Regulation

Corporate Environmental Opportunism

“There is too much regulation and this is acting as a depressant on the economy.”

This statement could have been made by any one of the current Republican presidential contenders, but the words come from a press conference held by Ronald Reagan shortly after taking office in 1981.

Reagan used the event to announce the launch of his effort to weaken federal rules in areas such as environmental protection and occupational safety and health—moves that were supposed to encourage job creation.

Little has changed over the past three decades in the thinking of conservatives about the purportedly harmful effects of government oversight of industry and the magic of deregulation. After all, they have gotten a lot of political mileage out of Reagan’s aphorism that “government is the problem.”

What’s more interesting is the changing posture of business, the constituency on whose behalf the assault on regulation is said to be mounted. Three decades ago, there was no question that large corporations were ardent foes of agencies such as EPA and OSHA, and they promoted the idea that aggressive regulation destroyed jobs and curtailed economic growth. They also acted on those beliefs.

Richard Kazis and Richard Grossman opened their 1982 book Fear at Work: Job Blackmail, Labor and the Environment by recounting the announcement in 1980 by Anaconda Copper (then owned by the oil company Atlantic Richfield) that it was shutting down its smelter and refinery operations in Montana because they could not be retrofitted to satisfy environmental standards. The move eliminated 1,500 jobs.

Critics pointed out that Anaconda could have received a multiyear extension of its Clean Air Act compliance deadlines but had chosen not to apply for one, suggesting that it had other reasons for the shutdown. Nonetheless, Anaconda’s action served to generate hostility not toward the company but toward the EPA and environmental activists. Other large companies also stoked anti-regulation sentiments.

With the exception of a few diehards such as Koch Industries, today’s major corporations do not espouse Neanderthal views on environmental regulation. Almost all of them purport to have enlightened stances on issues such as air and water quality, climate change and recycling as part of overall company policies on corporate sustainability and responsibility (CSR).

BP, which purchased Atlantic Richfield in 2000, took a hit to its image during the Gulf of Mexico oil spill last year, but before that it had acknowledged that global warming was a problem and claimed to be going “beyond petroleum” by investing (modestly) in renewable energy sources. BP’s competitor Chevron also became a proponent of environmental protection and launched an ad campaign with the tagline “Will You Join Us” that was apparently meant to convey the idea that the oil giant is in the vanguard of efforts to save the earth.

Such positions are not limited to the petroleum sector. Retailing behemoth Wal-Mart has taken high-profile steps to reduce its carbon footprint and has pressured its suppliers to do the same. Toyota, General Motors and other auto giants have put increasing emphasis on hybrids and electric cars. Goldman Sachs, a CSR pioneer in the investment banking world, was the first Wall Street firm to adopt a comprehensive environmental policy (after being pressured by groups such as Rainforest Action Network). Ceres, a non-profit that focuses on sustainability issues, has several dozen Fortune 500 companies in its coalition.

Given all this high-minded corporate thinking on the environment, how can Republican candidates continue to portray regulatory rollbacks as the pro-business position? Or even, in cases such as Newt Gingrich and Michele Bachman, get away with calling for the abolition of the EPA?

A key reason is that big business, despite its claim to have embraced sustainability, is not willing to apply that principle in the public policy arena. CEOs are not speaking out against the EPA bashers or denying them PAC contributions.

This gets to the heart of what is wrong with CSR. It is a system of voluntary and selective actions that companies adopt, largely for public relations purposes—not mandated and enforceable directives imposed by democratic institutions. CSR cannot take the place of the EPA.

The absence of progressive corporate voices on environmental issues makes it easier for the likes of Gingrich and Bachman to make outlandish statements on regulatory matters. To make matters worse, President Obama implicitly endorsed the wrongheaded notion that environmental regulations stand in the way of job creation in his recent decision to prevent the EPA from implementing a long-planned stricter air quality standard for ground-level ozone emissions.

What more could Corporate America ask for? It gets to portray itself as environmentally friendly while reaping the advantages of regulatory rollbacks being promoted across the political spectrum. That’s opportunism on a grand scale.

Does the Debt Deal Make You Sick?

Sinking stock markets are not the only sign that the eleventh-hour debt ceiling deal was the wrong solution to the wrong problem.

The announcement by Cargill that it is recalling an astounding 36 million pounds of salmonella-tainted ground turkey products is a perfect symbol of the hazards of shrinking government.

During the debt ceiling debate, Democrats frequently portrayed themselves as defenders of social insurance programs such as Medicare and Social Security. That’s all well and good, but their willingness to go along with substantial cuts to the budgets of federal agencies can also have serious consequences.

Among those agencies are the Food and Drug Administration, and the Food Safety and Inspection Service (FSIS) of the Department of Agriculture. FSIS is responsible for protecting the public from illness caused by tainted meat, poultry and egg products. FDA oversees safety issues for other food groups.

These agencies should be sacred cows, so to speak, but many of the anti-government yahoos now in Congress seem to view food safety regulations as an encroachment on the free market and personal liberty. Even before the new debt deal, this function was being targeted.

Last year, in the wake of incidents involving widespread contamination of eggs, peanut butter and spinach, Congress tightened food safety regulation and gave more authority to the FDA. The agency was finally given the power to issue mandatory recalls rather than depending on producers to withdraw dangerous products voluntarily. As soon as the law passed, rightwingers were moving to undermine it.

In December, Rep. Jack Kingston of Georgia, then the ranking member and now the chair of the appropriations committee overseeing the FDA, said that the number of food-borne illnesses in the country did not justify the cost of the new law. Kingston, whose website bio brags that he has “fought to lower taxes, balance the budget, and reduce government interference in our lives,” criticized the legislation as “overreach” and vowed to cut food safety spending to make it difficult to implement the new rules.

Kingston and his colleagues made good on that threat in June, when the Republican majority in the House voted to cut $87 million from the FDA budget and $35 million from FSIS.

The rightwing effort to eviscerate federal food regulation is justified with the assumption that corporate food producers are willing and able to monitor themselves. This assumption perseveres despite the dismal track record of the industry.

Take Cargill. Its current turkey problem is far from an anomaly for the company. Over the past decade or so, it has been involved in a series of recalls in its meat and poultry operations such as the following:

August 2010: recalled 8,500 pounds of ground beef after an outbreak of a rare strain of E.coli bacteria was traced to a company plant in Pennsylvania.
December 2009: subsidiary Beef Packers Inc. recalled 22,000 pounds of ground beef after an investigation of salmonella was traced to a company distribution center in Arizona.
October 2009: recalled 5,500 pounds of beef tongues because the tonsils may not have been completely removed, leaving in tissue that raises the risk of “mad cow” disease.
November 2007: recalled more than 1 million pounds of ground beef suspected of being tainted with E.coli.
April 2004: subsidiary Excel recalled 45,000 pounds of ground beef suspected of being tainted with E.coli.
October 2002: recalled 2.8 million pounds of ground beef suspected of being tainted with E.coli.
December 2000: recalled more than 16 million pounds of packaged poultry linked to an outbreak of listeria.

And this is the dismal record of an industry leader with more than $100 billion in annual revenues, not a fly-by-night operator without the resources to maintain decent standards in its operations.

Rep. Kingston likes to declare that the U.S. food supply is “99.99 percent safe.” That apparently fabricated figure does not change the fact that, according to the Centers for Disease Control, 48 million Americans are sickened by tainted food each year, of whom 128,000 are hospitalized and 3,000 die.

Debates over the proper levels of federal spending and regulation are typically framed in abstractions, but they can become a matter of survival. When Patrick Henry said “give me liberty or give me death,” I doubt he meant he would give his life for the right of a giant corporation to sell contaminated food without government interference.

An Indictment of the Financial Sector

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

A critical researcher’s dream.

Aiding Corporate Outlaws

In a move akin to asking burglars for suggestions on how to make security systems less effective, Rep. Darrell Issa, chairman of the Oversight and Government Reform Committee in the new Republican-dominated House of Representatives, is consulting corporations and trade associations on regulatory policy.

Seeking to revive the anti-regulatory fervor of the Reagan era, Issa is throwing around fabricated numbers ($1.7 trillion) about the cost of business compliance with government rules and bogus claims about the negative impact of regulation on job creation. And in an unambiguous signal that corporate interests are now to be considered paramount, he has been sending letters to scores of companies and associations asking for their deregulatory wish lists.

Issa’s office declined to disclose a complete list of those sent the love letters, but Politico reports that the recipients include trade groups such as the National Association of Manufacturers and the American Petroleum Institute, and individual companies such as Toyota, Duke Energy, Bayer and FMC Corp.

Of all these names, FMC is probably the least well known, but it is a good example of the kind of corporation that will probably benefit the most if Issa and his colleagues have any success – i.e. a company with an abysmal track record.

FMC is a $3 billion chemical company that produces pesticides, insecticides, herbicides and specialty chemicals for food processing and other industries. Headquartered in Philadelphia, the company dates back to the invention of an insecticide pump by John Bean in the 1880s. From the 1920s onward it functioned as a conglomerate, acquiring a wide range of food processing and chemical firms (it was also a military contractor for a period of time).

It was through these acquisitions that FMC assumed responsibility for some of the most hazardous production facilities and waste sites in the country. For example:

In 1977 FMC’s South Charleston, West Virginia plant was shut down under court order for discharging carbon tetrachloride (used in cleaning agents) into drinking-water supplies of communities along with Kanawha and Ohio rivers. After FMC and two of its executives were indicted in federal court on charges of conspiring to conceal excessive discharges at the plant, the company agreed to pay a fine of $35,000 and to place $1 million in escrow to finance future water pollution studies. In 1983 an explosion at the plant killed one worker and injured three others. OSHA later determined that safety violations by the company contributed to the conditions that caused the accident.

In 1983 FMC agreed to spend $6 million to clean up a hazardous waste site in Minnesota that threatened the drinking water supply of Minneapolis. The cleanup at the munitions plant in the town of Fridley, where chemical wastes were buried for more than two decades, involved the treatment of up to 58,000 cubic yards of soil for contaminants such as trichloroethylene.

In 1995 about 6,250 pounds of phosphorus trichloride spilled from an overfilled tank onto the ground, reacted with rainwater and sent a toxic cloud of hydrochloric acid from the FMC plant in Nitro, West Virginia.

In 1998 the EPA fined FMC $209,600 for underreporting Toxic Release Inventory data related to a phosphorous processing plant on the Shoshone-Bannock Fort Hall Reservation near Pocatello, Idaho. Later that year, FMC and the EPA reached agreement on a consent decree to resolve other violations at the plant by requiring the company to spend approximately $158 million on remedial measures. FMC also agreed to a penalty of $11.8 million, a record at the time for violations of the Resource Conservation and Recovery Act.

In 1999 FMC reached agreement with the EPA and the Justice Department regarding the cleanup of the Avtex Fibers Superfund site in Front Royal, Virginia, which FMC owned and operated from 1963 to 1976. Avtex bought the facility in 1976 but shut it down in 1989 under the weight of some 2,000 environmental violations related to many years of contamination with asbestos, lead and other toxic substances. FMC agreed to spend about $100 million for the clean-up of the site, considered the biggest environmental problem area in the state.

By 2000, FMC had been named as a potentially responsible party in connection with about 30 locations on the federal government’s National Priority List of hazardous waste sites.

Add to all of this FMC’s involvement over the years in cases involving price fixing, sex discrimination, defrauding the federal government and other violations of laws and regulations. In 2000 it paid $80 million to settle a whistle-blower lawsuit challenging the safety of the Bradley Fighting Vehicles the company was producing for the U.S. Army.

In recent years FMC has restructured itself, spinning off many of its operations. But it continues to battle with the federal government over regulatory issues. Its biggest fight has concerned the controversial pesticide carbofuran, sold by FMC under the name Furadan. In 2006 the Bush EPA finally acknowledged the product was so dangerous for humans and for animals that it should be completely banned, as the European Union has done. The slow process of removing the product from the market has continued ever since, with FMC kicking and screaming in protest.

The company has been largely unsuccessful in its legal challenge up through the appellate level and has been considering an appeal to the U.S. Supreme Court. It may now hope for relief from Congress instead.

The deregulatory juggernaut is nothing more than an effort to aid and abet the country’s worst corporate outlaws. We’ll be in big trouble if Issa and his ilk succeed.

Full Graphic Disclosure

Forget Joe Camel and the Marlboro Man. Federal regulators want people to think of disease, birth defects and death when they pick up a package of cigarettes. The Food and Drug Administration, implementing legislation passed by Congress last year, has just released three dozen proposed enhanced warning labels that manufacturers would have to print on each pack of cancer sticks.

In the place of the plain text warnings that have appeared on tobacco packaging for years, these labels would be much larger and much more visually striking. The proposals include, for example, photos of a smoker in an open coffin, a mother blowing cigarette smoke at her infant child, and a sickly cancer victim.

The main objective of the warnings is to encourage existing smokers to quit and the dissuade children from picking up the dangerous habit. But apart from consumer behavior modification, the labels can be seen as a form of disclosure—disclosure of the harmful effects of a product.

The need for bold messages about deleterious aspects of the things we buy is not limited to cigarettes. It might make sense to apply the FDA’s approach to a whole range of goods and services. For example:

SUV models shown to be prone to rollovers should come not just with a plain-text sticker showing miles per gallon, but also full-color photos of mangled vehicles with bleeding drivers and passengers.
Electric bills sent by utilities relying on coal-fired power plants should be required to include photographs of floods, droughts and other effects of catastrophic climate change.
The pumps at gas stations should be adorned with photographs of oil spills and refinery disasters.
A variety of products sold by Wal-Mart should have packaging containing images of the oppressive Chinese sweatshops in which they were produced.
Stores selling gold jewelry should display photographs showing the despoiled land around the cyanide-leaching facilities in which the precious metal is mined.
Producers of dangerous pharmaceuticals should be required not just to mention possible injurious side effects, which most people have tuned out, but to show images of actual victims.
Health insurance providers should have to send out pictures of policyholders who died because an expensive treatment was rejected by the company.
Perhaps manufacturers of the worst junk food should be required to air commercials with actors who are morbidly obese.
And, of course, gun sellers should have to hand out gory photos of victims of accidental discharges.

Given the exalted status of commercial free speech in this country, these ideas could never come to pass. Yet there is still a serious issue to address: How do we turn dry data about corporate harms into messages people pay attention to?

The objective, however, is not just to change consumer behavior but also that of producers. All disclosure is meant to highlight an activity that is subject to abuse and hopefully curb those abuses. The Environmental Protection Agency’s Toxics Release Inventory is designed to get manufacturers to clean up their production processes – and has had a positive impact. Campaign contribution disclosure is meant discourage the big-money takeover of elections (there’s obviously been a lot less progress on that front, especially now that much corporate electoral spending can take place anonymously). Disclosure of executive compensation is supposed to check the relentless march toward lavish CEO salaries, bonuses and stock options (another less than rousing success).

The fact that disclosure does not immediately cure the problem it is meant to highlight does not undermine the case for transparency. It may simply mean that the form of the disclosure is not compelling enough. That’s the beauty of the FDA approach to cigarettes.

In replacing the misleading feel-good images that marketers have long sought to associate with even the most noxious products, the aggressive warning labels begin to force corporations to be honest about what they sell and consumers to come to grips with the true nature of much of what they consume. This form of anti-advertising may begin to liberate us from the illusions of our manufactured desires.

The Dark Side of Family Business

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

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

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

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

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

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

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

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

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

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

Stealth Disclosure

The Congressional practice of quietly attaching an unrelated provision to a larger piece of legislation at the last minute has all too often been used to benefit powerful corporate interests. In two recent cases, however, the stealth amendment process has resulted in changes that will make it easier to monitor questionable business practices by energy companies and federal contractors.

Extractive industries are complaining about language (Section 1504) slipped into the new financial reform bill that will require them to report on royalties and other payments to governments. The aim is to make it harder for those corporations to conceal bribes and other illegal transfers used to obtain petroleum or mining concessions and that often prop up corrupt regimes such as the one in Equatorial Guinea. The provision, based on a bill that had been introduced by Senators Benjamin Cardin of Maryland and Richard Lugar of Indiana, applies to publicly traded oil, gas and mining companies whose shares trade in the United States.

The law is a victory for groups such as Publish What You Pay, which has long campaigned to increase the transparency of energy corporation dealings with governments around the world. The campaign has already succeeded in getting some firms to disclose the information voluntarily, but it will be much better to have it mandated and overseen by the Securities and Exchange Commission, which will write rules covering the inclusion of the information in financial statements.

That’s why trade associations such as the American Petroleum Institute and companies such as Exxon Mobil are grousing about the law. An API spokesperson told the Wall Street Journal that Russian and Chinese oil companies not subject to the requirement “could use the data to outfox U.S. companies in deals.”

Dubious complaints are also being heard from Beltway Bandit mouthpieces in response to a swift move by Sen. Bernie Sanders of Vermont to insert a provision in the recently passed supplemental appropriations bill giving the public access to a database about contractor performance – which in many cases means contractor misconduct.

The database is the Federal Awardee Performance and Integrity Information System (FAPIIS), which was mandated as a result of 2008 legislation enacted thanks to the efforts of groups such as the Project On Government Oversight (POGO), which has its own Federal Contractor Misconduct Database covering the 100 companies doing the most business with Uncle Sam. FAPIIS is supposed to make it easier for federal agencies to review the track record of a much wider range of companies bidding on new contracts worth $500,000 or more. In addition to contract performance information collected from various federal sources, FASPIIS includes data submitted by companies with more than $10 million in contracts or grants on any criminal, civil or administrative proceedings brought against them during the previous three years.

FAPIIS was an important step forward, but it was able to get through Congress only after its sponsors agreed to restrict access to the database. POGO tested the provision by filing a FOIA request with the Pentagon for its FAPIIS information but was shot down.

A short time later, however, it came to light that the Sanders amendment survived in the supplemental spending bill President Obama signed on July 29. The provision will give the public access to FAPIIS information about contractor track records, but unfortunately it excludes past contract performance reviews by federal agencies.

Already, the Professional Services Council, the leading trade association of federal contractors, is warning that making parts of FAPIIS public “could create a politically motivated blacklist of vendors.” The PSC seems to believe that the public should not have the ability to pressure the federal government to stop doing business with crooked companies.

Speaking of blacklists, the FAPIIS change comes on the heels of an announcement by the Obama Administration that it is creating a master Do Not Pay database covering individuals and businesses that should not be receiving payments from federal agencies. At a time of growing hysteria about the federal deficit, it is good to see that attention is being paid to ways of cutting costs that are truly wasteful.

Obama’s Oil Magic

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

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

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

In other words: Abracadabra, the oil is gone.

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

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

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

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

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

A Business Backlash?

By all rights, the laissez-faire crowd should be silent these days. Recent months have been marked by one example after another of the perils of deregulation and the folly of trusting large corporations to do the right thing. From Toyota to Goldman Sachs to Massey Energy to BP, 2010 has been the year of big business irresponsibility.

As in 2002 (after the accounting scandals involving Enron, WorldCom et al.) and 2008 (the meltdown of Wall Street), we’re now at one of those moments, following an outbreak of corporate misconduct, in which public sentiment about business is up for grabs, as is public policy.

The business camp is already working hard to regain support, in ways ranging from BP’s seemingly benign vow to “make things right” to Rep. Joe Barton’s shameless “shakedown” outburst designed to turn the Obama Administration into the villain. Here are some other signs that corporations and their defenders are already going back on the offensive:

A federal judge with personal investments in the petroleum industry struck down the Obama Administration’s moratorium on deepwater drilling, despite evidence brought to light by Congressional investigators that the practice is much more dangerous than we had been led to believe and none of the oil giants have adequate accident response plans. The challenge to the moratorium had been brought by smaller oil service firms, but the judge’s decision was hailed by majors such as Chevron and Royal Dutch Shell.
Massey Energy, apparently hoping for a like-minded judge, has filed suit against the federal Mine Safety and Health Administration in a brazen effort to pin the blame on regulators for the April explosion at the Upper Big Branch mine in West Virginia that killed 29 workers.
Verizon Communications CEO Ivan Seidenberg, the current head of the Business Roundtable, recently gave a speech in which he challenged regulatory initiatives in the telecom and financial sectors, criticized efforts to limit tax avoidance by multinational companies, and declared: “It’s time for us all to raise our game and embrace the power of the private sector that will create real value and real growth for our country.”

If business advocates are emboldened to speak out so soon, that suggests that corporations have not been reprimanded adequately for their misconduct. The criticism expressed by the Obama Administration and Congressional Democrats has had a ritualistic quality about it—a Kabuki dance of disapproval that may not result in any real change.

Even the $20 billion BP escrow fund feels inadequate, given the fact that there is no end in sight to the disaster. Although BP’s shareholders are agonizing over the suspension of the dividend payment, the company itself does not seem very put out by the creation of the fund, especially since it is being allowed to spread out the cost over several years.

The ability of BP to buy its way out of the crisis contributes to the sense that large corporations can do the most outrageous things and emerge relatively unscathed. It is unlikely that the forthcoming criminal case against the company will cause much more discomfort. The company has already been through that process with previous disasters involving oil spills in Alaska and a deadly refinery explosion in Texas. It paid the resulting penalties with no problem, and the fact that it was put on probation has had little practical effect.

What’s needed is a more dramatic response to corporate negligence. It might be the arrest of a top executive or an announcement that the federal government will no longer do business with companies with serious regulatory violations or an antitrust initiative to try to break up large firms which think that their size somehow makes them above the law. Only then might corporations think twice about lashing back and returning to business as usual.

BP’s Partner in Crime

The liability costs stemming from the ongoing environmental disaster in the Gulf of Mexico are likely to be in the tens of billions of dollars. BP, of course, will bear the brunt of those costs, but other deep pockets should not be ignored. Transocean, the owner of the rig where the initial explosion occurred, and Halliburton, which was supposed to seal the well with concrete, will both be targeted.

But we shouldn’t forget that BP is not the sole owner of the underground well, known as Macondo, that continues to spew large quantities of crude oil into the sea. The biggest minority holder, with a 25 percent share, is Anadarko Petroleum, which is a major offshore driller in its own right and has ties to major controversies in the energy industry. The company is worth a closer look.

Anadarko was formed in 1959 as a subsidiary of Panhandle Eastern Pipe Line Company, which used the entity to get around Federal Power Commission limitations on the price it could charge on natural gas produced from properties it owned in the Anadarko Basin in Texas, Oklahoma and Kansas. Anadarko got involved in offshore exploration in 1970. Among its early project partners was Amoco, which would later (1998) be acquired by BP.

By the 1990s Anadarko was a major player in the Gulf of Mexico. During the following decade the company became better known (and much larger) after acquiring Union Pacific Resources and then Kerr-McGee, which had pioneered offshore petroleum exploration in the late 1940s. The latter acquisition, in particular, saddled Anadarko with a dubious legacy.

In the 1970s Kerr-McGee was embroiled in a scandal over accusations of serious safety violations and falsification of records at its nuclear fuel plant in Oklahoma. The controversy escalated after the whistleblower in the case, technician and union activist Karen Silkwood, died under suspicious circumstances in 1974. Silkwood’s family sued the company for causing her to be contaminated with plutonium. In 1986 Kerr-McGee paid $1.38 million to settle the case after a jury award of $10.5 million had been overturned on appeal.

Two decades later, Kerr-McGee mounted a court battle to prevent the federal government’s Minerals Management Service from restoring royalty rates paid by offshore drillers to reasonable rates after they had been reduced by Congress when energy prices were low in the mid-1990s. The case, which was resolved after Anadarko completed its acquisition of Kerr-McGee, could cost U.S. taxpayers, according to a Government Accountability Office estimate, more than $50 billion.

While Kerr-McGee was pursuing its case it was also defending itself against a whistleblower suit charging that the company had cheated the federal government out of millions of dollars in offshore drilling royalties by underreporting its output. In January 2007 a federal jury found the company guilty, but the judge in the case later overturned the verdict on a technicality.

Anadarko’s own record is not unblemished. Last year it and two related companies paid $1.05 million in civil penalties and agreed to spend $8 million in remedial actions to resolve charges that they violated the Clean Water Act by discharging harmful quantities of oil from a production facility in Wyoming. Two years earlier the company was fined $157,500 by the EPA for destroying wetlands in southwest Wyoming. Anadarko is also heavily involved in natural gas drilling in the Marcellus Shale in the northeastern United States, which is viewed as a serious threat to drinking water supplies. Its joint venture partner in the shale operations is Mitsui, which is also the third partner (with a 10 percent stake) in the Macondo well.

Anadarko does not appear to have had any role in operational decisions at that ill-fated Macondo well, but the company is separately involved in its own deepwater drilling activities in the Gulf of Mexico that were temporarily shut down as a result of the moratorium announced by President Obama. While BP rightfully remains the primary target of legal and other responses to the gulf disaster, Anadarko – both by virtue of its ownership interest in Macondo and its own risky drilling – also deserves to feel some of that pain.