Dirt Diggers Digest

McDonald’s and the Road to the Fast Food Strike Wave

fast-food-strike-AP46472623_620x350 As this is being written on August 29^th, there are reports that fast-food workers are staging walkouts and protests in some 60 cities. Many of the actions are directed at McDonald’s, which makes sense, given that it is the largest and best-known player in the industry.

Yet what makes a focus on McDonald’s even more appropriate is the company’s history. More than any other restaurant operator, it has worked to suppress pay rates, enforce harsh work procedures and prevent unionization. In other words, it epitomizes everything that the current strikes are trying to change. The following is an overview of that disgraceful history.

From its earliest days in the late 1950s, McDonald’s went to great lengths to maintain total control of its underpaid work force, using techniques such as lie detector tests and rap sessions that supposedly were meant to give workers a chance to air grievances but were mainly designed to give managers a sense of who the troublemakers were.

This non-union philosophy did not go unchallenged. When McDonald’s sought to open its first stores in San Francisco in the early 1970s, the company was confronted by unions and local politicians who opposed city approval because of the labor policies of the company. It took a long court battle before McDonald’s prevailed. In the late 1970s the fast-food chains faced an intensive campaign in Detroit by an independent group called the Fastfood Workers’ Union.

In 1990 a group called the Campaign for Fair Wages staged protests at McDonald’s outlets in the Philadelphia area to protest the fact that workers at inner-city locations were being paid less than those in the suburbs. In 1998 a group of workers at a McDonald’s outlet in Macedonia, Ohio went on strike and sought representation by the Teamsters union, but the effort fizzled out.

Apart from resisting unions, McDonald’s long lobbied in the United States for a lower minimum wage for teenagers, who made up the large majority of the company’s labor force. When the Nixon Administration came out in support of the idea, Sen. Harrison Williams of New Jersey charged that it was a quid pro quo for a $255,000 campaign contribution that McDonald’s chairman Ray Kroc had made to Nixon’s re-election campaign. After years of debate, the “teenwage” concept was finally adopted by Congress when the minimum wage was revised in 1989 (the two-tier system expired in 1993).

Unions have been a bit more evident among McDonald’s operations in other countries. In Ireland, Sweden and a few other countries, unions were successful in negotiating working conditions, but the company and its franchisees still sought to keep unions out wherever possible. This policy became a target of a militant labor campaign when the company opened its first outlet in Mexico in 1985. The restaurant workers union laid siege to the facility and forced it to shut down until a successful representation election was held.

Unions in Denmark launched a boycott of the company in 1988 after franchisees refused to sign a collective bargaining contract. After about eight months the company relented and agreed to join the employers’ group that negotiated with the Danish hotel and restaurant union. In the 1990s McDonald’s resisted union drive in countries such as Canada, Russia and Indonesia. Like Wal-Mart, it later agreed to cooperate with state-controlled unions in China.

McDonald’s has also faced pressures about working conditions in its supply chain. In 2000 the company was rocked by reports that a Chinese sweatshop employing under-aged workers forced to toil up to 16 hours a day was producing toys for its Happy Meals. McDonald’s and its U.S. supplier announced that they were cutting ties with the Chinese subcontractor involved. In 2005 thousands of Vietnamese workers who produced Happy Meal toys staged a two-day strike to protest abusive conditions on the job, and the following year a violent protest occurred at a Happy Meal toy supplier in China.

Actions such as these prompted McDonald’s to join with Walt Disney and a group of NGOs in what was called Project Kaleidoscope to promote better working conditions in the Chinese plants producing goods linked to the two companies. A 2008 report by the initiative spelled out some broad principles and claimed that a group of 10 target facilities had succeeded in improving working conditions.

Back in the United States, the Coalition of Immokalee Workers, which had just successfully pressured the Taco Bell chain to take responsibility for ensuring that farmworkers who picked the tomatoes used in its outlets were treated decently by suppliers, issued a call in 2005 for McDonald’s to do the same. After two years of campaign pressure, McDonald’s gave in and signed a three-way agreement with the Coalition and the growers under which the restaurant chain agreed to pay one cent more per pound for tomatoes to boost farmworker pay.

McDonald’s response to the farmworker campaign shows that, when put under enough pressure, it will make concessions. Let’s hope that the strikers can raise the heat to that level.

Note: This post is drawn from my new Corporate Rap Sheet on McDonald’s, which can be found here.

Auto Safety Lapses Evoke the Bad Old Days

Ford_pays__17_4_million_to_settle_recall_801160000_20130801222604_640_480 The Big Three carmakers, once considered the epitome of corporate irresponsibility, have been viewed in a more favorable light in recent years.

After their near-death experience of a few years back—during which two of them, General Motors and Chrysler, went bankrupt and had to be rescued by the federal government—the consensus seems to be that they have cleaned up their act. They are also being rewarded in the marketplace, where Detroit’s sales have been booming.

It is true that the Big Three are no longer exclusively focused on gas-guzzling SUVs or death traps such as the Pinto. GM is promoting its electric Volt rather than dodging Michael Moore. Yet there have been some indications recently that the giant automakers may be slipping back into old habits.

Recently, the National Highway Traffic Safety Administration fined Ford Motor $17.35 million for taking too long to recall more than 400,000 SUVs that were susceptible to sudden acceleration, a problem that was linked to at least one death and nine injuries in crashes.

If you hadn’t heard about this case, it may have been because NHTSA decided not to issue a press release about the penalty. Word got out and the matter received modest coverage in a few newspapers. It was only the Corporate Crime Reporter that gave the story the prominence it deserved: front-page treatment.

The Ford penalty came a couple of months after Chrysler took the unusual step of refusing to acquiesce to NHTSA’s request that it recall 2.7 million Jeeps the agency contends are defective and prone to fires in the event of rear-impact collisions. Chrysler, now controlled by Italy’s Fiat, later relented but applied the recall to only 1.6 million vehicles. Moreover, its fix for the problem—installing trailer hitches on the vehicles—was dismissed as inadequate by the watchdog Center for Auto Safety, had been responsible for bringing the defect to light.

One would think that Ford, in particular, would be more diligent on safety issues, given the hard lessons of its past. This was the company, after all, that produced those ill-fated Pintos, whose unshielded fuel tanks near the back of the fragile compacts caused horrific explosions in rear-end collisions. Evidence later emerged that Ford was aware of the vulnerability of the gas tank, but went ahead with production of the car. In one civil case a jury awarded $125 million in damages (reduced by the judge to $3.5 million).

Ford was also embarrassed by reports that many of its cars with automatic transmissions produced during the 1970s had a tendency to slip from park into reverse. In 1981 federal regulators forced the company to send warning notices to purchasers of some 23 million vehicles about the problem. Ford may not have been happy about this, but it was a lot less onerous than the massive recall of the cars that had been urged by public interest groups.

In 1996 Ford gave in to public pressure and agreed to pay for replacing ignition switches on more than 8 million cars and trucks that were prone to short circuits that could cause fires. In 1998 State Farm, the largest auto insurer in the United States, sued Ford, charging that the company withheld information about the potential fire hazard from federal regulators and the public.

In 1999 NHTSA hit Ford with a $425,000 fine in the matter. An investigation later revealed evidence that Ford knew about ignition defects, which also sometimes caused vehicles to stall out while making turns, but remained silent. A California judge then ordered the recall of an additional two million vehicles—the first time a U.S. court had ever taken such an action against automaker.

In 2000 Bridgestone/Firestone announced a massive recall of tires, most of which had been installed on Ford sport-utility vehicles and light trucks. Ford alleged that the tire company had known of the defects for several years. Information later came out suggesting that Ford, as well as Bridgestone/Firestone, had known of the tire defects long before the recalls were announced.

An investigation by the New York Times found that in the 1980s Ford had taken a number of design shortcuts that raised the risk of rollover accidents in what would become its wildly popular Explorer SUV.

What a track record. Let’s hope we are not returning to those bad old days of automaker recklessness.

Note: The latest addition to my CORPORATE RAP SHEETS is a dossier on Monsanto, the bully of agricultural biotechnology. Read it here.

The ACA Employer Penalty Gap

walmart_jwj_subsidies Along with the scandalous number of the uninsured, one of the biggest healthcare outrages in the United States is the ability of large companies employing low-wage workers to avoid providing reasonable group coverage, letting those employees enroll instead in public programs such as Medicaid.

Those programs were meant for poor people not in the labor force or those working for marginal employers. In the absence of any legal obligation to provide workplace coverage, giant prosperous corporations such as Wal-Mart exploit the public programs and thus shift costs onto taxpayers.

A recently updated report by the Democratic staff of the U.S. House Committee on Education and the Workforce estimates that the workforce of a typical Wal-Mart Supercenter costs taxpayers some $250,000 a year in Medicaid costs (as part of at least $904,000 a year in overall safety net costs per store).

One might think that this is going to change under the Affordable Care Act that is gradually taking effect. While the law contains a requirement for individuals to have coverage, there is no real employer mandate to provide that coverage to workers. Instead, the ACA imposes penalties on certain employers for failing to provide affordable and inadequate coverage. Yet there are no fines levied when a boss pushes a worker onto the Medicaid rolls.

In fact, the ACA’s provisions encouraging states to adopt expanded Medicaid coverage, while a good thing for the uninsured, will make it easier for low-wage employers both to avoid providing group coverage and to escape penalties for doing so. This largely overlooked fact is worth keeping in mind when businesses complain about the supposedly onerous employer penalties in the ACA—penalties whose implementation the Obama Administration announced in July will be delayed for a year. (Also being delayed, we just learned, are provisions limiting the out-of-pocket costs insurance companies can impose.)

The ACA’s employer penalties have an exceedingly narrow scope. They will apply only when an employee of a firm with 50 or more full-time workers (the law’s definition of a “large” employer) seeks non-group coverage from an insurance company through one of the new state Exchanges that are being constructed and the employee qualifies for a premium or cost-sharing subsidy based on his or her household income.

Those individual subsidies are available only for workers whose household income is between 100 and 400 percent of the federal poverty line (FPL) for their family size and whose employer either fails to provide any group coverage or provides coverage that is unaffordable or inadequate. Coverage for people in that income range is deemed unaffordable if the premium (for self-only coverage) exceeds 9.5 percent of household income or the plan covers less than 60 percent of medical costs.

This means that employers of people earning less than the FPL or more than 400 percent of the FPL face absolutely no risk of penalties for failing to provide decent coverage, while the workers in those income ranges are denied subsidies from the Exchanges. Those earning less than the FPL may or may not be eligible for Medicaid, depending on the state. Those earning more than 400 percent of the FPL are not eligible for Medicaid in any state.

Penalties may also not apply when “large” employers fail to provide affordable coverage to those in the 100-400 percent of FPL range. That’s because some of those workers will for the first time qualify for Medicaid if they live in a state that accepts the optional federal incentives in the ACA for expanding Medicaid eligibility.

Do those conservative state legislators refusing to go along with Medicaid expansion realize that they are increasing the likelihood that employers will have to pay ACA penalties?

Some concern has been expressed about the potential coverage gap for those low-income families which are not eligible either for an Exchange subsidy or Medicaid, but much less attention has been paid to what amounts to an employer penalty gap.

A primary aim of the ACA is to reduce the ranks of the uninsured, but the rejection of a single-payer system means that workplace-based coverage needs to be strengthened. That should have meant a rigorous employer mandate. Instead, the ACA went with a pay-or-play system whose penalties turn out to be full of holes. Companies such as Wal-Mart may thus find it easy to continue shifting their healthcare costs onto the public.

At the state level, one of ways activists have sought to fight such cost-shifting has been to push for the disclosure of data showing which companies account for the largest number of enrollees in Medicaid and other public plans. Such shaming lists have been published for about half the states, with Wal-Mart or McDonald’s typically appearing at the top.

The ACA will require “large” employers to file reports indicating whether they provide group coverage (the effective date of this has also been pushed back). There is no indication in the ACA itself whether these reports can be made public, but given that they will be submitted to the IRS, it is likely that they will be treated as confidential. Not only does the ACA fail to impose a real employer mandate; it also appears to miss an opportunity to shame those freeloading employers which expect taxpayers to pick up the tab for their failure to provide decent coverage.

Cadillacs versus Corollas in the Healthcare Debate

solidgoldcadillac Over the past couple of years it has appeared that critics of the Affordable Care Act were virtually all die-hard Tea Party types who couldn’t accept reality, including a ruling of the U.S. Supreme Court.

We are now seeing reminders that those who have misgivings about the ACA are not only those misguided souls who believe it amounts to a government takeover of healthcare.

One group that had raised objections to at least part of the plan are now finding that a compromise they made is coming back to haunt them. That group is the labor movement, particularly public sector unions, which had questioned the dubious decision of Senate Democrats and the Obama Administration to include an excise tax on higher-cost health plans when drafting the ACA; the provision was designed to help fund the costs of subsidizing new coverage for the uninsured.

That decision was particularly galling because Obama had strongly opposed John McCain’s proposal for health plan taxation during the 2008 Presidential campaign. Unions denounced the provision, but in early 2010 they agreed to support a modified version of it. The modifications included a delay in its effective date (until 2018 for plans covering state and local government employees or ones covered by collective bargaining agreements) and an increase in the threshold levels above which the tax would apply.

The issue has been little discussed during the past three years, but now there are reports that local governments across the country are using the coming excise tax to pressure public employee unions to accept less expensive coverage—i.e., plans in which the worker pays more and gets less—or face the prospect of other contract concessions or layoffs.

What the proponents of the excise tax chose to ignore is that unions, especially in the public sector, have often focused on negotiating better benefits because significant wage increases were not possible, either for political or fiscal reasons. In other words, better benefits were not a giveaway to public unions, as anti-government types like to claim, but rather a form of compensation for insufficient pay rates.

When the excise tax was being debated in 2009, proponents misleadingly referred to it as applying only to “Cadillac” plans. It was meant to give the impression that only luxurious coverage of the type offered to corporate executives would be affected. Now it appears that those who drive Corollas may get hurt most by the provision.

The labor movement is also worried that the ACA will weaken the multiemployer benefit plans that some unions negotiate for their members. The concern is that unionized small employers participating in those plans will be end up in a competitive disadvantage compared to non-union competitors which will be able to purchase lower-cost group coverage through the Exchanges being created by the ACA.

Last month the Wall Street Journal reported that the heads of three major unions—the Teamsters, the Food and Commercial Workers and Unite Here—were trying to get the Administration to do something about ACA’s impact on multiemployer plans but were being “stonewalled.” The unions are also concerned that the law prevents low-wage workers in group plans from gaining access to the premium and cost-sharing subsidies that will be available to those who purchase individual coverage through the Exchanges.

The lack of action in response to labor concerns contrasts with the surprise announcement last month by the Administration that it was delaying the implementation of the ACA provisions imposing financial penalties on certain employers that fail to provide affordable group coverage to their workers. The post on the White House website was entitled WE’RE LISTENING TO BUSINESSES ABOUT THE HEALTH CARE LAW.

Despite the scare-mongering that has been going on in parts of the media, the penalties for failing to provide group coverage (or for providing unaffordable coverage) are far from onerous. To begin with, they don’t apply to employers with fewer than 50 full-time workers, and the penalties don’t actually kick in unless there are more than 80 full-timers. Penalties are calculated according to the number of full-timers only, ignoring part-timers and seasonal workers.

And the penalties don’t apply at all unless one of the workers denied affordable group coverage on the job qualifies for a premium or cost-sharing subsidy when purchasing individual coverage through an Exchange. Those subsidies will not be available to anyone with household income above 400 percent of the federal poverty line. This means that even larger employers that fail to provide decent coverage but whose pay rates are somewhat above poverty levels may be able to skirt the penalties entirely.

Perhaps the Obama Administration should be listening a bit less to business and more to workers and their unions.

When Will the Big Banks Be Reined In?

In case anyone had doubts about the venality of the big U.S. banks, some recent news reports provide indisputable proof.

First, David Kocieniewski of the New York Times wrote a mind-boggling front-page report on how Goldman Sachs has been using a metals storage company to move large quantities of aluminum from one warehouse to another in Detroit. The maneuver, which exploits esoteric rules of the London Metal Exchange, generates millions of dollars in profit for Goldman and pushes up the price of products such as soft drinks sold in aluminum cans.

The creation of paper profits from aluminum shuffling is just one of the various ways that banks manipulate commodity prices. Occasionally they are called to task for their actions. The Federal Energy Regulatory Commission just announced that JPMorgan Chase would pay $410 million in penalties and disgorgement to ratepayers to settle charges that it manipulated electricity markets in California and the Midwest several years ago. The announcement came shortly after the agency ordered the British bank Barclays and four of its traders to pay $453 million in civil penalties in connection with similar abuses in the western United States.

Apparently these banks decided that Enron’s energy market manipulation from a decade earlier was a game plan rather than a cautionary tale.

Another Times piece reports that major banks have in effect blacklisted more than a million low-income Americans because their names appear in databases of supposedly risky customers. The article highlights a Brooklyn woman who ended up on such a list after she overdrew her checking account by all of $40 in 2010 and subsequently was turned down by numerous banks when she tried to open an account. Many of the blacklisted people had to resort to exploitative check-cashing services and payday lenders to conduct their financial transactions. Among the subscribers to ChexSystems, the largest of the databases, were said to be Bank of America, Citibank, JPMorgan Chase and Wells Fargo.

Allow that to sink it. Banks that have been involved in multi-billion-dollar scandals involving the deceptive sale of toxic securities, municipal bond bid rigging, foreclosure abuses and the like decide that it is too risky to take on a customer who once had a two-digit overdraft in her checking account.

For institutions such as these, the only proper response is to play as dirty as they do. A third NYT article reports that the city of Richmond, California is doing exactly that by employing its power of eminent domain to take over occupied homes that are under the threat of foreclosure and instead offer the owners new, more affordable mortgages that reflect the diminished value of the property. The banks, which have dragged their feet on foreclosure reforms, are indignant over the move and are, in the words of the Times, threatening to “bring down a hail of lawsuits and all but halt mortgage lending in any city with the temerity” to consider the tactic.

The need for bold tactics such as eminent domain has been brought about not only by the banks but also by the half-hearted efforts of the Obama Administration to deal with the foreclosure crisis. This is just one of the ways the administration has not held the financial industry fully responsible for the financial meltdown of 2008 and the repercussions that are still with us.

The President himself is spending his time these days lobbying Congress to support the selection of Larry Summers as the next chair of the Federal Reserve. This is the same Summers who, as Clinton’s Treasury Secretary, promoted the financial deregulation that helped usher in the bank recklessness that has done so much harm to the economy.

The Wall Street Journal recently revealed for the first time that Summers has been working as a consultant to Citigroup in addition to his previously reported roles advising a hedge fund, a venture capital firm and a money management company. Obama apparently thinks that someone with this kind of track record is well suited to oversee monetary policy as the head of an agency that is also one of the main banking regulators.

I’m more impressed with the public officials in Richmond, California.

R.I.P. for SAC?

SAC indictment It’s not clear what real value hedge funds add to the economy, but the apparent abuses of Steven Cohen’s SAC Capital Advisors have made one significant though unintentional contribution: They have breathed new life into the concept of a corporate death penalty.

The criminal and civil charges just filed against SAC by the U.S. Attorney’s Office in Manhattan for insider trading could very well lead to the demise of the firm, given that prosecutors are reportedly seeking forfeiture of some $10 billion. In fact, some analysts believe that forcing SAC out of business is the primary goal of the feds.

In recent years, federal prosecutors have appeared to do everything possible to avoid prosecutions of even the most egregious companies if the case threatened their viability. This has allowed many of the big banks to avoid major criminal charges for their role in the financial meltdown, money laundering or LIBOR interest rate manipulation.

Those that have faced charges have never been in danger of going under, given their ability to negotiate deferred prosecution agreements or the application of criminal charges to a minor subsidiary. Some of the penalties have been sizable (e.g. $1.9 billion for HSBC and $1.5 billion for UBS) but not big enough to sink them.

SAC is a different story. A $10 billion penalty would cripple the firm, which has already been experiencing a rapid outflow of assets since the insider trading charges first surfaced and SAC paid $616 million last March to settle civil charges brought by the Securities and Exchange Commission.

Prosecutors don’t have to worry about broad economic consequences of an SAC collapse. Some negative ripple effects might be felt in Stamford, Connecticut, where the firm is headquartered, but there are plenty of other wealthy firms and individuals there to generate business for luxury car dealers and the high-end service sector.

The fact that a firm such as SAC could disappear without causing any significant disruption raises the question of what purpose it serves in the first place.

Hedge funds have been around for decades, but they used to be low-profile firms serving a limited clientele of wealthy individuals. During the 1990s hedge funds came out of the shadows. Hordes of young investment professionals like Steven Cohen left the stodgy confines of Wall Street and opened their own hedge funds. No longer satisfied with the prospect of becoming a mere millionaire at a brokerage firm, these hotshots saw the chance to become multimillionaires through esoteric investment techniques beyond the comprehension of mere mortals.

The dream of unlimited wealth was shaken in 1998, when a hedge fund called Long-Term Capital Management—which had used $2.2 billion in assets to acquire financial positions with a value of more than $1 trillion—was on the verge of collapse. Concerned that a failure of this magnitude would weaken the entire financial market, the Federal Reserve intervened by putting together a group of investment banks that bailed out the hedge fund and its rich investors.

Events such as this tarnished the reputation of hedge funds but did not result in a stampede among their clients, which included a growing number of pension funds. In fact, the sluggish performance of the stock market in the wake of the dot.com collapse made affluent investors even more interested in the extraordinary returns that hedge funds seemed to offer.

Despite the hype in the business press about funds pulling in annual returns of 40 percent or more, many hedge funds struggled to outperform the stock market. Looking for the big score, some turned back the clock to the financial maneuvers of the 1980s. Rather than simply engaging in financial plays, they used their holdings in companies to press for corporate restructuring to pump up the stock price or in some cases bought out the firm entirely in order to reshape it. Hedge fund managers began to behave like the corporate raiders of the 1980s, and some of those raiders, such as Carl Icahn, transformed themselves into hedge fund managers.

Yet even these approaches could not provide levels of return high enough to meet the inflated expectations of hedge fund investors. All the evidence suggests that firms such as SAC decided that the only way to beat the market was to obtain information that no one else had; in other words, by resorting to insider trading.

That was the message of the successful prosecution of Galleon Group founder Raj Rajaratnam in 2011 and is also at the heart of the SAC indictment, which alleges not just some isolated instances of insider trading. Instead, it charges that such behavior was inherent in the way SAC has operated:

The relentless pursuit of an information “edge” fostered a business culture within SAC in which there was no meaningful commitment to ensure that such “edge” came from legitimate research and not Inside Information. The predictable and foreseeable result, as charged herein, was systematic insider trading.

If SAC’s goose is indeed cooked, the next issue is what happens to its competitors. There’s no reason to believe that any of the other big hedge funds have been any more scrupulous in their pursuit of an information edge. Perhaps what we should be talking about here is not just the death penalty for a single company but for an entire industry.

China’s Familiar Charges Against Glaxo

big-pharma-pills-and-money Global corporations piously claim to adhere to the laws of the countries in which they do business, knowing full well that those laws in many places are weak or are not rigorously enforced.

It’s thus amusing to see British drug giant GlaxoSmithKline squirm in the face of corruption charges unexpectedly brought by the Chinese government. GSK purports to be shocked by allegations that its Chinese executives used funds laundered through travel agencies to bribe doctors, hospitals and public officials to purchase more of its products. The company insists that it has zero tolerance for such behavior and that a recent internal investigation had found no evidence of corruption in its Chinese operations.

These protestations are as unconvincing as the Chinese government’s claims that it is simply enforcing the law—as opposed to giving its emerging pharmaceutical industry a leg up. GSK’s alleged transgressions are little different from the practices that it and the rest of Big Pharma employ around the world.

Take the United States. In recent years, GSK has become known as the company that pays massive amounts to resolve wide-ranging allegations brought by regulators and prosecutors.

Some of those charges involved payments very much like the ones it is being accused of making in China. GSK was charged with giving kickbacks to doctors and other health professionals to prescribe drugs such as the anti-depressants Paxil and Wellbutrin for unapproved (and possibly dangerous) purposes. Payments also went to figures such as radio personality Drew Pinsky, who was given $275,000 by the company to promote Wellbutrin on his program.

The kickback allegations were among the charges covered by a $3 billion settlement GSK reached with the U.S. Justice Department in 2012. Also included in the deal were accusations that GSK withheld crucial safety data on its diabetes medication Avandia from the Food & Drug Administration and that it defrauded government healthcare programs in its pricing practices.

These safety and pricing matters were the culmination of years of controversy surrounding GSK and its predecessor companies. The safety issues dated back at least to the 1950s, when Smith, Kline & French was among the firms linked to Thalidomide and its horrible legacy of birth defects.

Until it was sold off in the late 1980s, Glaxo’s infant formula business, like that of Nestle, was accused of undermining public health in the third world by marketing the powder to women who were so poor that they tended to dilute the formula to the point that it lost its nutritional potency.

In the 1980s, SmithKline Beckman was the target of a rare criminal case brought under U.S. drug laws for failing to warn regulators and the public about the potentially lethal side effects of its blood pressure medication Selacryn.

Later years saw frequent charges that GSK suppressed evidence about the dangers of Paxil, especially in children. There were also many cases involving pricing abuses, including one in which GSK paid $150 million to resolve allegations of violating the federal False Claims Act in its dealings with Medicare and Medicaid.

Unlike many corporate settlements, GSK’s $3 billion deal with the feds required it to plead guilty to several criminal counts. It also had to sign a Corporate Integrity Agreement with the Department of Health and Human Services.

In other words, the company is in effect on parole and subject to heightened scrutiny. The Chinese accusations seem to point to a big, fat violation of the U.S. Foreign Corrupt Practices Act. That would jeopardize GSK’s settlement and subject it to new penalties and sanctions.

Foreign corporations have long taken advantage of China’s lax regulatory system. Now that the People’s Republic is (selectively) cracking down, a company such as GSK deserves no sympathy.

Deregulation Crashes and Burns

Canada’s Transportation Safety Board is far from reaching a conclusion on what caused an unattended train with 72 tanker cars filled with crude oil to roll downhill and crash into the Quebec town of Lac-Megantic, setting off a huge explosion that killed at least 15 people. But that hasn’t stopped Edward Burkhardt, the chief executive of the railroad, from pointing the finger at everyone in sight — except himself.

Burkhardt first tried to blame local firefighters who had extinguished a small blaze in the train before the larger accident, and now he is accusing his own employee — the person who was operating the train all by himself — for failing to apply all the hand brakes when he parked the train for the night and went to a hotel for some rest after his 12-hour shift.

Whatever were the immediate causes of the accident, Burkhardt and his company — Montreal, Maine & Atlantic (MMA) Railway and its parent Rail World Inc. — bear much of the responsibility.

Burkhardt is a living symbol of the pitfalls of deregulation, deunionization, privatization and the other features of laissez-faire capitalism. He first made his mark in the late 1980s, when his Wisconsin Central Railroad took advantage of federal railroad deregulation, via the 1980 Staggers Rail Act, to purchase 2,700 miles of track from the Soo Line and remake it into a supposedly dynamic and efficient carrier. That efficiency came largely from operating non-union and thus eliminating work rules that had promoted safety.

Wisconsin Central — which also took advantage of privatization to acquire rail operations in countries such as Britain, Australia and New Zealand — racked up a questionable safety record. Burkhardt was forced out of Wisconsin Central in a boardroom dispute in 2001, but he continued his risky practices after his new company, Rail World, took over the Bangor and Aroostook line in 2003 and renamed it MMA.

Faced with operating losses, Burkhardt and his colleague Robert Grindrod targeted labor costs with little concern about the safety consequences. In 2010 the Bangor Daily News reported that MMA was planning to reduce its crews to one person in Maine, which, amazingly, was allowed by state officials. Grindrod blithely told the newspaper: “Obviously, if you are running two men on a crew and switch to one man, you’re saving 50 percent of your labor component.” The company also succeeded in getting permission for one-man crews in Canada.

Inadequate staffing may have also played a role in a 2009 incident at an MMA maintenance facility in Maine in which more than 100,000 gallons of oil were spilled during a transfer in the facility’s boiler room. In 2011 the EPA fined the company $30,000 for Clean Water Act violations.

MMA continued to have safety problems even before the Lac-Megantic disaster. The Wall Street Journal reported that MMA had 23 accidents, injuries or other reportable mishaps from 2010 to 2012 and that on a per-mile basis the company’s rate was much higher than the U.S. national average.

The Lac-Megantic accident is prompting calls in Canada for a reconsideration of the policy of allowing a high degree of self-regulation on the part of the railroads. A review of lax regulation, including the elimination of work rules, should also occur in the United States. There’s also a scandal in the fact that railroads like MMA are still allowed to use outdated and unsafe tanker cars.

Yet some observers are seeking to exploit the deaths in Quebec by making the bizarre argument that the real lesson of the accident is the need to rely more on pipelines rather than railroads to carry the crude oil gushing out of the North Dakota Bakken fields (the content of the MMA tankers) and the tar sands of Canada. North Dakota Senator John Hoeven, for instance, is using the incident to argue the need for the controversial XL Pipeline.

How quickly these people forget that the safety record of pipelines is far from unblemished. Hoeven’s neighbors in Montana are still recovering from the 2011 rupture of an Exxon Mobil pipeline that spilled some 40,000 gallons of crude oil into the Yellowstone River.

The problem is not the particular delivery system by which hazardous substances are transported but the fact that too many of those systems are under the control of executives such as Burkhardt who put their profits before the safety of the public.

Job Actions Have Wal-Mart Running Scared

Walmart_strike It’s déjà vu all over again at Wal-Mart. Returning to its customary practice of using intimidation to respond to demands for improved working conditions, the company recently began firing some of the “associates” who participated in strikes at its stores. Other workers are being disciplined under the pretext of violating Wal-Mart’s attendance policy.

While this is bad news for the workers affected, the use of heavy-handed tactics is a sign that the company is worried about the historic job actions that have been spreading through its U.S. operations. If Wal-Mart really believed its claims that the OUR Walmart group spearheading the protests has limited support among the company’s massive workforce, then it would be ignoring the movement rather than desperately trying to squelch it.

The current wave of firings is actually an escalation of repressive policies that the company has been implementing since OUR Walmart began ramping up its campaign in 2011. A report released in May by American Rights at Work found that the company has been responding to the activism by disguising acts of retaliation as legitimate discipline or routine enforcement of company policy. Accusing Wal-Mart of fostering a “climate of fear,” the report also documented ways in which the company violated federal labor law by denying OUR Walmart members and organizers access for protected concerted activity.

Such actions continue a tradition of anti-union animus that has characterized Wal-Mart since its earliest years. While some have sought to romanticize founder Sam Walton and pin the blame for the company’s notorious labor policies on his successors, it was Sam himself who first brought in union-busting consultants when some members of his then much smaller workforce began to talk about organizing in the 1970s. The investment paid off for management. For example, after about half of the workers at a Wal-Mart warehouse in Searcy, Arkansas signed cards in support of Teamsters representation in the early 1980s, the consultants 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.

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, but the issue was by then moot.

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.

Wal-Mart’s labor relations 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.

The problem for current Wal-Mart management is that its workers are more difficult to intimidate than they were in the past. Organizing efforts used to be limited to single locations; now OUR Walmart, using non-traditional tactics, is operating in many places and can mobilize large numbers of people, as seen in last year’s Black Friday job actions as well as the recent strikes and the protests at the company’s annual meeting.

One way Wal-Mart management is responding to the growing solidarity is by increasing its use of a category of worker it believes it can more readily control: temps. The company traditionally used such contingent workers only during the holiday season. Recently there have been reports that some Wal-Mart stores are hiring only temps.

So much for those TV ads that sought to portray a job at Wal-Mart as the stepping-stone to a career.

Subsidy Megadeals for Megacorporations

The Miami Herald recently published a story with the headline “Amazon Doesn’t Need Tax Incentives, But Localities Offer Millions in Tax Breaks.” Throwing large sums of money at large corporations in a desperate attempt to create jobs is an affliction not limited to public officials in Florida. It is a wasteful and self-defeating public policy that can be found throughout the United States.

An indication of just how pervasive the practice has become can be found in a new report my colleagues and I at Good Jobs First have just issued. The title is Megadeals, and it is a look back at the largest state and local subsidy packages of the past three decades.

In the course of five months of painstaking research, we identified 240 of those packages with a total value of at least $75 million each; the aggregate cost is more than $64 billion. Many of them reach into nine and even ten figures. There are eleven deals costing $1 billion or more in public money.

Most astounding are the costs per job. The average for our 240 megadeals is $456,000 and there are 18 for which the cost per job is $1 million or more.

Megadeals have been awarded to many of the largest and best known companies based in the United States as well as foreign ones doing business here, including: General Motors, Ford, Nissan, Toyota and just about every other large automaker; oil giants such as Exxon Mobil and Royal Dutch Shell; aerospace leaders Boeing and Airbus; banks such as Citigroup and Goldman Sachs; media companies such as Walt Disney and its subsidiary ESPN; retailers such as Sears and Cabela’s; old-line industrials such as General Electric and Dow Chemical; and tech stars such as Amazon.com, Apple, Intel and Samsung.

Sixteen of the Fortune 50 are represented. Not included is the company atop of the Fortune list: Wal-Mart. That’s not because Wal-Mart doesn’t receive subsidies—Good Jobs First has separately documented more than $1.2 billion in such taxpayer assistance in our Wal-Mart Subsidy Watch website—but its deals have been worth less than $75 million each and thus don’t qualify for our list.

The most expensive single listing is a 30-year discounted-electricity deal worth an estimated $5.6 billion given to aluminum producer Alcoa by the New York Power Authority. Taking all of a company’s megadeals into account, Alcoa is at the top with its single $5.6 billion deal, followed by Boeing (four deals worth a total of $4.4 billion), Intel (six deals worth $3.6 billion), General Motors (11 deals worth $2.7 billion), Ford Motor (9 deals worth $2.1 billion), Nike (1 deal worth $2 billion) and Nissan (four deals worth $1.8 billion).

The overall costs of megadeals have risen over the past three decades (in current dollars). The megadeals from the 1980s averaged $157 million. The average rose to $175 million in the 1990s and $325 million in the 2000s. It then declined to $260 million in the 2010s. The average for the list as a whole is $269 million.

Some of the deals involve little if any new-job creation; indeed, one in ten of the deals involves the mere relocation of an existing facility, usually within the same state and often a short distance. Some of these retention deals were granted in so-called job blackmail episodes in which a company threatened to move jobs out of state unless it got new tax breaks or other subsidies.

The megadeals list is a new enhancement of Good Jobs First’s Subsidy Tracker database, the first compilation of company-specific data on economic development deals from around the country.

Until now, the content of Subsidy Tracker has consisted exclusively of official disclosure data provided by state and local governments. The information has been obtained from government websites and from direct requests to agencies. Given the limitations of the disclosure practices among state and local governments—and often from program to program within jurisdictions—the exclusive reliance on official data meant that Subsidy Tracker was missing information on many large deals that had been reported in the media. Either those deals were missing entirely if there was no official disclosure for the programs involved, or else Tracker had incomplete data if some but not all of the programs used in the package were disclosed.

To rectify this problem, we went back and collected information on large deals using a variety of sources, including press releases, newspaper articles and reports on specific projects as well as the official data we already had. The results went into the creation of the megadeals list and have been incorporated into Subsidy Tracker.

Note: The page containing the Megadeals report also has a link to a spreadsheet with full details on all 240 of the deals.