October 2010 Archives

The Corporate Crime PAC

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

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

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

BP

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

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

Goldman Sachs

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

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

GlaxoSmithKline

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

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

Hewlett-Packard

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

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

American Airlines

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

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

Dell

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

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

Citigroup

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

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

Lockheed Martin

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

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

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

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

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

Corporations Want It All

Most of U.S. Big Business seems to be on a capital strike these days, refusing to invest and create new jobs. A notable exception is semiconductor giant Intel, which just announced that it will spend up to $8 billion upgrading its chip fabrication plants in the United States and build a new one in Oregon.

What’s odd is that Intel CEO Paul Otellini is just as critical of American economic policies, especially those promoted by the Obama Administration, as many other companies that use that vote of no confidence to justify their redlining of the USA. One of Otellini’s main gripes is that the United States provides too little in the way of tax breaks and other incentives to corporations compared to other countries. Speaking at a recent event at the Council on Foreign Relations, he proposed “that we take a page from others’ playbooks and provide attractive incentives for companies to build factories here that will employ our workers.”

This is a truly bizarre comment from the head of company that has received more in economic development subsidies than just about any other corporation in the United States. Over the past two decades, taxpayers in states such as New Mexico, Arizona and Oregon have underwritten the company’s rise to its dominant position in the semiconductor market.

New Mexico. The process began in 1993, when Intel announced plans for what was then an unprecedented $1 billion investment in a new chip plant, to be built in a suburb of Albuquerque called Rio Rancho. The company pressured local officials to provide what would ultimately amount to about $455 million in property tax abatements and sales tax exemptions on the equipment purchased for the facility.

Arizona. Soon after getting its way in New Mexico, Intel put the squeeze on officials in Arizona, where it proposed to build another plant in Chandler, a suburb of Phoenix. The company received some $82 million in property tax abatements, sales tax exemptions and corporate income tax credits. In 2005 Intel strong-armed the state to change the method by which it calculates corporate taxes to a system known as single sales factor, which allowed Intel and other companies with lots of property and a big payroll but relatively low sales in the state to enjoy enormous tax reductions.

Oregon. In 1999 Intel announced plans for a large expansion of its semiconductor operations in Oregon but made it clear that the investment was contingent on receiving a huge property tax abatement. Actually, what Intel was demanding was an extension of tax breaks it previously received in the state, where its manufacturing operations dated back to 1974. Those breaks were enabled by the state’s Strategic Investment Program (SIP), which was adopted in 1993 with Intel in mind. The company’s new SIP deal reduced Intel’s property tax bill by an estimated $200 million over 15 years. In 2005 Intel got the county to extend the property tax break to 2025, locking in an estimated $579 million in additional savings. In addition to these property tax breaks, Intel enjoyed a substantial reduction in corporate income taxes thanks to Oregon’s decision to join the single sales factor bandwagon.

So what is Otellini complaining about? Perhaps his real gripe is that the Federal Trade Commission sued Intel last December, charging that the company “illegally used its dominant market position for a decade to stifle competition and strengthen its monopoly.” The parties settled the case in August, with Intel agreeing to end some of the pressure tactics it applies to computer makers.

Yet it is likely that Otellini’s comments reflect a broader attitude on the part of Big Business. The Supreme Court ruling in the Citizens United case and the resulting flood of corporate money into the current electoral campaigns appear to have given CEOs like Otellini the idea that they are entitled – entitled to buy elections and entitled to have government policy oriented to their serve their every need. The way things are going, those corporate titans may get their wish.

Will the Tea Party Movement Turn on Corporate America?

Like many unlikely marriages, the relationship between the Tea Party movement and Big Business is complicated. There’s no question that corporate money, at least from the likes of billionaire David Koch, has bankrolled the movement via front groups such as Freedom Works and Americans for Prosperity.

A new film called (Astro)Turf Wars explores how “corporate American is faking a grassroots revolution.” Tea Party idol Glenn Beck has just embraced the U.S. Chamber of Commerce amid charges that it may be injecting foreign money into the midterm elections.

Yet the ideology of many Tea Partyers, to the extent it can be discerned, probably does not conform with mainstream corporate thinking. The movement may even be a threat to some vested business interests.

The misgivings of corporate types outside the Koch camp about the Tea Party phenomenon are becoming more apparent. As the Center for Responsive Politics points out, Tea Party-backed Republican Senatorial candidates are receiving most of their campaign contributions in small amounts from individuals rather than from the Chamber, business PACs and corporate executives. Business Week has just come out with a cover story headlined: WHY BUSINESS DOESN’T TRUST THE TEA PARTY.

The article dwells on the anxiety of many businesspeople about the erratic and loony aspects of the Tea Partyers. It notes that even in South Carolina the state chamber of commerce could not bring itself to endorse the Tea Party-backed candidate for governor, Nikki Haley.

Yet the potential for a major rift between Tea Partyers and Big Business is more than a matter of political style. Among the core principles espoused by all the Tea Party groups are fiscal responsibility and “free” markets. Although large corporations may talk a similar line, they often seek special benefits from government that undermine fiscal discipline and violate laissez-faire principles.

After all, it was the financial industry that created the necessity for and led the push for the TARP bailout that so enrages Tea Partyers. Big business also received many large government contracts and loan guarantees through the Recovery Act that is also vilified by the movement. Not to mention the fact that the big for-profit insurance companies and other players in the medical-industrial complex stand to make a lot of money from the non-single-payer health reform plan enacted by Congress.

For all the noise they are making, Tea Party candidates could not do much about these programs if they get elected. The real test will be whether rightwing insurgents decide to target the much wider range of pro-corporate tax and spending policies that permeate government at all levels.

Some corporate types are clearly worried about this. In September the Wall Street Journal reported that business leaders and lobbyists fear that Tea Party-backed Republican candidates would oppose “special tax breaks” that benefit various industries, ranging from agribusiness to NASCAR racetracks.

The potential for such a rupture in the unholy alliance between the Tea Party and corporations is one of the few bright spots in the otherwise gloomy political outlook. But rather than sitting back and waiting for this estrangement to happen on its own, we should be looking for opportunities to force the issue and perhaps even reach out to some of the more open-minded rank-and-file elements of the Tea Party world.

It would not be the first time that Left and Right tried to find common ground in opposing “corporate welfare.” Something of the sort happened in the late 1990s when Ralph Nader and Republican House Budget Committee Chairman John Kasich (who is now running for governor of Ohio) led an effort to identify federal giveaways to business that people across the political spectrum agreed should be eliminated.

That effort ultimately collapsed, but the potential for cooperation is stronger than ever, given the unprecedented market bailouts of the past few years. And as I can attest from my work with Good Jobs First, the issue of runaway corporate subsidies is especially urgent at the state and local level.

It is popular on the Left to assume that the Tea Party movement is little more than a giant front group for corporate interests. Yet it is also possible that David Koch’s money has created a monster that he and his henchmen will ultimately not be able to control.

Tracking Corporate Traitors

Not too many years ago, America was up in arms about offshore outsourcing. The news media were filled with reports of the wholesale migration of both white collar and industrial jobs to low-wage havens in Asia. The mood of panic was reflected in articles such as the March 2004 Time magazine cover story Is Your Job Going Abroad?

For most people these days, the outsourcing controversy has largely been forgotten or recalled only in the context of the new NBC sitcom situated in an Indian call center. But for the folks at the AFL-CIO, offshoring is neither a laughing matter nor a thing of the past. The labor federation and its community affiliate Working America have just released both a report and a database showing that the corporate practice of shifting jobs from the United States to cheaper foreign locales is still a burning issue for American workers and the American economy.

The report cites evidence that the use of offshoring is expanding in corporate America, though many companies have learned to be more discreet about it. The true extent of the job migration is difficult to determine, the report notes, because federal statistical agencies such as the Bureau of Labor Statistics and the Bureau of Economic Analysis are not set up to measure this kind of phenomenon accurately.

For those less inclined toward policy briefs and more concerned about conditions in their community, the AFL and Working America also released a new version of their Job Tracker database. It allows one to plug in a Zip code and see a Google map with pushpins indicating workplaces that have experienced job flight, as indicated by WARN Act filings, Trade Adjustment Assistance certification and other data sources. Job Tracker also shows which workplaces have been hit with health and safety violations (from the OSHA database), labor law violations (from the NLRB database) and employment discrimination violations (from the database of the Office of Federal Contract Compliance Programs).

This is a great resource for researching bad employers, whether or not they are moving jobs offshore. The site also has a feature allowing a user to recommend a company that should be featured on Job Tracker. It would be great to see it expanded even more to cover other forms of regulatory violations as well as key data such as government contracts and subsidies.

The Job Tracker is handy for finding out how employers in specific locations export jobs, but it is also helpful to see aggregate figures for corporate behemoths. The AFL/Working America report mentions the case of IBM, whose U.S. workforce dropped from more than 40 percent of the company’s worldwide total in 2005 to just over a quarter in 2009.

IBM is far from unique. Based on figures from its 10-K SEC filings, the U.S. share of General Electric’s workforce dropped from 51 percent at the end of 2005 to 44 percent at the end of 2009. During the same period, the U.S. share at Caterpillar fell from 52 percent to 46 percent. Even at Wal-Mart, celebrated for creating American jobs (such as they are), the U.S. share declined from 72 percent to 67 percent. For many corporations it is not possible to measure the trend, given that they choose not to give a geographic breakdown of employment in their 10-K or annual report.

The tendency of large U.S.-based corporations to invest and create low-wage jobs abroad is not a new story. But the decision by such companies to expand employment overseas at the expense of U.S. jobs during a period of severe recession at home amounts to a form of economic treason. In this way, the Job Tracker is not just a database but also a corporate crime detector.

Tiananmen Square Inc.

Large corporations don’t depend on China only for cheap labor; they also seem to be adopting the practices of that country’s repressive government in the treatment of dissidents. It has just come to light that oil giant Chevron is working with Houston authorities in the prosecution of shareholder activist Antonia Juhasz, who berated executives and directors at the company’s annual meeting last May over environmental and human rights issues.

Juhasz, author of the book Tyranny of Oil and editor of an alternative annual report on Chevron, was removed from the May meeting and arrested. Rather than dropping the charges after the disruption was over, Chevron has pursued the matter. At a recent court hearing, the company pushed for Juhasz to get jail time for criminal trespass and other charges.

What happened to Juhasz was not the first time an activist was ejected from an annual meeting for speaking out. In 2004 veteran labor activist Ray Rogers was wrestled to the ground by security guards and forcibly removed from Coca-Cola’s meeting after he forcefully criticized the company for its ties to paramilitary groups involved in the murder of trade union leaders in Colombia. He was threatened with arrest but not taken into custody.

The criminal prosecution of Juhasz is a troubling turn of events. Annual meetings are the one occasion when corporations are supposed to give the semblance of being democratic institutions. CEOs and board members should endure the protests and not try to take revenge on their critics.

Some might say that the likes of Juhasz and Rogers are out to disrupt annual meetings and that they should instead work through proper channels to get their point of view across. But corporations are trying to close that avenue as well.

Corporate interests are up in arms about the Securities and Exchange Commission’s decision in August giving shareholders new powers to nominate directors to corporate boards. The move marks the beginning of the end of non-competitive board elections that have much in common with the selection of leaders in China and the old Soviet Union.

Corporations tried mightily to prevent this intrusion of democracy into their affairs. As I noted a year ago, the corporate comments submitted to the SEC about the proposal raised some ridiculous objections. The Business Roundtable claimed that the rules would violate a corporation’s First Amendment rights by forcing it to include comments by outside candidates in its proxy statement.

McDonald’s Corporation fretted that shareholders might nominate someone “who may not have even met the existing members of the Board.” Sara Lee Corporation claimed that the change would result in directors who represented a special interest rather than the interests of all shareholders – conveniently forgetting that many directors have been chosen because of their affiliation with a financial institution or other entity that has a significant relationship with the company—a suspicious practice known as corporate interlocks or interlocking directorates.

Having lost in the rulemaking process, business groups are now taking the matter to court. The U.S. Chamber of Commerce and the Business Roundtable have challenged the SEC decision in the federal court of appeals in Washington. The two groups – whose legal team is led by Eugene Scalia, son the Supreme Court Justice – depict activist shareholders as a special interest whose ability to nominate board candidates would violate the First and Fifth Amendment rights of corporations. Their brief implies that the whole idea of proxy access is a plot by unions.

Echoing the current Republican talking point, they claim that the new rules would create “uncertainty.” They even play the recession card, saying: “We respectfully submit that stewardship of the national economy during these difficult economic times counsels strongly in favor of a stay.” They conclude by saying that a failure of the appeals court to put a stop to the proxy reforms would cause “irreparable injury” to public traded corporations.

At one time, such arguments would be laughed out of court. But in the current climate, with business rights being treated as sacrosanct, the challenge has a reasonable chance of success. Democracy may not be coming to Corporate America after all.