Archive for February, 2019

A Reputation for Purity is Now in Tatters

Thursday, February 21st, 2019

For the tens of millions of baby boomers in the United States, the first large corporation whose products they encountered was probably Johnson & Johnson. That’s because the vast majority of parents in the postwar period used the company’s baby shampoo, oil and powder on their precious bundles of joy. Carefully cultivating an image of purity, J&J established itself as an indispensable part of infant care.

That image is now in tatters. The company just disclosed that it is being investigated by the Justice Department, the Securities and Exchange Commission and Congress in connection with possible asbestos contamination of its baby powder and other talc-based products. These probes were prompted by investigative reporting in outlets such as the New York Times alleging that J&J executives raised internal concerns about the asbestos issue decades ago but the company never acknowledged these publicly.

These revelations gave more credence to thousands of lawsuits filed against J&J in recent years by women, including many who used the company’s baby powder on themselves as well as their infants, charging that the products caused them to develop ovarian cancer. J&J has been losing a lot of these cases, including one in which a jury awarded $4.7 billion in damages to a group of 22 women.

Rarely has a product’s reputation fallen so far, and rarely has a company once held in such high esteem come to be regarded as morally equivalent to cigarette manufacturers. Yet a closer look at J&J’s track record shows that its immaculate reputation has been deteriorating for quite some time.

Over the past decade the company has been involved in a series of scandals and has been forced it to pay out large sums in civil settlements and criminal fines.

The most serious of those cases involved allegations that several of its subsidiaries marketed prescription drugs for purposes not approved as safe by the Food and Drug Administration, thus creating potentially life-threatening risks for patients.

For example, in 2013 the Justice Department announced that J&J and several of its subsidiaries would pay more than $2.2 billion in criminal fines and civil settlements to resolve allegations that the company had marketed it anti-psychotic medication Risperdal and other drugs for unapproved uses as well as allegations that they had paid kickbacks to physicians and pharmacists to encourage off-label usage. The amount included $485 million in criminal fines and forfeiture and $1.72 billion in civil settlements with both the federal government and 45 states that had also sued the company.

Other J&J problems resulted from faulty production practices. During 2009 and 2010 the company had to announce around a dozen recalls of medications, contact lenses and hip implants. The most serious of these was the massive recall of liquid Tylenol and Motrin for infants and children after batches of the medication were found to be contaminated with metal particles.

The company’s handling of the matter was so poor that its subsidiary McNeil-PPC became the subject of a criminal investigation and later entered a guilty plea and paid a criminal fine of $20 million and forfeited $5 million.

J&J also faced criminal charges in an investigation of questionable foreign transactions. In 2011 it agreed to pay a $21.4 million criminal penalty as part of a deferred prosecution agreement with the Justice Department resolving allegations of improper payments by J&J subsidiaries to government officials in Greece, Poland and Romania in violation of the Foreign Corrupt Practices Act. The settlement also covered kickbacks paid to the former government of Iraq under the United Nations Oil for Food Program.

All of this has been a humiliating comedown for a company that was once regarded as a model of corporate social responsibility and which set the standard for crisis management in its handling of the 1980s episode in which a madman laced packages of Tylenol with cyanide. While the company was then being victimized, in the subsequent crises it mainly has itself to blame. Off-label marketing, faulty production practices and foreign bribery are bad, but the current scandal over asbestos contamination and the alleged cover-up pose a threat to the survival of the company.  

A Major Rebuke to Corporate Arrogance

Thursday, February 14th, 2019

New York City’s progressive elected officials, unions and community activists have just delivered what may be the most remarkable rebuke to corporate influence ever seen in the United States. In forcing Amazon.com to drop its plan for a satellite headquarters campus with 25,000 employees, arranged through a deal including some $3 billion in subsidies, progressives have up-ended a decades-old dynamic in which large corporations have used job creation promises to get state and local officials to hand over vast amounts of taxpayer funds to underwrite private business expansion.

Traditionally, opponents of big subsidy deals were accused of being job killers and of ruining the “business climate.” Amazon’s opponents in New York overrode those criticisms with their arguments that the giant retailer did not need or deserve enormous tax breaks and that the city should be devoting its financial resources to more pressing public needs.

Part of what fueled the opposition was Amazon’s reputation as a low-road employer, especially in its distribution centers. The company made no attempt to hide this fact. When asked during a city council meeting whether Amazon would remain neutral during any organizing drives at its facilities, a company executive quickly replied: “No.”

What also helped is that New York’s economy is far from desperate and is much larger than the arenas in which Amazon is used to operating. For many places, the prospect of thousands of jobs could be a matter of survival. That’s why southeastern Wisconsin was willing to offer Foxconn billions in subsidies for a flat-screen plant that probably will never be built.

In New York, 25,000 jobs were seen less as the basis for an economic transformation and more as a recipe for a worsening of the city’s severe housing and transit problems. The side effects of a major project, which in the past were usually an afterthought, in this case took center stage.

More broadly speaking, what probably did Amazon in was its arrogance. It had spent more than a year conducting an elaborate HQ2 competition in which officials from more than 200 localities eagerly participated. Amazon came to view itself as kind of corporate divinity, to which communities were supposed to bow down.

Although Gov. Cuomo and Mayor de Blasio were among those participants, the people of New York were a lot less inclined to play the game. They simply could not understand why a megacorporation controlled by the wealthiest man in the world needed a handout from them in order to expand its operations. By scorning Amazon, New Yorkers are sending a powerful message to all large corporations: you should no longer assume that by dangling dubious promises of job creation you can raid public resources and ignore the social impacts of your expanded operations.  Ask not what our communities can do for you, ask what you can do for us.

Trump’s Muddled Class Warfare

Thursday, February 7th, 2019

Among the various roles played by Donald Trump during his State of the Union address was that of class warrior. He described a divide between “wealthy politicians and donors” living in gated communities while supposedly pushing for open borders and “working class Americans” who are “left to pay the price for illegal immigration—reduced jobs, lower wages, overburdened schools, hospitals that are so crowded you can’t get in, increased crime, and a depleted social safety net.”

Trump’s efforts to stir up worker resentment focus almost exclusively on situations in which foreigners can be depicted as the real culprits. He has no difficulty demonizing undocumented immigrants or the Chinese government, yet he rarely has any critical words for the traditional targets of populist anger: the super-wealthy and powerful corporations. On the contrary, those interests have enjoyed a privileged place during the Trump era, receiving lavish benefits in the form of tax breaks and regulatory rollbacks.

The latest example of the latter came less than 24 hours after Trump concluded his remarks in the House chamber. His Consumer Financial Protection Bureau announced plans to gut restrictions on payday lenders that were developed during the Obama Administration and were scheduled to take effect later this year.

The new rules were designed to put the responsibility on lenders to make sure their customers could afford the loans they were being offered. This was seen as a necessary safeguard in an industry notorious for charging astronomical interest rates to vulnerable customers who frequently ended up with massive debts after rolling over a series of short-term loans.

Prior to being neutered by the Trump Administration, the CFPB conducted a series of enforcement actions against payday lenders for egregious practices. For example, in 2014 the bureau brought a $10 million action against ACE Cash Express, alleging that the company “used illegal debt collection tactics – including harassment and false threats of lawsuits or criminal prosecution – to pressure overdue borrowers into taking out additional loans they could not afford.”

Payday lending has effectively been outlawed in about 20 states, but the Obama-era rules would have made a big difference in the rest of the country where the disreputable business is still allowed to function with annual interest rates of 300 percent or more. It will come as no surprise that many of the latter states are ones in which Trump enjoys high levels of popularity.

I can’t help but wonder what working class Trump supporters will think of this policy. Coal miners cannot be completely faulted for believing that Trump’s moves to dismantle power-plant emission controls may help them get work, but will struggling low-income families be cheered to learn that the administration is making it easier for payday lenders to exploit them rather than following the lead of the states that put a lid on usury?

Or, to put it more broadly, how long will Trump be able to pretend to be a working-class populist while pursuing the worst kind of plutocratic policies?