Dirt Diggers Digest

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holding out as long as possible in the hope that Mitt Romney would be elected and the Affordable Care Act would be repealed, various red states are now being forced to decide whether they will set up the insurance exchanges mandated by the act or let the federal government do it for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.

Corporate Rap Sheets

American Express is penalized $85 million for deceptive credit card practices. The Bear Stearns unit of JPMorgan Chase is sued for defrauding purchasers of mortgage-backed securities. These are just a single recent day’s contribution to the never-ending wave of corporate malfeasance—bribery, tax evasion, price-fixing, defrauding of government or consumers, environmental violations, unfair labor practices and much more. Given the frequency of these scandals, it is difficult to remember which corporation has done what.

A new feature of the Dirt Diggers Digest site (and that of the Corporate Research Project) will make it easier to keep track of these misdeeds. Corporate Rap Sheets are dossiers summarizing the most significant crimes, violations and other questionable activities of the world’s largest and most controversial companies. The rap sheets provide readable accounts of a company’s history on major accountability issues and, wherever possible, include links to key documents or other information sources.

These dossiers are not limited to formal legal actions and regulatory proceedings. They also look at the general behavior of the companies in areas such as environmental protection, labor relations, taxes and subsidies. They also list watchdog groups as well as books and reports about the company.

The Corporate Rap Sheets project is designed to contribute to the tradition of tabulating corporate misbehavior that began with Edwin Sutherland’s 1949 book White Collar Crime, resumed three decades later in works such as Everybody’s Business: The Irreverent Guide to Corporate America, and today is pursued on the web by sites such as the Project On Government Oversight’s Federal Contractor Misconduct Database and the Business & Human Rights Resource Centre. (I have prepared a fuller account of this tradition to go along with the rap sheets.)

I am launching the project with a set of 20 dossiers that focus on four industries known for their checkered accountability record: automobiles (General Motors, Ford Motor and the major Japanese and German producers); military contracting (Boeing, Lockheed Martin, Northrop Grumman and the like); mining (the big global resource companies such as BHP Billiton, Rio Tinto and Anglo American); and petroleum (the four remaining members of what used to be called the Seven Sisters: Exxon Mobil, Chevron, BP and Royal Dutch Shell).

In the months to come, I plan to add more rap sheets for the giants of other controversial industries such as pharmaceuticals, tobacco, agribusiness and banking. New rap sheets will be announced at the end of Dirt Diggers Digest weekly posts.

Here are some tidbits from the first batch of rap sheets:

HONDA. The company’s more fuel efficient cars have given it a relatively benign environmental reputation, yet in 1998 Honda had to pay up to $267 million to settle U.S. government allegations that it programmed millions of its cars to ignore spark-plug failures that could result in much higher emission levels. The company paid a civil fine of $12.6 million and $4.5 million to fund environmental projects, while spending up to $250 million to serve and repair the vehicles involved.

NORTHROP GRUMMAN. In April 2009 the company agreed to pay $325 million to settle federal charges that TRW, prior to its acquisition by Northrop, had failed to properly test parts (which turned out to be defective) used in spy satellites built for the National Reconnaissance Office.

ROYAL DUTCH SHELL. In 2004 the company admitted that it had overstated its proven oil and natural gas reserves by 20 percent. It later came out that top executives knew of the deception about the reserves back in 2002. The company ended up paying penalties of about $150 million to U.S. and British authorities.

GENERAL MOTORS. In 2011 workers at GM’s subsidiary in India went on strike to protest a speed-up and unsafe conditions. In 2012 GM was confronted with worker protests over its move to eliminate jobs and cut costs at some of its operations in South America. In Colombia, a group of former workers staged a hunger strike, alleging that they were fired after sustaining serious injuries resulting from unsafe conditions on GM assembly lines.

BOEING. In 1999 the U.S. Labor Department accused Boeing of impeding an investigation into racial discrimination at the company. Boeing later agreed to pay $4.5 million to settle claims of both racial and gender discrimination involving more than 4,000 women and 1,600 minority employees in six locations. The settlement with the U.S. Labor Department was the first in which a firm committed to a company-wide program to eliminate discriminatory pay disparities. Nonetheless, Boeing was hit with a class action sex discrimination lawsuit that was settled in 2004 when the company agreed to pay up to $72.5 million in damages and to revamp many of its personnel practices. The settlement was preceded by reports that Boeing had suppressed evidence in the case.

BHP BILLITON. The company has been a frequent target of criticism over its treatment of communities displaced or otherwise affected by its mining operations. For example, in 2005 Survival International accused the company of exploring for diamonds in the Gana and Gwi Bushmen’s reserve in Botswana without their consent. In 2007 a complaint was filed with the Organization for Economic Cooperation and Development accusing BHP of using forced eviction and destruction of a town in Colombia to provide land for the company’s Cerrejon open-cut coal mine. To resolve the dispute, the company agreed to consult more closely with local communities and to spend more on local sustainability projects.

Read more at the Corporate Rap Sheets page.

Corporate Recidivism

The announcements by the Justice Department and the Securities and Exchange Commission that they had each charged Tyco International with engaging in foreign bribery was not just another all-too-familiar instance of corporate misconduct. It is an indicator of how a large corporation can be repeatedly drawn to illicit behavior even after being embroiled in a huge scandal that shook it to its core.

In the early 2000s, Tyco ranked with Enron and WorldCom as the leading symbols of the sleazy side of big business. In 2002 its chairman and CEO Dennis Kozlowski resigned amid reports that he was being investigated for evading more than $1 million in sales taxes due on artwork for his $18 million apartment on Park Avenue.

That was just the beginning. Kozlowski and Tyco’s former chief financial officer Mark Swartz were then indicted in a racketeering lawsuit charging them with looting the company of some $600 million through stock fraud, falsified expense accounts and other means. During their trial, details were revealed about Kozlowski’s lavish lifestyle—including what would become an infamous $6,000 shower curtain—based on what the prosecution called his misappropriation of company funds. In 2005, the two men were convicted of fraud, conspiracy and grand larceny; they were sentenced to 8-25 years in prison.

While the actions of Kozlowski and Swartz were meant to enrich themselves, Tyco benefited from other questionable maneuvers, such as the transfer of its corporate domicile offshore to Bermuda to avoid paying some $400 million a year in federal income taxes. In December 2002 the company, acknowledging what had long been suspected, admitted that for years it had engaged in financial gimmickry to inflate its reported earnings.

An internal investigation documented that Tyco managers had been openly encouraged to engage in creative accounting to give investors a misleadingly rosy view of how the company was performing. At the time, Tyco reduced its stated earnings by $382 million and later reported another $1 billion in accounting irregularities. In 2006 Tyco agreed to pay $50 million to settle SEC charges related to the accounting improprieties, and the following year it paid $3 billion to settle related class-action investor lawsuits.

In an effort to improve its reputation with shareholders, Tyco has undergone several restructurings and spinoffs. It also moved its legal headquarters from Bermuda to Switzerland, where the tax avoidance possibilities are apparently even more attractive.

Yet the one thing that should have been the top priority—ending its ethical shortcomings—apparently fell off the list, if the new SEC complaint is any indication.

According to the agency, Tyco repeatedly violated the Foreign Corrupt Practices Act through illicit payments to officials in more than a dozen countries during a period that began before 2006 and continued at least until 2009. After settling its earlier case with the SEC, Tyco allegedly continued to cook its books to disguise the bribes its subsidiaries were paying in places such as Turkey, China, Thailand, Malaysia, Egypt and Saudi Arabia.

At the same time the SEC and Justice Department revealed their actions against Tyco, the agencies announced that the company had settled the civil and criminal charges by agreeing to pay a total of $26 million—less than what it paid the SEC six years ago.

This comes across as a slap on the wrist for a company which had previously been accused of serious accounting fraud and which was supposed to cleaning up its act. The fact that Tyco could be granted a non-prosecution agreement for the criminal conspiracy charge is especially odious.

Both the SEC and Justice seemed to be trying to justify the light penalties by praising Tyco for cooperating in the investigation of the bribery. Yet this is the same company that was supposed to have rooted out its culture of corruption long ago.

It didn’t do a very good job of that, and the $26 million penalties—for a company with more than $17 billion in annual revenue and $1.7 billion in profits—does not create much pressure to end the profitable misconduct.

If there’s one thing that can be said for Kozlowski and the others who looted Tyco and cooked its books, it’s that they thought big. The prosecutors deciding on penalties for the company’s misdeeds should do the same.

Corporations are the Real Moochers

The firestorm over Mitt Romney’s closed-door comments depicting nearly half the U.S. population as parasites is coming mainly from those defending seniors, the poor and the disabled. But what’s really wrong with the Ayn Rand worldview Romney was parroting is that it ignores those who are the biggest moochers of all: giant corporations.

If, as Romney suggested, moocherism begins with the failure to pay federal income taxes, then that label can easily be applied to many of the country’s major companies. A November 2011 report by Citizens for Tax Justice and the Institute on Taxation and Economic Policy found that more than one-quarter of large companies paid zero taxes in at least one of the three years examined.

Quite a few of those companies arranged their affairs so that they had negative tax rates, meaning that the IRS sends them checks. And many of those that paid taxes did so at what CTJ and ITEP called “ultra low” rates of 10 percent or less.

Corporate tax avoidance is just the beginning of the story. The dependence on government that has Romney so upset is at the heart of the business plan for much of Corporate America. What libertarian types tend to overlook is that much of the public spending they disdain comes in the form of purchases from businesses. It’s estimated that more than $500 billion a year in federal outlays occurs via private-sector contracts.

Some companies rely so heavily on that spending that they are as government-dependent as any Medicaid or food stamp recipient. Aerospace giant Lockheed Martin, for example, derives more than 80 percent of its revenue from the federal government, especially the Pentagon; for its competitor Raytheon the figure is about 75 percent.

A large portion of what is called entitlement spending, especially in healthcare, ends up in the pockets of corporations, including drug makers, medical device manufacturers and for-profit hospital chains. The largest of the latter, HCA, gets more than 40 percent of its revenue from Medicare and Medicaid.

Corporations can get federal grants as well as contracts. The Commerce and Agriculture Departments have a slew of programs that assist businesses in marketing their products or that underwrite some of their costs. And, of course, a large portion of the billions paid each year in farm subsidies goes to agribusiness giants rather than family farmers.

Despite the recent Republican demagoguery on Solyndra, targeted federal spending to develop new energy technologies is nothing new. The Recovery Act’s billions for solar and wind companies was completely in line with federal programs that have subsidized everything from coal gasification to nuclear power plants. Before the Fukushima Daiichi disaster in Japan, the U.S. government was promoting a loan guarantee program to encourage the construction of a new generation of nukes by major utility companies.

Giant corporations also depend on the federal government to help them sell their goods abroad. The Export-Import Bank of the United States spends more than $30 billion each year providing various forms of insurance, loan guarantees and direct loans for the likes of Boeing, General Electric and Caterpillar. The federal government’s Overseas Private Investment Corporation helps U.S. companies do more business offshore by providing political risk insurance and other types of financial assistance.

Another form of corporate dependency on government is the ability of natural resources companies to operate on public lands and pay either no royalties or artificially low ones . Mining corporations, for example, take advantage of an 1872 law that allows them to extract gold, silver and other hardrock minerals from public lands royalty-free.

Assistance from the federal government can be a matter of life and death for some companies, as in clear in the cases of General Motors and Chrysler as well as the banks that were brought back from the brink by the TARP bailout and then thrived on the influx of billions in essentially free money from the Federal Reserve.

Hearing all the ways in which the federal government makes life easier and more profitable for big business, a newly arrived Martian might expect giant corporations to be grateful boosters of the public sphere. Instead, as we know all too well, most large companies are disdainful of government and are constantly whining about regulation and taxes they can’t avoid paying.

To make things worse, many government-dependent companies are less than honest when it comes to their dealings with the public sector. The Project On Government Oversight’s Federal Contractor Misconduct Database identifies hundreds of examples of contract fraud and other offenses. Healthcare providers such as HCA, not satisfied with the vast amount of honest business they get from Medicare and Medicaid, have defrauded taxpayers out of billions more.

If Romney wants to find the real moochers—and often crooked ones at that—he can find them in the corporate world that is his natural habitat.

Corruption and Concentration

The United States has by far the fattest military budget in the world, but soon the biggest company providing much of that weaponry could be European. Britain’s BAE Systems and Airbus parent EADS have announced plans to join forces, creating the world’s largest aerospace and military contracting corporation.

Business analysts are focusing on the challenge such a merger would pose to the companies’ U.S. rivals Boeing and Lockheed Martin, while little mention is being made of the fact that the deal would bring together two of the most ethically challenged large corporations in the world today.

For most of the past decade, BAE has been confronted with allegations that the company engaged in widespread bribery in its dealings with foreign governments. The charges began to receive significant attention in June 2003, when The Guardian reported that the U.S. government had privately accused BAE of offering bribes to officials in the Czech Republic. The Guardian went on to report that BAE was facing bribery allegations in three additional countries: India, South Africa and Qatar. Among the charges was that BAE had paid millions of pounds in secret commissions to obtain a huge deal, backed by the British government, to sell Hawk jets to South Africa. There were subsequent allegations that the company had formed a £20 million slush fund (later said to be £60 million) for paying bribes to officials in Saudi Arabia in the 1980s.

Despite denials by the company, Britain’s Serious Fraud Office (SFO) launched a criminal investigation of the bribery charges, focusing on the allegations regarding Saudi Arabia. BAE and the Saudi embassy reportedly lobbied intensively to have the probe terminated, and in December 2006 their effort paid off. The British government called a halt to the case because of national security concerns. (In April 2008 Britain’s High Court ruled that the termination of the investigation was unlawful, but in July 2008 the House of Lords overruled the court.) The SFO did, however, continue to investigate BAE’s questionable behavior in six other countries. The company was also being investigated by Swiss officials for possible money laundering violations.

Unable to escape these allegations, BAE announced in June 2007 that it would commission its own purportedly independent examination of the issues led by Lord Woolf, former lord chief justice of England and Wales. The Woolf Committee’s 150-page report, released in May 2008, stated that BAE’s top executives “acknowledged that the Company did not in the past pay sufficient attention to ethical standards and avoid activities that had the potential to give rise to reputational damage.” However, the report seems to have bowed to the wishes of the company that the focus be placed on the future rather than the past. The report provided what it called “a route map for the Company to establish a global reputation for ethical business conduct.” Among its 23 recommendations is that BAE “continue to forbid facilitation payments as a matter of global policy.” Given the less than draconian nature of the recommendations, it is no surprise that BAE agreed to adopt all of them.

A new front in BAE’s problems with questionable payments opened in late July 2008, when the Financial Times reported that it had seen documents suggesting that the company had paid at least £20 million to a company linked to a Zimbabwean arms trade close to controversial President Robert Mugabe.

In February 2010 BAE reached settlements with the U.S. Justice Department and the U.K. Serious Fraud Office concerning the longstanding bribery charges. The company agreed to pay $400 million in the U.S. and the equivalent of about $47 million in Britain to resolve the cases.

Confidential U.S. government cables given leaked to the press by Wikileaks in 2011 indicated that BAE had paid more than £70 million in bribes to Saudi officials to support its help win a contract for fighter jets.

EADS has been embroiled in its own corruption controversies. In mid-2006 a scandal emerged regarding EADS co-chief executive Noel Forgeard. French and German market regulators announced that they were looking into the timing of substantial sales of EADS stock by Forgeard and members of his family that occurred just before the company announced delays in the production of the Airbus A380 superjumbo jet. Forgeard initially claiming the timing was coincidental, but within a few weeks he was forced to resign, as was the head of Airbus, Gustav Humbert.

That did not put an end to the insider trading investigation. In December 2006 French police searched the Paris headquarters of EADS and that of its main French shareholder, the Lagardère conglomerate. In April 2008 a formal complaint was filed against EADS as well as more than a dozen current and former executives. The following month preliminary charges were brought against Forgeard and then against former deputy chief executive Jean-Paul Gut. In December 2009, however, French authorities concluded there was insufficient evidence against the executives.

Prior to the insider trading affair, EADS and/or Airbus had been named in numerous scandals around the world involving alleged bribery. A 2003 article in The Economist described a pattern of foreign bribes paid by Airbus throughout its history, noting that the French government tolerated such payments until 2000.

One of the most significant controversies occurred in Canada, where former Prime Minister Brian Mulroney was investigated over charges that he took bribes from German businessman Karlheinz Schreiber to induce Air Canada (then government controlled) to purchase $1.2 billion worth of Airbus planes in 1988. Mulroney denied the allegation vehemently and sued his own government, winning an apology and a cash settlement. The allegations were kept alive when Schreiber brought a civil suit against Mulroney, but Schreiber ended up making contradictory statements about the matter.

In December 2007 the government of India cancelled a $600 million order for military helicopters from Eurocopter after allegations that there had been corruption in the bidding process.

Just last month, it was reported that Britain’s SFO has launched a criminal probe of claims that a unit of EADS bribed officials in Saudi Arabia to win a $3 billion communications contract. The company asked PricewaterhouseCoopers to conduct a parallel investigation.

Given the records of these two corporations, the regulators who will be deciding whether to approve the merger should also consider what conditions could be imposed on the combined company to get it to put an end to its legacy of corruption.