clark, Smith and Wild show that foreign business interests are once again profiting from the misery of the people of the DRC. The problem is concentrated in the Katanga region, which contains large deposits of copper and cobalt, two substance very much in demand on the international market. There, “freelance” miners, including young children, work crude, hand-dug mines to extract ore that is sold to middlemen, who in turn sell to nearby smelters run by Chinese companies such as Zhejiang Huayou Cobalt Nickel Materials Co. (logo). The cobalt is shipped to China and is ultimately sold to companies such as Sony and Samsung for use in making cellphone batteries. The child workers, toiling in hazardous and unsanitary conditions, earn the equivalent of about $3 a day.

The article reports that more than 60 of Katanga’s 75 mineral processing plants are owned by Chinese companies and some 90 percent of the region’s mineral output is sent to China, whose fast-growing economy has an insatiable appetite for raw materials. The Bloomberg Markets article notes that Chinese extractive companies are operating in a number of other African countries aside from the DRC, such as Zambia, Niger, Sudan, Ethiopia and Zimbabwe.

The latest Fortune Global 500 list contains 29 corporations based in China, including three with revenues in excess of $100 billion. We need to know a lot more about companies such as these and how they are behaving abroad as well as at home.

Giant Mining Firm’s Social Responsibility Claims: Rhetoric or Reality?

The recent decision by the U.S. Supreme Court to slash the damage award in the Exxon Valdez oil spill case and the indictment of Sen. Ted Stevens on corruption charges are not the only controversies roiling Alaska these days. The Last Frontier is also witnessing a dispute over a proposal to open a giant copper and gold mine by Bristol Bay, the headwaters of the world’s largest wild sockeye salmon fishery. Given the popularity of salmon among the health-conscious , even non-Alaskans may want to pay attention to the issue.

The Pebble mine project has been developed by Vancouver-based Northern Dynasty Ltd., but the real work would be carried out by its joint venture partner Anglo American PLC, one of the world’s largest mining companies. Concerned about the project and unfamiliar with Anglo American, two Alaska organizations—the Renewable Resources Coalition and Nunamta Aulukestai (Caretakers of the Land)—commissioned a background report on the company, which has just been released and is available for download on a website called Eye on Pebble Mine (or at this direct PDF link). I wrote the report as a freelance project.

Anglo American—which is best known as the company that long dominated gold mining in apartheid South Africa as well as diamond mining/marketing through its affiliate DeBeers—has assured Alaskans it will take care to protect the environment and otherwise act responsibly in the course of constructing and operating the Pebble mine. The purpose of the report is to put that promise in the context of the company’s track record in mining operations elsewhere in the world.

The report concludes that Alaskans have reason to be concerned about Anglo American. Reviewing the company’s own worldwide operations and those of its spinoff AngloGold in the sectors most relevant to the Pebble project—gold, base metals and platinum—the report find a troubling series of problems in three areas: adverse environmental impacts, allegations of human rights abuses and a high level of workplace accidents and fatalities.

The environmental problems include numerous spills and accidental discharges at Anglo American’s platinum operations in South Africa and AngloGold’s mines in Ghana. Waterway degradation occurred at Anglo American’s Lisheen lead and zinc mine in Ireland, while children living near the company’s Black Mountain zinc/lead/copper mine in South Africa were found to be struggling in school because of elevated levels of lead in their blood.

The main human rights controversies have taken place in Ghana, where subsistence farmers have been displaced by AngloGold’s operations and have not been given new land, and in the Limpopo area of South Africa, where villagers were similarly displaced by Anglo American’s platinum operations.

High levels of fatalities in the mines of Anglo American and AngloGold—more than 200 in the last five years—have become a major scandal in South Africa, where miners staged a national strike over the issue late last year.

Overall, the report finds that Anglo American’s claims of social responsibility appear to be more rhetoric than reality.  Salmon eaters beware.