Regulation

Think Irresponsible

volkswagen-clean-diesel-ad.w529.h352 In the competition among industries to see which can act in the most irresponsible manner, we have a new winner. After nearly a decade during which banks and oil giants like BP were the epitome of corporate misconduct, the big automakers are now on top.

The news that Volkswagen inserted devices in millions of its “clean diesel” cars to disguise their pollution levels is the latest in a series of major scandals involving car companies. It comes on the heels of criminal charges against General Motors for failing to report a safety defect linked to more than 100 deaths. The Justice Department, unfortunately, deferred prosecution of those charges in a deal that required GM to pay $900 million. That looks like a bargain compared to the possibility that the EPA could sock Volkswagen, which once employed an ad campaign called Think Small, with penalties of some $18 billion.

Last year, Justice announced a deferred prosecution agreement with Toyota that required the Japanese company to pay $1.2 billion to settle charges that it tried to cover up the causes of a sudden acceleration problem. Later that year, Hyundai and Kia had to pay $100 million to settle DOJ and EPA allegations that they understated greenhouse gas emissions from more than 1 million cars and trucks.

This past July, Fiat Chrysler was hit with by the National Highway Traffic Safety Administration with a fine of $105 million — a record for that agency, which long had a cozy relationship with the industry — for deficiencies in its recall of defective vehicles.

Even Honda, which once had a squeaky clean reputation, was fined $70 million earlier this year by NHTSA for underreporting deaths and injuries relating to defective airbags. Those airbags were produced by the Japanese company Takata, which resisted making changes in its production process despite incidents in which the devices exploded violently, sending shrapnel flying into drivers and passengers.

The ascendance of the auto industry to the top of the corporate wrongdoing charts is actually an encore for what was a long-running performance. During the 1960s, GM inadvertently gave rise to the modern public interest movement in its ham-handed response to the issues raised by a young Ralph Nader about the safety problems of its Corvair compact. The 1970s were the era of the Ford Pinto with its fragile fuel tanks that blew up in even mild rear-end collisions. The 1990s were marked by the scandal over defective tires produced by Bridgestone/Firestone.

Although carmakers were not in the forefront of corporate misbehavior during the past decade, the industry’s record was far from unblemished. In 2005 VW presaged its current problems when it paid $1.1 million to the Justice Department to settle allegations that it failed to notify regulators and correct a defective oxygen sensor in more than 300,000 Golfs, Jettas and New Beetles.

And to make matters worse, through these decades the auto giants kept up a drumbeat of criticism of supposed regulatory excesses and, in the cases of GM and Chrysler, did not hesitate to ask for large bailouts when their markets collapsed.

The American love affair with the automobile has also put us in bed with corporate irresponsibility on a major scale.

Bringing Regulatory Fines Into the 21st Century

In spite of perennial business complaints about regulatory overreach, for decades large corporations were able to break the law knowing that the potential financial penalties would inflict little pain. Typical fines were the commercial equivalent of parking tickets.

In recent years, the Justice Department has forced Corporate America to pay a higher price for its sins. Major banks, in particular, now have to consent to ten or eleven-figure settlements, such as Bank of America’s $16.7 billion payout last year.

DOJ, however, handles a limited number of cases. The question is whether the federal regulatory agencies are following suit in bringing penalty levels into the 21st Century.

I’ve been looking at the enforcement data for those agencies as part of the preparation for the Violation Tracker my colleagues and I will introduce this fall. The numbers are a mixed bag.

One agency that has apparently recognized the importance of substantial penalties is the National Highway Traffic Safety Administration. In July it imposed a civil penalty of $105 million on Fiat Chrysler for failing to carry out a recall of 11 million defective vehicles in a complete and timely manner. The penalty, the highest in the agency’s history, followed a $70 million penalty against Honda earlier in the year. In 2000 Chrysler (then owned by Daimler) was fined only $400,000 for a deficient recall.

By contrast, the Nuclear Regulatory Commission is still applying laughably low penalty amounts. The list of “significant enforcement actions” on its website shows only about three dozen cases in which any penalty at all was imposed in the period since 2009, and only five of those involved amounts above $50,000.

The NRC list appears not to have been updated recently, but a look at recent press releases by the agency show that penalty amounts continue to be modest. In April of this year, the agency fined a subsidiary of Dominion Resources all of $17,500 for security violations at a facility in Wisconsin.

Despite a series of significant accidents, the Pipeline and Hazardous Materials Safety Administration is still lagging in its penalty amounts. Since 2010 it has collected fines of $1 million or more in only three cases, and it still imposes penalties below $10,000 in some instances.

The Occupational Safety and Health Administration, which has a much larger jurisdiction than these other agencies, seems to have one foot in the past and a couple of toes in the present when it comes to penalty levels. As the AFL-CIO’s Death on the Job report points out, the average penalty per inspection is only about $10,000.

In a limited number of high-profile cases, OSHA brings out the big guns. When BP failed to live up to the terms of a settlement stemming from a massive explosion in 2005 at its Texas City refinery (photo) that killed 15 workers, the agency proposed penalties of $87 million (though it settled for $50 million after the company appealed).

Financial penalties by themselves are not a panacea for ending the corporate crime wave, but they are certainly part of the solution. And the bigger the better.

Addendum: Upon re-reading this post I realized I should have mentioned that agencies vary in the amount of discretion they have in setting penalties. In some cases maximum fines are determined by law. My point is that regulators should make full use of the power they have to set penalties as high as possible in cases of egregious offenses.

Big Coal’s War on Its Workers

helmets_wide-b8e68ac63c226846ea9705fcf6fc13535c1b2b2e-s800-c85 Fossil-fuel apologists have accused the Obama Administration of waging a war on coal in its effort to cut power plant greenhouse gas emissions. Yet the main source of the industry’s distress is the energy market, and the real war is the one coal companies have for years carried out against the health and safety of its workforce.

There’s no doubt that Big Coal is in trouble. One of the industry’s largest players, Alpha Natural Resources, recently filed for Chapter 11 bankruptcy protection, following the path taken by competitors such as James River Coal, Walter Energy and Patriot Coal. Financial weakness prompted the delisting of Alpha and Walter Energy from the New York Stock Exchange. Industry leader Peabody Energy has seen its share price tumble even before the current market tumult. It is now trading at around $2 a share, compared to $70 in 2011.

Given the outsize role played by coal in the climate crisis, it is difficult to work up much sympathy for the industry in its time of trouble. While it is tempting to simply let the dirty industry shrink towards disappearance, there needs to be a just transition for those who have risked their lives extracting the fossilized carbon from the ground.

The magnitude of that risk has been made clear to me recently in the preparatory work I’ve been doing for the Violation Tracker database my colleagues and I at Good Jobs First will release this fall. The initial version will cover penalties imposed by agencies such as the Environmental Protection Agency, the Occupational Safety & Health Administration and, most relevant to the current discussion, the Mine Safety & Health Administration.

Based on preliminary results, it now appears that coal mining companies will turn out to be among the corporations with the largest aggregate federal environmental, health and safety penalties during the past five years. The largest mining offender is Alpha Natural Resources, whose penalty tally will top $100 million.

That reflects the fact that Alpha is now home to two of the most controversial firms in U.S. mining history: Pittston Coal and Massey Energy. Pittston had a long record of environmental and safety violations before its operations were used in the creation of Alpha in 2002, but even more notorious was Massey, which was responsible, among other things, for the 2010 Upper Big Branch mining disaster in West Virginia that took the lives of 29 workers, the most fatalities in a U.S. coal accident in 40 years. In the wake of that disaster, which an independent report attributed to management failures, Alpha agreed to purchase Massey. We thus attribute Massey’s violations to it.

At least 20 other coal mining companies will show up in Violation Tracker with $1 million or more in total penalties. The largest amounts, in excess of $30 million each, will be linked to Murray Energy, whose head Robert Murray has vowed his firm will be the “last man standing” in the coal industry, and Patriot Coal.

Patriot, a spinoff from Peabody Energy, is a prime example of the vindictiveness of the coal industry toward miners. Its Chapter 11 filing earlier this year was its second in three years. In both cases the company has tried to use the bankruptcy court as a way to undermine its contractual commitments to United Mine Workers members and retirees, especially with regard to pension and health plan contributions. Its current move against worker benefits comes as the company, which is trying to sell off its assets, is awarding more than $6 million in executive bonuses.

A repeated health and safety violator and a raider of worker benefits. It’s hard to imagine anyone will be sad to see Patriot disappear.

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.

Preventing Death on the Job

dupont_laporte The Occupational Safety & Health Administration recently put DuPont on its list of severe violators and proposed fines totaling $273,000 in connection with last year’s chemical leak at a pesticide plant in La Porte, Texas that killed four workers. OSHA called the deaths preventable and accused DuPont of having “a failed safety program.”

This was a severe blow to a company that prides itself on having a “world-class” safety system and which thinks so highly of its skills in this area that it provides safety consulting services to other companies. DuPont expressed disappointment at OSHA’s actions.

The gap between (self) image and reality is nothing new at DuPont. The company’s claims to be a safety leader are not recent measures to address the fallout from the deadly accident in Texas. In his 1984 book America’s Third Revolution: Public Interest and the Private Role, former DuPont CEO Irving Shapiro called the company’s safety record “extraordinary” and made the preposterous claim that its employees “are safer on the job than at home.”

These statements flew in the face of safety problems at DuPont that extended back at least to the 1920s, when numerous workers were poisoned, some fatally, in connection with the production of tetraethyl lead for gasoline.

During the early 1970s, evidence began to emerge of high levels of bladder cancer among DuPont production workers, especially at the Chambers Works in New Jersey. Since at least the 1930s there had been evidence linking beta-nephthylamine (BNA), a chemical used in dye bases, to cancer. Yet the company went on producing BNA at Chambers until 1955, and after it was dropped DuPont went on making benzidine, another carcinogen, for ten more years.

In the years since Shapiro’s book, the safety problems have continued. In 1987 a New Jersey Superior Court jury found that DuPont officials and company doctors deliberately concealed medical records that showed six veteran maintenance workers had asbestos-related diseases linked to their jobs. Also in 1987, the company agreed to pay fines totaling $11,100 as part of a settlement of OSHA charges relating to record-keeping at plants in Dallas and Niagara Falls, New York.

In 1995 oil company Conoco, then owned by DuPont, agreed to pay $1.6 million to settle OSHA charges related to an explosion and fire the year before that killed a worker at a refinery in Louisiana.

In 1999 OSHA announced that DuPont would pay $70,000 to settle charges that it failed to record more than 100 injury and illness cases at its plant in Seaford, Delaware.

In 2010 OSHA criticized DuPont for exposing employees to hazardous chemicals at its plant in Belle, West Virginia, where a worker had died after a ruptured hose released a large quantity of phosgene gas. The following year, OSHA cited DuPont for dangerous conditions after a contract welder was killed when sparks set off an explosion in a slurry tank at a plant in Buffalo, New York. In 2012 the U.S. Chemical Safety and Hazard Investigation Board added its criticism of the company in connection with the Buffalo accident.

In short, the accident at La Porte, which had a history of previous violations, is far from an anomaly for DuPont. The only surprising aspect of the story is why OSHA did not come down on the company much harder.

Rena Steinzor, a University of Maryland law professor and author of the book Why Not Jail?, has posted an article criticizing OSHA for not seeking criminal charges against DuPont. The Corporate Crime Reporter notes that OSHA chief David Michaels, asked about Steinzor’s critique at a recent press conference, dismissed her piece but did not explain why the DuPont case did not merit a criminal referral to the Justice Department.

OSHA has long been reluctant to go the criminal route, relying instead on civil proceedings and ridiculously low financial penalties. In its latest Death on the Job report, the AFL-CIO notes that since the agency was created fewer than 100 criminal enforcement cases have been pursued. During this same period there have been more than 390,000 workplace fatalities.

The agency’s willingness to put a large company like DuPont on the severe violators list, which is dominated by smaller firms, especially in the construction industry, is a step forward. But OSHA will need to do a lot more to address the ongoing tragedy of workplace fatalities and disease.

Color-Coded Cancer Sticks

colorcodedcigs At the headquarters of Reynolds American (parent of R.J. Reynolds Tobacco) in North Carolina and the Virginia headquarters of Altria (parent of Philip Morris USA) time is apparently running backwards. The two companies just filed a lawsuit in DC federal court that reads like it was written in 1995, not 2015.

The target of the suit (15-CV-00544) is the U.S. Food and Drug Administration, which the companies apparently have forgotten was given authority by Congress in 2009 to regulate tobacco marketing, including the introduction of new products. That law came after years of vociferous opposition by Big Tobacco.

What has the companies up in arms is an FDA guidance document issued in March concerning review requirements for packaging changes. The agency takes the position that certain modifications in background color, logo and descriptors can be significant enough to trigger the stricter rules regarding new products.

Presenting themselves as victims of government overreach, the companies argue that their First Amendment rights are being violated: “FDA’s unlawful actions already have harmed Plaintiffs and threaten greater harms in the future by restricting Plaintiffs’ ability to modify their product labels without FDA preauthorization and by chilling and restricting protected speech.”

Although the case does not involve the federal warning labels that have been required for decades, it makes the puzzling argument that the FDA guidelines also violate the industry’s Fifth Amendment rights against self-incrimination.

While it is not unusual for big business to assert free speech rights to oppose regulations, this position is particularly galling when it comes from the tobacco industry. These are the companies, after all, that for decades concealed and denied the hazards of smoking, asserting it was their right to “believe” their products were non-addictive and did not cause cancer despite the mountain of evidence to the contrary. Their dishonest claims were made all the more fraudulent when documents came to light indicating that firms such as Brown & Williamson (now part of Reynolds American) knew about the dangers at least as far back as the early 1960s.

The issue of control over tobacco packaging was already fought, and the industry lost. In 2006 a federal court, finding that the industry had caused “an immeasurable amount of suffering,” ordered it stop labeling cigarettes with designations such as low tar, light and natural that gave the misleading impression that they were safe.

Tobacco companies began using techniques such as package coloring to get around the restriction. In 2010 a New York Times article on the practice quoted Prof. Gregory Connolly of the Harvard School of Public Health as saying the industry was “circumventing the law.” He added: “They’re using color coding to perpetuate one of the biggest public health myths into the next century.”

At the heart of the new case is the tension between public policies designed to discourage tobacco use and the continued existence of an industry which has to attract customers to survive. The industry’s lawsuit, with its assertion of free speech rights, proceeds from the assumption that producing and selling tobacco products is a legitimate activity. A more appropriate premise might be that tobacco is a public health menace that should be controlled as tightly as possible until the last smoker has kicked the habit and the companies can shut down.

Big Tobacco would do well to stop wrapping itself in the Bill of Rights and acknowledge that it is lucky it is still allowed to sell its deadly products at all.

Note: This piece draws from my new Corporate Rap Sheets on Reynolds American and Altria.

Smokeless Tobacco and Toothless Regulation

snus It took decades for the federal government to overcome tobacco industry deception and adopt warning labels for cigarette packages in the 1960s. It took three more decades before the Food and Drug Administration was given the authority to regulate both the content of tobacco products and their marketing.

Now a branch of the industry is seeking to turn back the clock with regard to a specific product. Swedish Match is petitioning the FDA to drop the customary dire warning requirements for its smokeless tobacco called snus, which is sold as small packages that the user tucks between the lip and the gums.

Giving in to the Swedish Match proposal for a “light” warning that in effect says that snus is not as harmful as cigarettes would begin to differentiate the regulation of different types of tobacco products. It would be a coup not only for Swedish Match but potentially for makers of e-cigarettes, who also claim to be selling something safer than regular cancer sticks. Swedish Match, by the way, does not sell cigarettes, but it does produce cigars and chewing tobacco.

Yet perhaps the worst impact of granting Swedish Match’s request is that it would begin to restore credibility to an industry whose level of irresponsibility is perhaps unmatched in the world of business. Let’s recall the history.

Warnings about the harmful effects of smoking date back at least to the early 1950s, when Reader’s Digest published a widely discussed article on the subject. Rather than address the underlying issues, Big Tobacco started promoting filtered cigarettes, especially the R.J. Reynolds brand Winston, as a supposedly safer alternative. Reynolds also tried to give a healthier allure to its unfiltered Camels with an ad campaign claiming they were smoked by more doctors than any other brand. Lorillard promoted its Micronite filter as the greatest protection in cigarette history (much later it came out that the filter contained asbestos).

The same thing happened after the publication of the famous 1964 Surgeon General report on the dangers of smoking. While refusing to acknowledge the growing body of evidence, the industry stepped up its marketing efforts and introduced new products, such as Philip Morris’s low-tar Merit brand, that deceived consumers into thinking they were less deleterious.

Along with the warning labels, Congress banned cigarette advertising on radio and television, yet the tobacco companies used other channels. Reynolds egregiously sought to hook youngsters with its ads featuring a friendly cartoon character named Joe Camel.

Philip Morris, whose parent company is now called Altria, took another tack that was also in its own way pernicious. Once it became clear that federal regulation was coming, the company jumped on the bandwagon but slowed it down by pushing for oversight only on marketing to children. The well-funded argument that smoking was a legitimate adult activity slowed the push toward more comprehensive regulation and caused countless deaths.

Although the industry eventually had to accept such regulation in the United States, it is doing its best to thwart protections elsewhere, especially in smaller and poorer countries. Philip Morris International, which was spun off by Altria into a separate company, has tried to bully nations such as Uruguay and Togo into abandoning strong anti-smoking policies by threatening to drag them into expensive legal proceedings under the auspices of the World Trade Organization.

Swedish Match may protest that it has not been involved in many of these practices, yet it is a dominant player in the market for chewing tobacco, which like cigarettes is linked to cancer. It is also worth noting that the company was built by Ivar Kreuger, whose financial empire turned out to be a Ponzi scheme that collapsed during the Great Depression.

Whether or not there are significant differences between the health effects of cigarettes and snus, federal officials should do nothing to weaken a regulatory system that remains vitally important for public health.

Note: This piece draws from my new Corporate Rap Sheet on Altria and Philip Morris International as well as a soon-to-be-posted one on Reynolds American.

Debunking Anti-Regulatory Rhetoric

dimon Belief in the infallibility of papal pronouncements is not as great as it used to be, but conservatives have lost none of their reverence for the statements of corporate executives. Nowhere is this clearer than in the new Congress, where Republicans seem preoccupied with addressing calls for regulatory “reform” from business leaders.

The vote in the House to begin gutting Dodd-Frank is the case in point. Conservatives appear to have taken to heart the dubious complaints by banks that they are being crippled by what are actually far from draconian restrictions.

JPMorgan Chase CEO Jamie Dimon is keeping up the drumbeat, telling reporters the other day that “banks are under assault.” Would that it were so. Dimon cited as “evidence” the fact that his institution needs to deal with multiple regulatory agencies: “You should all ask the question about how American that is, how fair that is.”

First of all, the fragmentation of bank regulation in the United States is an old issue that has nothing to do with the severity of the oversight. Several agencies treating banks with kid gloves do not amount to something more onerous than having one do so.

What makes Dimon’s laments all the more absurd is that they come from the head of a bank with an abominable track record. This is the bank that in 2013 had to pay $13 billion to settle federal and state allegations concerning the sale of toxic mortgage-backed securities. It is also the bank that suffered a $2 billion trading loss generated by a group of London-based traders that top management failed to rein in and that Dimon himself all but excused in a blustering appearance before a Congressional committee.

And it is the bank that a year ago paid $1.7 billion to victims of the Ponzi scheme perpetuated by Bernard Madoff to settle civil and criminal charges of failing to alert authorities about large numbers of suspicious transactions made by Madoff while it was his banker.

Criticisms of financial regulations coming from someone like Dimon should be accorded as much respect as denunciations of the racketeering laws coming from a mobster.

Another key source of overheated anti-regulation rhetoric is the U.S. Chamber of Commerce. The Washington Post’s Dana Milbank has published a funny but telling account of how top officials of the powerful trade association reacted when he asked them how their dire warnings about the threats to free enterprise posed by the Obama Administration squared with the recent good news about the economy.

Chamber President Tom Donohue and chief lobbyist Bruce Josten called Milbank “crazy” for saying that the Chamber had ever issued such warnings, with Donohue offering to buy the journalist lunch if he could produce such statements. Of course, Milbank goes on to reproduce several overwrought quotes.

It’s quite possible that the likes of Donohue and Josten are so used to speaking in exaggerated terms that they forget the meaning of their words.

Unfortunately, their acolytes in Congress, who receive those words wrapped in campaign contributions, take the messages all too seriously.

Prosecuting Corporate Culprits

Steinzor On December 18th, the national page of the New York Times contained two stories on atypical events in the business world. One was headlined “Pharmacy Executives Face Murder Charges in Meningitis Deaths” and the other “Chemical Company Owners are Charged in Spill That Tainted West Virginia Water.”

By all rights, articles like these should be as common as those reporting on the prosecution of warring gang members or drug kingpins. Actually, they should be more common, since street crime is declining while corporate malfeasance seems to be on the rise.

The reasons for the reluctant prosecution of corporate crime are carefully dissected in the new book Why Not Jail? Industrial Catastrophes, Corporate Malfeasance, and Government Inaction by Rena Steinzor (photo), a law professor at the University of Maryland.

Steinzor, who is also president of the Center for Progressive Reform, starts by pointing a finger at what she calls “hollow government,” by which she means “outmoded and weak legal authority, funding shortfalls that prevent the effective implementation of regulatory requirements, and the relentless bashing of the civil service.”

What makes the decline of health, safety and environmental regulation so troubling is that for quite a while the system was, Steinzor notes, working fairly well. Both the food and drug laws of the early 20th Century and the environmental and workplace health legislation of the 1970s were helping to reduce deaths and illnesses.

Yet by the beginning of the new century, regulatory agencies were becoming timid while industry opponents and their Congressional allies grew ever more aggressive and successful. Steinzor takes the Obama Administration to task for often putting politics above regulatory rigor and for allowing the OMB’s Office of Information and Regulatory Affairs to continue its traditional practice of weakening proposed rules.

Steinzor also excoriates the Justice Department for its widespread use of deferred prosecution agreements and non-prosecution agreements, both before and during the Obama Administration. She sees these techniques as exactly the wrong approach in addressing corporate culpability in situations such as the Massey Energy mine collapse and two disasters — the Macondo well blowout and Texas City refinery explosion — linked to BP.

Rather than letting corporations buy their way out of these situations with financial settlements and promises not to sin again, Steinzor shows how it is possible to basic use legal concepts such as recklessness and willful blindness to bring criminal prosecutions against culpable managers and executives, especially when “industrial activities cause grave harm to public health, consumer or worker safety, or the environment.”

This needs to be done not only at the federal level, but also by local prosecutors, who have the powerful but largely neglected weapon of state manslaughter laws at their disposal.

Steinzor acknowledges that it will be difficult to change the attitudes of prosecutors, who all too often go for the easier approaches.

Another obstacle is the reluctance prosecutors seem to have about bringing cases they think might threaten the continued existence of a large corporation, a phobia stemming from the demise of the Arthur Andersen accounting firm in 2002 in the wake of its criminal conviction for actions relating to the Enron fraud.

It is significant that the two prosecutions cited at the start of these piece involve executives at relatively small firms. Until we also see executives at Fortune 500 companies facing the risk of time behind bars, the current corporate crime wave will continue unabated.

Real Abuses, Sham Reforms

bosses_900 It is now a full century since the Progressive Era ended some of the worst abuses of concentrated economic power. This year is the 100^th anniversary of the Clayton Act and the Federal Trade Commission Act. It is 103 years since the dissolution of the Standard Oil trust, 108 years since the passage of the Pure Food and Drug Act.

Yet even a casual reading of the business news these days suggests that we live in an economy disturbingly similar to the age of the robber barons.

Back then, the trusts shifted their incorporation to states such as New Jersey and Delaware that were willing to rewrite their business laws to accommodate the needs of oligopolies. Today large corporations are reincorporating themselves in foreign tax havens to dodge taxes. The practice is reaching epidemic proportions in the pharmaceutical industry.

Back then, unscrupulous drug companies and meatpackers sold adulterated products that could sicken or even kill their customers. Today General Motors is caught in a growing scandal about ignition switch defects that resulted in at least 13 deaths. The news about the automaker’s recklessness grows worse by the day, with the New York Times now reporting that company withheld information from federal regulators about the cause of fatal accidents.

Back then, wheeler-dealers such as James Fisk peddled dubious securities in companies that later collapsed, impoverishing investors. Today we’re still trying to get over the impact of the toxic mortgage-backed securities that the big banks packaged and sold during the housing bubble. Just the other day, Citigroup became the latest of those banks to settle charges brought by the Justice Department. Yet the $7 billion extracted from Citi, like the amounts obtained from the other banks, will cause little pain for the mammoth institution and will thus do little to deter future misconduct. The provision in the settlement for “consumer relief” is too little, too late.

And, of course, back then, the trusts got to be trusts by eliminating their competition. Today concentration is alive and well. Recently, the second largest U.S. tobacco company, Reynolds American, proposed a takeover of Lorillard, the number three in the industry. If this deal goes through, it won’t be long before Reynolds tries to marry Altria/Philip Morris, putting virtually the entire carcinogenic industry in the hands of one player, the way it was a century ago during the reign of the American Tobacco Company, aka the Tobacco Trust.

The movement toward a Media Trust just accelerated with the revelation that Rupert Murdoch’s 21^st Century Fox, already huge, is seeking to take over Time Warner. The deal would put a mind-boggling array of entertainment properties under one roof. Murdoch offered to sell off Time Warner’s CNN – a meaningless concession given that the news network has struggled to survive against Murdoch’s despicable Fox News. Murdoch’s move comes as another media octopus, Comcast, is awaiting approval for its deal to take over Time Warner’s previously spun off cable business.

While we have all too many indications of a new Gilded Age, still scarce are signs of an effective response. We’ve got a good amount of muckraking journalism and a fair number of people (and even a few elected officials) who calls themselves progressives. Yet somehow this does not add up to a movement that can take a real bite out of corporate crime.

Part of the problem is that many of those in power professing progressive values are not serious about challenging corporate power. Some historians argue that the original Progressives were, like the New Dealers who came later, mainly concerned with saving capitalism from itself rather than changing the system. Yet they still managed to impose significant restrictions on big business through antitrust and other forms of regulation.

Today’s progressive officials often seem to want nothing more than to give the appearance of reform. That’s the story at the Justice Department, which has raised settlement levels and extracted some token guilty pleas but still allows corporations to buy their way out of serious legal jeopardy. Meanwhile, antitrust enforcement is tepid, and as the GM case increasingly shows, regulation is often a joke.

A resurgence of robber-baron behavior requires real, not sham reform.