May 2019 Archives

Challenging Corporate Investment in Anti-Abortion States

For the past three decades, labor activists have watched with frustration as foreign automakers concentrated their U.S. investments in states hostile to labor unions and worker rights. The problem continues today as Volkswagen is reported to be colluding with state officials in Tennessee to thwart a new United Auto Workers organizing drive.

Now reproductive rights activists are facing a similar challenge: what to do about large corporations doing business in states that are taking aggressive action to restrict women’s right to choose.

There are already moves by some media companies to address the issue by saying they will reconsider working in Georgia, a favorite location for film and television production because of its generous tax credits. In recent days, companies such as Netflix, Walt Disney and WarnerMedia have made statements saying they could shun the Peach State because of its new law that would effectively outlaw abortion.

While trying to appear bold, the companies are actually taking a weak position by saying they would act only if the law takes effect, ignoring the fact that Georgia and the other states are paving the way for a weakening of reproductive rights by the U.S. Supreme Court even if their laws are struck down before being implemented.

The media industry is not the only sector that is susceptible to pressure campaigns. Many large corporations have made substantial investments in the hardline anti-abortion states, often receiving sumptuous subsidy packages from state and local officials. Here are examples from the Good Jobs First Subsidy Tracker:

Alabama: Toyota and Mazda got $900 million for an auto assembly plant. Amazon.com got $54 million for a fulfillment center. Google got $81 million for a data center.

Georgia: Kia got $410 million for an auto assembly plant. Baxter International got $211 million for a pharmaceutical production facility.

Kentucky: Amazon.com got $75 million for a distribution facility. Toyota got $146 million for an auto assembly plant expansion.

Louisiana: IBM got $152 million for a technology center. ExxonMobil got $118 million for a refinery upgrade.

Mississippi: Continental Tire got $595 million for a manufacturing facility. Toyota got $354 million for an assembly plant.

Missouri: Amazon.com got $78 million for a fulfillment center. Boeing got $229 million to expand its operations in the state.

Ohio: Amazon.com got $93 million for a data center. General Electric got $98 million for a global operations center.

It may be unrealistic to expect that corporations will abandon facilities in the anti-abortion states, but they may face pressure to avoid future investments in those places.

The big subsidy packages that may be offered by those states to lure the investments could also come to be seen in a very different light – the same way that gifts from the opioid-tainted Sackler family to major cultural institutions are now treated as toxic.

Not long ago, we saw how economic pressure on states helped to undermine opposition to gay marriage. We will now see whether similar pressure, exercised by targeting big business investment, can also help defeat the attack on reproductive rights.

A Limited Corporate Crackdown

The Trump Administration has, for the most part, allowed large corporations to get away with all kinds of misconduct. It has weakened enforcement, limited the use of heavy penalties and searched for ways to dismantle regulations.

Yet there is one corporation that Trump has been attacking recently with special fervor: the Chinese telecommunications equipment giant Huawei. A Washington Post front-page story article in mid-May was headlined: U.S. Hits Huawei with ‘death penalty,’ a reference to its placement (now delayed) on a list of companies that U.S. firms cannot do business with.

As with many of Trump’s hardball actions, the penalties against Huawei are actually collateral damage resulting from a different skirmish. The president is less concerned with the company’s practices than he is with putting pressure on China to make concessions in a trade dispute that is turning out to be a lot more difficult for the United States to win than Trump had promised.

The pretext for the actions against Huawei is that the company is a national security threat, which is the same general allegation that the U.S. had made against another Chinese telecommunications corporation, ZTE. That company was able to escape the blacklist last year after it paid a $1 billion fine, replaced its management and made other internal changes.

However the Huawei confrontation turns out, it is fascinating to see the harm that the federal government can inflict on a corporation, especially a large one, when it wants to get tough.

The use of the Entity List, compiled by the Commerce Department’s Bureau of Industry and Security, is a particular threat for a company like Huawei, which is heavily dependent on both hardware (chips from companies such as Qualcomm) and software (Google’s Android operating system) from the United States. The pressure on Huawei intensified when two British firms announced that they will abide by the U.S. restrictions. There are bound to be more international ramifications that threaten Huawei’s survival.

Imagine if the United States had applied similarly draconian measures against other foreign corporations accused of misconduct. More than half of the entries on the Violation Tracker list of the companies with the highest cumulative penalties are foreign-based. These include five banks along with BP and Volkswagen.

The U.S. Justice Department and other federal agencies have been willing to levy substantial fines against these companies, yet all of them are still doing business in the United States. These include some that have faced allegations similar to those made against Huawei. For example, the French bank BNP Paribas was accused of violating international sanctions and penalized nearly $9 billion but was not put on the Entity List.

Volkswagen may not have been involved in sanctions and national security controversies, but its environmental conduct has been quite egregious. If the federal government were serious about punishing foreign corporate bad actors, it should bring to their cases the same zeal being shown with regard to Huawei.

For that matter, a more aggressive approach toward rogue domestic companies would also be in order.

The Other Collusion

The Trump crowd may have escaped prosecution on charges of colluding with the Russians, but another case involving collusion is moving full steam ahead. Attorneys general from 43 states and Puerto Rico are pursuing a blockbuster lawsuit against the generic drug industry on charges of conspiring to artificially inflate and manipulate prices, reduce competition and unreasonably restrain trade for more than 100 different products.

Led by Connecticut Attorney General William Tong (photo), the coalition claims to have extensive evidence in the form of emails, text messages, telephone records, and statements from former company insiders documenting that 20 companies such as Teva, Sandoz and Mylan engaged in a “broad, coordinated and systematic campaign” to conspire with each other to generate prices increases that in some instances exceeded 1,000 percent.

The case, which could result in a multi-billion-dollar settlement, is a reminder that price-fixing, one of the oldest forms of corporate crime, remains a live issue. The main change is the method by which companies collude. Adam Smith’s discussion of the practice in The Wealth of Nations (1776) stated that “People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices.” Now the same results can be achieved electronically, without face-to-face encounters.

Price-fixing accounts for more of the federal criminal cases in Violation Tracker than any other offense type besides environmental matters. The 212 cases have resulted in $10 billion in penalties, including more than two dozen cases in which the defendants had to pay more than $100 million.

Many of those cases involve industries such as auto parts, electronic components and chemicals; in other words, business-to-business transactions. Federal antitrust prosecutors have focused much less on goods purchased by individual consumers.

That’s where the states come in. The current case against the generic drug companies is just the latest in a string of lawsuits in which state AGs have banded together to address anti-competitive practices that affect consumers.

We’re now in the process of collecting data on those cases to add to Violation Tracker. So far, we have identified more than 100 multistate lawsuits involving price-fixing and related matters. Quite a few of these involve drug and vitamin producers.

There have even been some brought against the same generic producers targeted in the new case. For example, in 2000 Mylan agreed to pay $108 million to settle multistate allegations that it conspired with other companies to control the market for generic anti-anxiety drugs.

The past and current allegations against companies such as Teva and Mylan are especially troubling because these generic producers were supposed to be the heroes of the drug industry. Instead of acting as a check on the avaricious impulses of the brand-name producers, it appears that they jumped on the profit-maximization bandwagon. This should serve as another indicator that market forces are not up to the task of eliminating price-gouging in the pharmaceutical industry. Strong government intervention is the only remedy.

Trump’s Wage Theft Vulnerability

Donald Trump may have Bill Barr’s Justice Department in his pocket, but the president is on much shakier ground in his home state. And that’s not only because New York Attorney General Letitia James is seeking his tax returns and investigating his business deals.

Trump also has to contend with the fact that the New York AG’s office is one of the most aggressive prosecutors of wage and hour violations by employers in the state. One of those employers is the Trump Organization, whose Trump National Golf Club in Briarcliff Manor, New York is reported to be rife with wage theft.

The Washington Post has just published a detailed account of the ways in which employees at the golf club, especially undocumented immigrants, have been required to work off the clock at no pay. Workers are reported to have been explicitly told by managers to clock out but continue to perform tasks such as vacuuming carpets and polishing silverware.

The Post article states that nearly 30 former employees of Trump golf courses have met with state prosecutors and have provided them documentation such as W-2 forms and pay stubs. One of those workers, Jose Gabriel Juarez (photo), told the Post: “It was that way with all the managers: Many of them told us ‘Just clock out and then stay and do the side work.’”

This does not bode well for the Trump Organization. According to data contained in Violation Tracker, the New York AG’s office has brought more than 60 successful cases against companies for wage theft and has collected more than $38 million in penalties. The largest recovery was $4.8 million paid by the utility company National Grid in 2013.

Yet those are only the cases in which the defendants were corporations. The New York AG’s office is one of only a few law enforcement agencies that also bring cases against individual corporate executives and business owners for labor violations. In other words, it takes the phrase wage theft literally and has on numerous occasions filed criminal charges against those individuals. Here are some examples:

In May 2016 Lalo Drywall, Inc. and its owner Sergio Raymundo, were sentenced in Manhattan Supreme Court after a conviction related to wage theft for underpaying workers at a mixed-use, commercial, and low-income residential project in Harlem. Raymundo pled guilty to one count of Falsifying Business Records in the First Degree under New York State’s Penal Law, a class E felony, as well as to one count of Failure to Pay Wages under New York State’s Labor Law, an unclassified misdemeanor.

In September 2017 Arthur Anyah, owner of Mical Home Health Care Agency, Inc. in Peekskill, New York was sentenced to one year in jail for defrauding 67 employees out of over $135,000 in wages. Anyah had pled guilty to engaging in a scheme to induce health care workers to provide home health care services to the agency’s clients without pay, as well as falsifying business records, failing to pay wages, and defrauding the state unemployment insurance contribution system.

These and other wage theft cases, as well as many other kinds of prosecutions, can be found in the press release archive of the New York AG’s office. The Corporate Research Project is in the process of compiling these cases and similar ones from the other state AGs for an expansion of Violation Tracker that will be released later this year. By that time there may very well be a new entry for the Trump Organization to include.