The Right to Freeload

RTWThe justifications cited by Michigan Gov. Rick Snyder for why he signed the “right to work” law that Republicans rammed through a lame duck session are as spurious as the name of the bill itself. The statutes now in place in two dozen states using that label provide, of course, no right to employment yet take advantage of the fact that the uninformed may jump to that conclusion.

Snyder has offered several rationales for his decision to approve legislation he had not previously supported. With a straight face he told Joe Scarborough of MSNBC that the law would make unions stronger by holding them more accountable to members, but he went on to repeat the platitudes about “freedom” that the corporate-backed proponents of the law disingenuously employ.

On top of that, Snyder has made the assertion that being a RTW state will make it easier for Michigan to attract new investment and jobs to the state, citing data from the Indiana Economic Development Corporation. The relationship between RTW and attractiveness to corporations is not a simple matter. On the one hand, there is a body of literature showing that RTW does not have a significant impact on job growth or the rate of new business formation. Yet, as Peter Fisher points out in his review of this literature in chapter 6 of his recent report Selling Snake Oil to the States, there is evidence showing that RTW states tend to have lower wage rates and lower per capita income.

There is no doubt that those lower wages along and lower rates of unionization are appealing to at least some low-road companies. In many RTW states there is a long history of coddling such firms. As James Cobb shows in his book The Selling of the South: The Southern Crusade for Industrial Development, 1936-1990, Dixie was using the availability of cheap, non-union labor as a selling point in industrial recruitment even before Section 14(b) of the 1947 Taft-Hartley Act created RTW by giving states the right to outlaw union security provisions in labor agreements. Cobb notes that some southern communities went so far as to offer written commitments to those investors that their operation would be union-free.

It is interesting that Snyder cites Indiana and its IEDC in his economic development rationale for RTW. That state and agency have relied much less on RTW than on subsidies in the effort to attract investment. Both lures are currently given equal billing on the homepage of the IEDC website, yet inside the site there is nothing more about RTW yet there are numerous pages about the myriad business tax credits and other kinds of assistance the state has to offer.

There is also a body of literature showing the limited effectiveness of such financial “incentives” in fostering economic growth, but here too there are some mercenary companies that will respond to handouts. The IEDC, by the way, has been the subject of investigative reporting showing that it has exaggerated the job-creation impact of its activities.

In his Snake Oil to the States report, Peter Fisher notes that RTW, by allowing workers who decline to join an existing union to avoid contributing to the cost of the collective bargaining from which they benefit, should really be called Right to Freeload.

The same can be said about the corporate subsidies that are at the heart of the economic development efforts of Indiana and numerous other states. Special tax breaks granted to certain companies mean that they are not paying their fair share of taxes, forcing other companies and households to make up the difference.

Michigan is actually a special case in this regard. Since taking office, Snyder has pushed the state to rely less on business tax credit programs, which under his predecessor had reached astronomical levels. However, his motivation for this has been to reduce taxes on all companies, meaning that the business sector overall will pay less and thus increase the burden on families.

By reducing wages, RTW is another way of allowing business to avoid paying its fair share of economic growth. The pattern is clear: through a combination of low wages, weak unions, subsidies and low business tax rates, the Right wants to build a society based on corporate freeloading.

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New in CORPORATE RAP SHEETS:  a dossier on drugmaker Merck, including its Vioxx scandal (which led to billions in fines and lawsuit damages), tax dodging and more.

 

Summing Subsidies

My colleagues and I at Good Jobs First were excited at the publication of the New York Times series on the “United States of Subsidies,” since it brings a great deal of attention to a problem—corporate abuse of economic development assistance—that we have been working on for more than a decade.

We were also pleased to see the online database that the Times posted to go along with the articles. We had provided a copy of the master spreadsheet for our Subsidy Tracker database to Louise Story, the author of the series, and she made extensive use of it. Although the Times obtained some information from other sources, it appears that about 98 percent of their company-specific listings come from Subsidy Tracker. (SEE UPDATE BELOW.)

Now that we have had a few days to examine the Times database, we see that there are some flaws in the way the paper used our data.

First, a few words on Subsidy Tracker. In recent years, a growing number of states began to put company-specific information on at least some of their economic development awards—grants, tax credits, tax abatements, etc.—online. This was often in response to the subsidy accountability movement that we and our allies have built.

The problem was that these disclosures usually happened via hard-to-find reports and web pages that were often difficult to search even when you did locate them. Good Jobs First decided to collect all these disclosures and combine them into one national search tool. We introduced Subsidy Tracker in December 2010 with 43,000 listings from 124 subsidy programs in 27 states.

Over the following two years, we have expanded that to the current total of 247,000 listings from 409 programs in all 50 states and the District of Columbia. That expansion was not due entirely to wider official online transparency. Using open records requests, we also obtained unpublished data on scores of additional programs (the total is currently 89). By posting this information to Subsidy Tracker, we became, in effect, the original online disclosure source for these programs.

In recent months we’ve begun applying this approach to city and county subsidy programs, which are far behind their state counterparts in terms of online disclosure.

Despite all this effort, we recognized that we still could not claim to have captured anywhere near all the subsidy awards that have been made across the country. Not only did we still lack many programs, we also have irregular numbers of years of data among programs.  That’s why we have not yet built into Subsidy Tracker a feature that enables instant aggregation of all the awards going to a particular company.

Along with the remaining gaps in the data, there is much that needs to be done with regard to the listings we do have to allow accurate aggregation. This includes the standardization of the variations in company names in our source materials, linking of parent and subsidiary companies, and accounting for mergers and acquisitions. There’s also the problem that some states report subsidy amounts for single years and others for multiple ones. These challenges are all part of our future work plan.

After getting our raw data, the Times did not consult with us on exactly how it would be used. We thus had no opportunity to warn the paper against the perils of aggregation. Specifically, we were not aware of the paper’s plans to create what it calls its $100 Million Club.

It is with this listing that the pitfalls in the Times approach become most apparent. The companies that receive the largest subsidies often get them in the form of packages negotiated with state and local officials. These packages usually consist of awards from various programs and may also involve project-specific awards outside established programs. Some of these pieces of packages are not included in state disclosure channels. It is part of our plan to research packages through other means and add them to Subsidy Tracker as a separate category. We’ve already begun the process in the Key Deals section of the state pages of the Accountable USA section of the Good Jobs First website.

The Times supplemented the roughly 154,000 entries it took from Subsidy Tracker with about 2,000 listings the paper obtained on its own or from an expensive subscription service produced by a company called Investment Consulting Associates. This enabled the inclusion of entries that were gleaned from press releases but had not yet been reported in the official program lists we rely on for Subsidy Tracker.

Yet the $100 Million Club still ends up with numerous instances in which the totals understate the true amount the big subsidy grabbers have received.

For example, the Times lists a total of $338 million for Boeing, including $218 from South Carolina. Yet it has been estimated that the package Boeing got by locating a new Dreamliner assembly line in the Charleston area could be worth some $900 million.

Apple is said to have received a total of $119 million, yet the Times fails to include more than $60 million in subsidies the company got for a data center in North Carolina.

The Times $100 Million Club also misses some major recipients entirely, including Volkswagen, which got more than $500 million in connection with an assembly plant in Tennessee, and ThyssenKrupp, which got more than $1 billion in subsidies for a steel mill in Alabama.

And these only include deals dating back to 2007, which is the period the Times used in compiling its $100 Million Club. The larger Times database seriously understates the size of major deals that took place earlier. For example, it lists only $19.3 million for GlobalFoundries in New York State, even though the company took over a $1.2 billion deal originally offered to Advanced Micro Devices (which isn’t listed at all).

We applaud the Times for the great reporting that went into its United States of Subsidies articles, but the paper fell short when it came to the compilations featured in its database. Good Jobs First will continue to build our Subsidy Tracker tool and in the future will create what we hope will be a more accurate and complete version of a $100 Million Club.

UPDATE

After this blog was posted, Louise Story contacted us with some concerns. She confirmed that 98 percent of the entries (a total of 152,729) in the Times database came from Subsidy Tracker, but she says the number of entries that came from other sources was actually 3,844 rather than the 2,000 we estimated. She added that in dollar terms, a subject we did not address in the blog, Tracker entries account for 67.3 percent of the total in the Times database. However, we cannot verify that number because the Times has not given us its underlying spreadsheet.

Story also believes that the blog should have mentioned the fact that she contacted me several weeks ago to say that the articles and database would be published soon and in effect told me about her aggregation plans. She did indeed contact me but gave the impression that her work was completed, meaning that an effort to suggest any changes in methodology would have been moot at that point.

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New in CORPORATE RAP SHEETS: A dossier on Swiss drug giant Novartis and its history of selling unsafe drugs, price-gouging, toxic dumping and gender discrimination.

The Corporate Entitlement Problem

To the extent that the United States has a real fiscal crisis, it has been exacerbated by aggressive tax avoidance on the part of big business. Now the chief executives of many of those same giant corporations are inserting themselves at the center of the current fiscal cliff debate, claiming they know what is best for the country.

The Campaign to Fix the Debt, whose “CEO Fiscal Leadership Council” now has more than 100 members from the corporate elite, is not, of course, proposing that the Fortune 500 start paying its fair share of federal taxes. In fact, the group is pursuing an agenda that may very well result in their companies’ paying even less to Uncle Sam.

As the Institute for Policy Studies has pointed out, companies represented in Fix the Debt stand to save tens of billions of dollars from the territorial tax system the campaign seems to be promoting. IPS has also shown the hypocrisy in the fact that the Fix the Debt CEOs calling for “reforms” in Social Security have fat personal retirement assets from their companies, while many of those firms are underfunding their employee pension plans.

There are numerous other ways in which the companies represented in Fix the Debt are far from honest brokers in dealing with the fiscal cliff—and in actuality engage in practices that exacerbate the country’s fiscal and economic problems.

Take the fact that among those companies are some of the most anti-union employers in the United States, beginning with Honeywell, whose CEO David Cote is on the steering committee of Fix the Debt and is one of its main spokespeople. After members of the Steelworkers union at a uranium facility in Illinois balked at company demands for the elimination of retiree health benefits, reductions in pension benefits and other severe contract concessions, Honeywell locked them out for 12 months.

Also on the council is Lowell McAdam of Verizon Communications, which for years has fought against union organizing at its Verizon Wireless unit and took a hard line in its most recent round of contract negotiations covering its unionized workforce.

Then there is Douglas Oberhelman, the CEO of Caterpillar, which has one of the most contentious labor relations histories of any large company, including a 15-week strike at one plant earlier this year prompted by management demands for far-reaching contract concessions.

Not to mention W. James McNerney, Jr. of Boeing, which was accused of opening an assembly plant in right-to-work South Carolina as a form of retaliation against union activism at its traditional manufacturing center in the Seattle area.

These anti-union crusaders have helped bring about a climate of wage stagnation that not only undermines the living standards of their employees but also weakens businesses that depend on their purchasing power.

Fix the Debt CEOs also seem to think that their companies deserve to be lavishly rewarded when they make investments that create jobs. While it is difficult to discern these rewards at the federal level, where they come through the fine print of the Internal Revenue Code, the payoffs are abundantly clear in the lucrative subsidy deals the corporations receive from state and local governments.

For example, that Boeing plant did not only get the promise of a workforce that in all likelihood will remain unorganized. South Carolina also bestowed on the company a state and local subsidy package that has been valued at more than $900 million.

Verizon has received more than $180 million in subsidies from state and local governments around the country. Caterpillar got an $8.5 million grant from Gov. Rock Perry’s Texas Enterprise Fund as well as local subsidies when it eliminated jobs in Illinois and opened a new plant in the Lone Star State. Honeywell has received subsidies in at least 14 states.

The subsidy recipients represented in Fix the Debt are not limited to that anti-union group; there are many others. For example, Goldman Sachs, whose CEO Lloyd Blankfein has been a frequent spokesperson for the campaign, took advantage of $1.65 billion in low-cost Liberty Bonds when building its new headquarters in Lower Manhattan.

The refusal of these companies to deal respectfully with unionized workers and their insistence on taking lavish taxpayer subsidies they don’t need are two symptoms of a flawed business culture. The United States does have an entitlement problem, but it is not related to Social Security, Medicare or Medicaid. It is the notion held by too many large corporations and their CEOs that their narrow interests are synonymous with the national interest. Rather than presuming to fix the debt, big business needs to fix itself.

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New in CORPORATE RAP SHEETS: a dossier on drug giant GlaxoSmithKline, including its $3 billion fraud settlement with the federal government.

Pfizer’s Long Corporate Rap Sheet

The Dirt Diggers Digest is taking a break from commentary for the Thanksgiving holiday, but the Corporate Rap Sheets project marches on. I’ve just posted a dossier on drug giant Pfizer. Here is its introduction:

Pfizer made itself the largest pharmaceutical company in the world in large part by purchasing its competitors. In the last dozen years it has carried out three mega-acquisitions: Warner-Lambert in 2000, Pharmacia in 2003, and Wyeth in 2009.

Pfizer has also grown through aggressive marketing—a practice it pioneered back in the 1950s by purchasing unprecedented advertising spreads in medical journals. In 2009 the company had to pay a record $2.3 billion to settle federal charges that one of its subsidiaries had illegally marketed a painkiller called Bextra. Along with the questionable marketing, Pfizer has for decades been at the center of controversies over its pricing, including a price-fixing case that began in 1958.

In the area of product safety, Pfizer’s biggest scandal involved defective heart valves sold by its Shiley subsidiary that led to the deaths of more than 100 people. During the investigation of the matter, information came to light suggesting that the company had deliberately misled regulators about the hazards. Pfizer also inherited safety and other legal controversies through its big acquisitions, including a class action suit over Warner-Lambert’s Rezulin diabetes medication, a big settlement over PCB dumping by Pharmacia, and thousands of lawsuits brought by users of Wyeth’s diet drugs.

Also on Pfizer’s list of scandals are a 2012 bribery settlement; massive tax avoidance; and lawsuits alleging that during a meningitis epidemic in Nigeria in the 1990s the company tested a risky new drug on children without consent from their parents.

READ THE ENTIRE PFIZER RAP SHEET HERE.

Obamacare’s Dangerous Dependence on the Private Sector

After holding out as long as possible in the hope that Mitt Romney would be elected and the Affordable Care Act would be repealed, various red states are now being forced to decide whether they will set up the insurance exchanges mandated by the act or let the federal government do it for them. While this is a defeat for die-hard opponents of Obamacare, it is a windfall for a group of companies that regard the exchanges as a huge business opportunity.

Those companies are not just the private health insurance carriers, whose continued existence was guaranteed by Obamacare’s rejection of both single payer and the public option, and whose services will be hawked on the exchanges. It turns out that the creation of the exchanges, whether done under the auspices of a state or the feds, will involve private contractors.

Some of the states that have already opted to set up their own exchanges are doing so with the help of corporations that make a business out of government services. For example, California awarded a $359 million contract to consulting giant Accenture.  Xerox got a $72 million contract from Nevada, and Maximus was awarded $41 million by Minnesota.

Maximus is also reported to be among those companies competing for a federal contract that may be awarded to help the tardy states catch up. This would be in addition to several hundred million dollars in contracts already awarded by the Department of Health and Human Services to three contractors to help build the federal exchange.

While it is dismaying to see large amounts of taxpayer money going to the private sector for what is supposed to be a public service, it is even more dismaying to see which companies are at the front of the gravy train.

Take the case of Maximus, which was established in the 1970s but whose business really took off in the wake of the welfare “reform” of the 1990s. Among other things, the Personal Responsibility and Work Opportunity Act opened the door to state government use of contractors to administer public assistance and other social programs. The annual revenues of Maximus soared from $88 million in 1995 to $487 million in 2001.

That was great for its executives and shareholders, but taxpayers and participants in the social programs the company helped administer were often less enthusiastic. Maximus ended up at the center of one controversy after another as its performance faltered and its promises of vast savings from contracting-out frequently failed to materialize.

For instance, after Maximus took over In Connecticut’s program of child-care benefits for poor families in 1996, the system soon fell into such as state of disarray that the New York Times published an article about the situation headlined IN CONNECTICUT, A PRIVATELY RUN WELFARE PROGRAM SINKS INTO CHAOS.

In Wisconsin, where former Gov. Tommy Thompson put Maximus in charge of the state’s welfare-to-work program, a legislative audit found that the company was using public money for unauthorized purposes such as staff parties. At the same time, Maximus was found to be doing a poor job in getting clients into full-time jobs.

Maximus has also been accused of filing false claims with the federal government for its state and local clients. In 2007 the company had to pay $30.5 million to resolve Medicaid fraud charges related to its contract with the District of Columbia.

In Texas, Maximus was embroiled in a scandal relating to work directly relevant to health insurance exchanges. In 2005 the Texas Access Alliance, an entity formed by Accenture and Maximus, received a whopping $899 million contract from the state to develop a social services enrollment system. It turned out to be a disaster. There was a high volume of glitches in the computer system and poor performance by the related call centers. The Alliance eventually lost the contract and was sued by the state. The case was settled under a deal in which the Alliance agreed to forgo $70.9 million in payments and Maximus agreed to pay $40 million in cash and provide a $10 million credit against future work.

The rollout of the Obamacare insurance exchanges is already operating on a tight deadline. It is difficult to believe that the situation will get better by putting companies such as Maximus and Accenture in the picture. Using these contractors may instead provide more evidence of the Affordable Care Act’s dangerous dependence on the private sector.

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New in CORPORATE RAP SHEETS: a dossier on Dow Chemical and its sordid history of napalm, Agent Orange, dioxin and Bhopal.

If you’re focused on the BP settlement and want a reminder of the company’s long list of sins, see the fully updated BP Corporate Rap Sheet.

Corporate Power and the Second Obama Administration

The corporate lobby is dumbfounded. After spending billions of dollars to defeat President Obama and take Republican control of the Senate, business interests have nothing to show for their efforts.

By all rights, Thomas Donohue of the U.S. Chamber of Commerce, which went all-out for Republican candidates, should be handing in his resignation. The Big Business-loving editorial page of the Wall Street Journal should be exhibiting a bit of contrition.

Instead, Donohue issued a press release reiterating the Chamber’s laissez-faire position: “It is the private sector that drives economic growth and jobs, and it is the government’s responsibility to work on a bipartisan basis to pass policies that will unleash the private sector and help put Americans back to work.”  The Journal warns Obama not to “consider his reelection to be a mandate to repeat his first-term record of rejecting all GOP ideas and insisting on his priorities.” God forbid that a President returned to office with a resounding victory should seek to promote his own priorities.

Even with the election is over, conservatives cannot let go of their caricature of Obama as a radical leftist who refuses to compromise. This may have something to do with the fact that many of them are radical rightists who refuse to compromise.

After Obama was first elected in 2008, the Journal predicted that he would “seek middle ground with business on thorny issues.” You wouldn’t know it from the campaign, but that was often what happened during the past four years.  Far from being the Bolshevik envisioned in the fevered imagination of his critics, Obama led Democrats in pursuing an agenda that was solidly middle-of-the-road or, in some respects, conservative, by earlier standards. Let’s recall that Obama:

  • Promoted and got enacted a healthcare reform plan that preserves the private insurance industry;
  • Enacted a stimulus plan that, among other things, funneled billions into subsidies, grants and contracts for large corporations;
  • Helped rescue the auto industry through a plan that forced workers to make major contract concessions and that took a hands-off approach to the management of companies such as General Motors and Chrysler that received tens of billions in federal aid;
  • Occasionally talked tough but ultimately did little to prosecute the financial institutions that were responsible for the near meltdown of the economy through predatory lending and reckless speculation;
  • Enacted a financial reform bill that allowed venal megabanks such as Citigroup to remain in existence and then did little to challenge Republican efforts to stonewall implementation of its consumer protection provisions;
  • Abandoned, in the face of Republican opposition, the pro-union Employee Free Choice Act and cap-and-trade legislation;
  • Continued the practice of allowing corporate criminals to escape real punishment through deferred prosecution agreements;
  • Continued to promote the myth of “clean coal” and adopted a weak or inconsistent position on dangerous energy practices such as offshore drilling and fracking;
  • Went along with the wrong-headed notion that corporate income tax rates are too high;
  • Claimed to be reducing the influence of corporate lobbyists but chose as a senior advisor someone who also serves as a strategist for clients such as military contractor Pratt & Whitney and Keystone XL pipeline developer TransCanada;
  • Declined to directly criticize large profitable companies that have refused to rehire adequate numbers of U.S. workers; and
  • Chose executives from union-unfriendly offshore outsourcers such as General Electric to advise him on job creation.

The list could go on. By any reasonable assessment, this record could be considered business-friendly or at least not overly hostile. The problem is that business groups are comparing the reality of Obama to a fantasy of token regulation, minimal taxation, vanished unions—in other words, totally unfettered corporate power—and thus feel frustrated.

Unfortunately, left to its own devices, a second Obama Administration is likely to go on trying to placate corporate interests and the Right by promoting policies that will never satisfy them but will dilute critical progressive goals.  Wouldn’t it be great if the President felt he needed to try that hard to satisfy the other end of the political spectrum?

Who Pays for Extreme Weather?

As the northeast begins to recover from the ravages of Sandy, there are estimates that the giant storm caused some $20 billion in property damage and up to $30 billion more in lost economic activity.

The question now is who will pay that tab—as well as the cost of future disasters that climate change will inevitably bring about.

It’s already clear that the private insurance industry, as usual, will do everything in its power to minimize its share of the burden. Insurers take advantage of the fact that their policies often do not cover damages from flooding, passing that cost onto policyholders. Most of them are unaware of the fact and fail to purchase federal flood insurance until it is too late.

Insurers also exploit clauses in their policies that impose much higher deductibles for non-flood damages during hurricanes. Fortunately, governors in New York, New Jersey and Connecticut are blocking that maneuver by giving Sandy a different official designation (which is consistent with the National Weather Service’s use of the term “post tropical storm”).  It remains to be seen, nonetheless, to what extent the insurance industry manages to create new obstacles for its customers.

The challenges for homeowners are just one part of the problem. Sandy also did tremendous damage to public infrastructure—roads, bridges, subway stations, etc. Although these are government assets, should the public sector bear the cost of rebuilding?

Many people are arguing, in the words of a New York Times editorial, that “a big storm requires big government.” That’s certainly true when it comes to initial disaster response.  Many more people would have died and much more damage would have occurred but for the efforts of public-sector first responders and even the Federal Emergency Management Agency, which has been remade since its debacle during the aftermath of Hurricane Katrina.

But the challenges associated with extreme weather go far beyond those relief functions. There’s now discussion of the need for New York City to build a huge flood-prevention system along the lines of that in the Netherlands.

Taxpayers, especially those of the 99 percent, should not be forced to assume the entire cost of such a massive undertaking. Extreme weather is clearly linked to climate change, which in turn has been largely caused by the growth in greenhouse gas emissions caused by large corporations, especially those in the fossil fuel industry.

Holding corporations responsible for the consequences of climate change is not a new idea. Yet it is one that all too frequently gets drowned out amid the bloviating of the climate deniers, much of whose funding comes from the very corporate interests they are working to get off the hook.

Back in 2006 BusinessWeek wrote that lawsuits targeting corporations for global warming were “the next wave of litigation,” following in the footsteps of the lawsuits that forced the tobacco industry to cough up hundreds of billions of dollars in compensation. Such cases did materialize. For example, in 2008 lawyers representing the Alaska Native coastal village of Kivalina, which was being forced to relocate because of flooding caused by the changing Arctic climate, filed suit against Exxon Mobil, BP, Chevron, Duke Energy and other oil and utility companies, arguing that they conspired to mislead the public about the science of global warming and this contributed to the problem that was threatening the village.

Such suits have not had an easy time in the courts. The Kivalina case was dismissed by a federal district judge, and that dismissal was recently upheld by the federal court of appeals. A suit brought by the state of California against major automakers for contributing to global warming was also dismissed.

It is far from certain that corporations will continue to get off scot free. In fact, groups such as the Investor Network on Climate Risks argue that the potential liability is quite real and that this should be a matter of concern for institutional shareholders. The Network, a project of CERES, pursues its goals through initiatives such as appeals to the SEC to require better disclosure of climate risks and through friendly engagement with large corporations.

Yet it may be that a more confrontational approach is necessary to build popular support for the idea that big business needs to be held accountable for its big contribution to the climate crisis.

Unfortunately, we are already seeing steps in the opposite direction. The Bloomberg Administration in New York has already announced new storm-related subsidies that will apply not only to struggling mom-and-pop business but also to giant corporations. Unless there is a popular outcry, the city will repeat its mistakes in the wake of the 9-11 attacks of giving huge amounts of taxpayer-funded reconstruction assistance to the likes of Goldman Sachs (see the website of Good Jobs New York for the dismaying details).

The fact that the large New York banks that stand to benefit from Bloomberg’s new giveaways helped finance fossil-fuel projects that contribute to climate change shows just how self-defeating this approach is.

Rather than using public money to help wealthy corporations pay for storm damage on their premises, we should be forcing those companies to pay the costs of addressing the climate crisis they did so much to create.

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New in CORPORATE RAP SHEETS: a dossier on the many environmental and labor relations sins of chemicals giant DuPont.

Wal-Mart’s Other Sins

The job actions taking place at many Wal-Mart locations around the United States have brought new attention to the abysmal labor practices of the country’s largest private employer. More than any other company, Wal-Mart depends on low wages, meager benefits, overtime abuses and gender discrimination to keep its labor costs artificially low while quashing any efforts by workers to rectify those conditions.

Two weeks ago, I used this blog to recount Wal-Mart’s labor and employment track record. Here I want to remind readers of some of the company’s many sins outside the workplace, using information I assembled for the new 5,000-word Wal-Mart entry in my Corporate Rap Sheets series.

Corruption. Wal-Mart doesn’t seem to mind its hardline reputation on personnel matters, but it has tried to otherwise paint itself as a squeaky-clean operation. That image was shattered last spring, when the New York Times published an 8,000-word front-page exposé about moves by top management to thwart and ultimately shelve an investigation of Foreign Corrupt Practices Act violations, focusing on extensive bribes paid by lower-level company officials as part of an effort to increase Wal-Mart’s market share in Mexico.

That story made a huge splash and reportedly undermined the company’s urban expansion efforts. A major public pension fund, the California State Teachers’ Retirement System, sued the company for breach of fiduciary duty in connection with the bribery scandal. It and other institutional investors showed their discontent with top management by opposing the official slate of directors at Wal-Mart’s annual meeting. About 12 percent of the shares outstanding were voted against the slate, an unprecedented level of dissent by the company’s previously quiescent shareholders. The company, apparently still trying to deal with the fallout, has just announced an overhaul of its compliance department.

State income tax avoidance. In 2007 the Wall Street Journal published a front-page story revealing that Wal-Mart was using a real estate gimmick to avoid paying many millions of dollars in state corporate income taxes each year. It was doing this by putting many of its stores under the ownership of a real estate investment trust (REIT) controlled by the company. The stores would pay rent to the captive REIT and deduct those payments as a business expense.

This trick, essentially paying rent to itself, reduced the company’s taxable income and thus lowered its state tax bill (the REIT was structured so its income wasn’t taxed by any state). A report by Citizens for Tax Justice estimated that Wal-Mart had thereby avoided some $2.3 billion in state income tax payments between 1999 and 2005–an average of more than $300 million a year.

Local property tax avoidance.  A 2007 report by my colleagues and me at Good Jobs First found that Wal-Mart has sought to reduce its property tax payments by frequently and aggressively challenging the assessed value attached to its U.S. stores and distribution centers by local officials.  The report examined a 10 percent random sample of the stores and found that such challenges had been filed for about one-third of them; an examination of all of the distribution centers found challenges at 40 percent, even though many of the latter had been granted property tax abatements when they were built.

Sales tax “skimming.” In a 2008 report by Good Jobs First entitled Skimming the Sales Tax, we found that Wal-Mart was receiving an estimated $60 million a year as a result of the little-known practice in some states of compensating retailers for collecting sales taxes and calculating the amount of that compensation based on total sales. This, in addition to the estimated $130 million in sales-tax-based economic development subsidies, means that Wal-Mart is depriving hard-pressed state and local governments of at least $73 million each year. This is just a small part of the more than $1.2 billion in state and local subsidies that Good Jobs First has documented on our website Wal-Mart Subsidy Watch.

Environmental violations. Wal-Mart has tried very hard in recent years to depict itself as a pioneer of sustainability by wide-ranging initiatives with regard to energy efficiency and the addition of organic foods and other green products to its shelves. Wal-Mart is largely silent about the environmental impact of the millions of customers who in most cases must still drive to the company’s retail outlets. It also wants us to forget that the company itself has had its share of environmental violations. For example, in 2004 the U.S. Department of Justice and the Environmental Protection Agency announced that Wal-Mart would pay a $3.1 million civil penalty and take remedial action to resolve alleged violations of the Clean Water Act in connection with storm water runoff from two dozen company construction sites in nine states. The following year, the company agreed to pay $1.15 million to the state of Connecticut to settle a suit alleging that it had allowed rain water to carry fertilizer, pesticides and other harmful substances stored outside its retail outlets into rivers and streams. It also signed a consent decree with the EPA to resolve charges relating to diesel truck idling at its facilities.

Undocumented Workers. When talking about Wal-Mart it is difficult to avoid the workplace entirely. Aside from its mistreatment of its own employees, the company takes advantage of exploited contract workers. For example, in 2003 a federal racketeering suit was filed against Wal-Mart by lawyers seeking to represent thousands of janitors who cleaned company stores and were reported to be working seven days a week and not receiving overtime pay. The filing took place 18 days after federal agents raided 60 Wal-Mart stores in 21 states to round up about 250 janitors described as undocumented aliens. In 2005 Wal-Mart agreed to pay $11 million to settle federal immigration charges. Documents later emerged suggesting that Wal-Mart executives knew that the company’s cleaning contractors were using undocumented immigrants.

“Dead Peasant” Insurance. Wal-Mart has not only worked people to death but also continued exploiting them after their demise. The mega-retailer is one of the large companies that engaged in the repugnant practice of secretly taking out life insurance on low-paid employees and making itself the beneficiary. The polite term for this is corporate-owned life insurance, though critics have labeled it “janitor’s insurance” or “dead peasant insurance.” In 2004 Wal-Mart settled one case brought in Houston for an undisclosed amount. Two years later it agreed to pay $5.1 million for a class action brought by the estates of former employees in Oklahoma, and in 2011 the company agreed to pay just over $2 million in a class-action suit filed in Florida.

The list could go on. In fact, it is difficult to find a form of corporate misconduct Wal-Mart has not exhibited. Yet it is probably the labor arena that counts the most in determining whether the company will be reined in. Support your local Wal-Mart “associates” in their efforts to stand up to the bully of Bentonville.

The Deadly Consequences of Weak Regulation

Unfortunately, it seems to take a public health crisis for the United States to remember the importance of diligently regulating companies such as drugmakers and food processors. And it is only during such crises that people realize that, despite the whines of corporate-friendly politicians, our problem is that such businesses are regulated too little rather than too much.

This scenario is being played out yet again in the fungal meningitis outbreak that has stricken more than 240 people and killed at least 20 of them around the country. It was only once the bodies began piling up that it became widely known that there has been confusion as to whether state or federal agencies should be overseeing operations such as the New England Compounding Center (NECC), which has been blamed for shipping tens of thousands of contaminated syringes with steroids used by patients with severe pain.

It turns out that the federal Food and Drug Administration had been keeping an eye on NECC, and in December 2006 the agency sent it and several similar companies a warning letter about distributing topical anesthetic creams without federal approval. An FDA press release about the warnings noted that exposure to high concentrations of local anesthetics can cause grave reactions and had in fact been linked to two deaths of users of the creams produced by one of the five firms. The NECC letter also mentioned concerns about the company’s practices related to the repackaging of Avastin, an injectable drug for treating colorectal cancer.

It’s not clear that the FDA letters had any impact. The compounding pharmacies paid little attention, given that a federal judge had previously issued a ruling calling into question the authority of the agency to regulate their business. Supposedly, state pharmacy boards are taking care of the matter.  One gets an idea of how serious that is from a Boston Globe story revealing that one of the members of the Massachusetts board is an executive with Ameridose, a compounding pharmacy also owned by NECC principals Barry Cadden and Gregory Conigliaro.

What makes companies such as NECC and Ameridose, both of which have suspended operations, even more dangerous is that they are privately held and thus have to disclose a lot less information about their operations. What they do reveal tends to be self-serving accounts of their supposed commitment to corporate social responsibility. The NECC website now consists solely of its “voluntary” recall, but the full Ameridose site is still up and has a less-than-hard-hitting news section.

There are numerous press releases about the company’s “outstanding” sustainability program, especially its recycling of cardboard and its installation of an ultrasonic humidification system. There are also releases about the company’s participation in a holiday food drive and its sponsorship of several industry conferences.

These are no doubt worthwhile initiatives, but the public might have also wanted to know how Ameridose was dealing with issues such as a 2008 FDA inspection that found that the company had been shipping products before it receive the results of sterility tests. That year Ameridose also had to recall some of its Fentanyl product.

The problems at Ameridose apparently went much deeper. According to reporting by the New York Times, employees at the firm expressed concern to management about serious safety and quality control issues but were rebuffed. One worker was quoted as saying: “The emphasis was always on speed, not on doing the job right.”

NECC and Ameridose are the kinds of companies lionized by Republican politicians preoccupied with defending “job creators” against government incursions in their business. It thus comes as no surprise that a search of the Open Secrets database shows that Conigliaro has contributed four times to Scott Brown’s Senate race in Massachusetts and has given $2,500 to Mitt Romney.

These firms are also among those government-dependent companies not singled out by Romney for mooching. Aside from the portion of their business covered by programs such as Medicare and Medicaid, the USA Spending database shows that Ameridose has received more than $800,000 in contracts from the federal government. In June, the U.S. Army signed an exclusive, five-year purchasing agreement with the firm to supply specialized compounded products for the pediatric intensive care unit at the Army’s Tripler Medical Center in Honolulu.

So the next time a politician complains about excessive regulation, we should keep in mind the risk to that pediatric intensive care unit and the actual harm caused to the meningitis victims.

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New in CORPORATE RAP SHEETS: Dossiers on the no-longer-merging military contracting and aerospace giants BAE Systems and EADS.

Standing Up to the Bully of Bentonville

The spreading job actions by Wal-Mart workers around the country, while still involving modest numbers, come across as a kind of catharsis. They inspire the same uplifting emotion as those movie scenes in which a long-suffering victim of bullying finally fights back against the tormentor.

Wal-Mart, probably more than any other large corporation, deserves the title of bully. For decades it has demonstrated utter contempt for the rights of its employees to act in concert to improve their conditions of work, which are in serious need of amelioration. It rules over a vast army of underpaid “associates” who in many cases are involuntarily limited to part-time status and thus denied even the meager benefits provided to full-timers, forcing them, with the cynical encouragement of management, to apply for taxpayer funded health coverage such as Medicaid that is not meant for employees of a $460 billion corporation.

Such impacts are not limited to those actually on Wal-Mart’s payroll. Since it is by far the largest U.S. private-sector employer, Wal-Mart’s abominable labor practices have set an example that makes it easier for many other employers to commit similar sins.

In the hope that we are indeed seeing a major turning point in the relationship between the giant retailers and its workforce, it is worth looking back at the company’s record to recall just how bad its behavior has been.

While some have sought to romanticize founder Sam Walton and pin the blame for the company’s retrograde policies on his successors, the exploitative approach was there from the start. As Bob Ortega points out in his 1998 book In Sam We Trust, Wal-Mart Sam Walton deliberately used superficial forms of paternalism to gain the loyalty of his workers while keeping labor costs at rock bottom. “We really didn’t do much for the clerks except pay them an hourly wage,” Walton wrote in his autobiography, “and I guess that wage was as little as we could get by with at the time.”

When Walton learned in the 1970s that some of his workers were talking about unionization, he did not try to address their concerns. Instead, he brought in a union-busting consultant named John E. Tate, who devised the policy of uncompromising resistance that would characterize Wal-Mart’s labor relations posture for decades to follow. That applied not only at the company’s stores, but also at its large network of distribution centers. For example, after nearly 50 percent of workers at a warehouse in Searcy, Arkansas signed cards in support of Teamsters representation in the early 1980s, Tate and his staff used the run-up to the election to scare the workforce into ultimately voting more than three-to-one against the union.

This scenario would play out again and again, both in the United States and Canada. For example, in 1997 the Ontario Labor Relations Board ruled that Wal-Mart had violated Canadian law by intimidating workers in the period preceding a representation election involving the United Steelworkers union. As a result, the board certified the Steelworkers, even though a majority of workers had voted against the union. The company, however, simply refused to bargain with the union.

When Wal-Mart used the same intimidation tactics during a 1997 election at one of its stores in Wisconsin, the National Labor Relations Board criticized the company but did not take the same sort of action as its Ontario counterpart. Later in 1997, exasperated United Mine Workers officials decided to call off an organizing drive at a Wal-Mart in Fairfield, Alabama less than 24 hours before the representation was scheduled to take place.

In 2000 a small group of courageous meatcutters at a Wal-Mart Supercenter in Jacksonville, Texas voted for representation by the United Food and Commercial Workers (UFCW). Within two weeks, the company announced that it was shutting down the meatcutting operations at that store and at more than 175 more in six states. The NLRB later ruled that the company had violated federal labor law by refusing to discuss the closing with the workers who had chosen union representation.

In 2001 the UFCW said it was launching a national organizing drive at Wal-Mart, but it focused on a few areas such as Las Vegas, where it engaged in a fierce battle with a slew of anti-union specialists flown in from corporate headquarters in Bentonville, Arkansas. Years later, the NLRB found that the company had engaged in various unfair labor practices, but by then the organizing effort had fizzled out. Looking back on the situation, the Las Vegas Sun published an article headlined WAL-MART BREAKS THE LAW, GETS PUNISHED, WINS ANYWAY.

While the UFCW largely turned away from individual store organizing in the United States, it continued the effort in Canada, on the assumption that the legal environment would be more conducive there. Yet Wal-Mart continued to run roughshod over Canadian law as well.

When workers at a store voted for representation, Wal-Mart simply refused to bargain with the union. If it was forced to do so, it turned to the same tactic it employed in Texas: shutting down the store or department where workers had asserted their desire for collective bargaining, pretending that the step was being taken for economic reasons.

After such a move in 2005 involving a store in Jonquiere, Quebec, Wal-Mart CEO Lee Scott defended the action in an interview with the Washington Post, saying that he “saw no upside to the higher labor costs” that union representation would have brought and that he “refused to cede ground to the union for the sake of being ‘altruistic.’”

That, in a nutshell, is Wal-Mart’s view of the world—that its desire to keep costs, especially those relating to labor, at the absolute minimum is all that matters. Any measures in furtherance of that goal are justified.

Along with fighting unions tooth and nail, the religion of cost minimization led to other practices that made life hellish for the company’s workforce. This included the systematic use of wage theft to cheat workers out of overtime pay as well as gender and racial discrimination. Over the past decade, the company has paid hundreds of millions of dollars to settle lawsuits over wage and hour violations. In 2005 it paid $11 million to settle federal charges related to the illegal use of undocumented immigrants—who were found to be working some 56 hours a week—to clean its stores. And Wal-Mart would have paid much more in damages for sex discrimination if the U.S. Supreme Court had not come to its rescue and derailed a massive class action suit (though other more limited suits took its place).

Wal-Mart’s employment practices have been so egregious that they go beyond regulatory infractions and enter the realm of human rights abuses. It’s thus no surprise that Human Rights Watch, which typically  analyzes atrocities in dictatorial governments, once published a report concluding Wal-Mart violated the right of its workers to freedom of association.

So here’s hoping that the freedom fighters of the Wal-Mart workforce succeed in fully taming the bully of Bentonville.

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New in CORPORATE RAP SHEETS: Dossiers on water villains Nestlé and Coca-Cola Company.