Regulators Draw Flak Meant for Corporate Perps

When a mobster or street criminal declares “I was framed” and expresses disdain for police and prosecutors, we dismiss it as part of their sociopathic tendencies. Yet when corporate transgressors do essentially the same thing by criticizing government regulators, they are taken much more seriously. All too often, business perps succeed in portraying themselves as the victims.

This charade is being played out yet again amid the current wave of scandals involving major U.S. and British banks. In the latest case, Britain’s Standard Chartered has been accused by New York State banking regulator Benjamin Lawsky of scheming with the Iranian government to launder billions of dollars in funds that might have been used to support terrorist activists.

Rather than being outraged by the fact a major financial institution may very well have provided substantial material support to a regime that the governments of the United States and other western countries spend so much time vilifying, most of the criticism seems to be aimed at Lawsky.

Some of this criticism, not surprisingly, is coming from Standard Chartered itself, which insists that 99.9 percent of its dealings with Iranian parties were legitimate and that it was already cooperating with other regulatory agencies in investigating the matter. Those other agencies, including the Federal Reserve and the Office of Foreign Assets Control, seem to be siding with Standard Chartered. An article in the New York Times served as a conduit for allegations by unnamed federal officials seeking that Lawsky’s case was seriously flawed.

The accusations against Standard Chartered are hardly unprecedented. Only two months ago, the Justice Department announced that the Netherlands-based ING Bank had agreed to pay $619 million to settle charges of having violated federal law by systematically concealing prohibited transactions with Iran and Cuba. Last month, the Senate Permanent Subcommittee on Investigations issued a report of more than 300 pages on the poor record of the British bank HSBC in avoiding money-laundering transactions linked to terrorism and drug dealing.

The unfriendly response to the Lawsky allegations is not just a matter of the usual tension between federal and New York State regulators when it comes to financial sector investigations. Disapproving comments have also come from officials in Britain, with one member of parliament making the ridiculous suggestion that anti-British bias was involved.

There’s something much larger at stake. We’re in the midst of an ongoing corporate crime wave, with major banks among the most prominent perpetrators. As the Times points out, large corporations are on track to pay as much as $8 billion this year to resolve allegations of defrauding the federal government, a record amount and more than twice the amount from last year.

We should be focusing our criticisms on the companies involved in these and other cases that have not yet reached the settlement stage—not the regulators and prosecutors trying to control the corporate misconduct.

If there is any criticism to be made of regulators, it is that too few of them resemble Lawsky. They are more likely to treat corporations with kid gloves, given that too many of them either come from the private sector or end up there after their stint in government. Or else they simply fail to take decisive action. In the other major financial scandal of the day—the manipulation of the LIBOR interest rate index by Barclays and other major banks—regulators such as the Federal Reserve Bank of New York knew of the abuses years ago and were slow to do anything. The inaction was brazenly used by former Barclays CEO Bob Diamond as a way of spreading the blame for the rate-rigging.

No discussion of regulation would be complete without mentioning the problem that many of the rules are too weak to begin with. The individual most responsible for this during the Obama Administration—Cass Sunstein—recently announced that he will be leaving the Office of Information and Regulatory Affairs to return to academia. An indication of the damage inflicted by Sunstein can be gauged by the fact that both the Business Roundtable and the U.S. Chamber of Commerce bemoaned his departure. Hopefully, Sunstein’s successor will make it harder for corporate malefactors to ply their trade.

The Risks of Being Employed

For those out of work for an extended period, unemployment can feel like a slow death.

Perhaps the only thing worse is the rapid death or serious injury experienced by many of those who have jobs but are forced to toil in unsafe conditions. As the ongoing economic crisis makes it difficult for workers to resist speed-ups and the hazards that go along with them, workplace accidents continue to mount. More than a dozen people are killed on the job each day.

New evidence of employer abuse comes in the latest statistics for the Occupational Safety and Health Administrations’ Severe Violator Enforcement Program (SVEP). According to the August 1 issue of Bloomberg BNA’s Labor Relations Week, the number of workplaces that have egregiously bad safety records has doubled in the past year, reaching 330 establishments.

OSHA created the SVEP in 2010 in an effort to focus attention on those employers that expose their workers to the most dangerous conditions, as indicated by the occurrence of serious accidents and citations for significant violations of safety and health standards.  This is a laudable initiative, but it is likely that OSHA’s list includes only a small fraction of the corporate malefactors.

One of the companies missing from the compilation is BP, with which OSHA recently reached a $13 million settlement relating to the remaining unresolved violations at the company’s notorious Texas City refinery. BP previously paid more than $70 million in connection with hundreds of violations at the facility, where 15 workers were killed and more than 170 injured in a 2005 explosion (photo).

BP’s payments are far from the norm. In fact, the 2012 edition of the AFL-CIO’s overview of safety and health practices concludes that typical penalties—which after a recent increase still average only $2,100 for serious violations cited by OSHA and only $942 for those brought by state agencies—are too low to serve as a real deterrent to employer negligence.

Most of the firms on the SVEP list are smaller companies, with the largest number in the construction sector.  One larger corporation is Cooper Tire & Rubber. In November 2010 Cooper was cited by OSHA for 10 violations for failing to provide adequate protection from hazardous chemicals at its plant in Findlay, Ohio. The following June, Cooper was cited for similar violations at its plant in Tupelo, Mississippi.

Failure to provide a safe work environment is not the only way that Cooper mistreats its workers. The tire maker is also among the large employers that have used the recession as a pretext for taking a hard line on collective bargaining. Last November, Cooper locked out workers in Findlay represented by the Steelworkers union after they rejected a contract offer from the profitable firm that eliminated wage guarantees and increased healthcare premiums. Back in 2008, when Cooper was losing money, the union agreed to $30 million in concessions that helped it survive. The lockout ended in February after workers approved a somewhat less onerous offer.

Cooper’s strategy is similar to that being employed by Caterpillar, which despite enjoying record profits, is seeking deep concessions from its union workers. In May more than 750 workers at Cat’s plant in Joliet, Illinois, took what is a rare step these days—they went on strike. They were willing to take the risk in the face of a company proposal to freeze wages for six years for workers with more seniority and to set wage rates for newer employees according to labor market conditions rather than collective bargaining. There appears to be no end in sight for the walkout.

Long-term unemployment can take a terrible toll on families, but many of those with jobs go to work each day facing risks to their life or their livelihood. The recession, intensified by corporate disregard for workplace safety and labor laws, weighs heavy on all of the 99%.

How to Succeed in Business

It’s only a few months to the presidential election, and the economy is still a mess, yet the candidates have been arguing over the secret of success in business.

This is an old and tired debate, and neither side is saying anything novel. Romney is reciting the chamber of commerce fairy tale that business achievement is the result purely of hard work and risk-taking on the part of lone entrepreneurs. Obama mostly accepts that narrative but meekly points out that business owners also depend on government-provided infrastructure and thus should pay a slightly larger share of the taxes needed to fund those roads, bridges and the like.

Both men talk as if we were still in an early 19th Century economy of small enterprises that live or die based on individual effort and minimal government activity—rather than the century-old reality that megacorporations are what dominate American commerce.

When the candidates do acknowledge the existence of big business, it is mainly to offer competing proposals on how to serve its needs. For the Republicans, this means further weakening of regulation and the dismantling of the corporate income tax. While the Democrats make some noise about controlling business excesses, nothing much comes of this, and their main goal seems to be that of bribing large corporations with incentives so they don’t abandon the U.S. economy entirely.

What both sides forget is that corporations exist at the behest of government—in nearly all cases state governments, which authorize their creation. The original ones were established to enlist private participation in government initiatives such as building canals. Before the Civil War, corporations were allowed to engage only in designated activities and could not grow beyond a certain size. It was to get around these limitations that robber barons such as Rockefeller created the trusts that came to control so much of American industry, prompting the passage of the Sherman Act and other antitrust efforts.

Whatever progress started to be made in thwarting the hyper-concentration of business was undermined when New Jersey and then Delaware rewrote their corporation laws to allow companies to do pretty much whatever they pleased and to become as big as they  wished in the process. Eventually, other states followed suit. The corporate form, once a privilege granted for special purposes, became an entitlement for any pool of money seeking to make a profit behind the shield of limited liability.

What presidential candidates should be debating is whether the time has come to tighten state corporation laws or replace them entirely with a federal system of chartering, as Ralph Nader and his colleagues argued in the 1970s.

Nader’s effort was prompted by a wave of revelations about corporate misconduct that came out of the Watergate investigations. Today we have our own corporate crime wave: recent cases of foreign bribery (Wal-Mart), illegal marketing of prescription drugs (GlaxoSmithKline and others), manipulation of interest rates (Barclays) and pipeline negligence (Enbridge Energy) come on the heels of the Wall Street mortgage securities fiasco, the BP spill in the Gulf of Mexico, and the Massey Energy coal mining disaster.

If we have to talk about success in business, the question we should be considering is whether any large company succeeds without engaging in illegal, or at least unethical and exploitative, behavior. In spite of all the talk about corporate social responsibility, it is difficult to find a major firm that does not cross the line in one way or another.

Take the most successful company of recent years: Apple. Thanks to a series of investigative reports, we now know that Apple’s business achievements are based on a foundation of underpaid workers, both in its foreign factories and its domestic retail stores. On top of that, the company engages in flagrant tax avoidance, and despite its gargantuan profits, it forces state governments to hand over big subsidies when it builds data centers.

Sure, Apple made use of the type of public infrastructure President Obama likes to talk about. Yet the biggest benefit it and other large companies receive from government is the unwillingness to engage in serious regulation and to prosecute corporate crime to the fullest, which would mean an end to the current practice of deferred prosecutions and other forms of wrist-slapping.

Forget about roads and bridges: the real secret of business success is government tolerance of corporate misconduct.

Through A Corporate Glass, Darkly

Conventional wisdom has it that we live in an age of hyper-transparency. That’s true if you look at what people are willing to reveal about themselves to Facebook, but it’s another story for large corporations and the 1%.

The Republican filibuster of the DISCLOSE Act and Mitt Romney’s reluctance to release more of his income tax returns are strong reminders of how those at the top of the economic pyramid seek to hide the ways they accumulate their wealth and influence public policy.

The current preoccupation with disclosure issues makes this a good time to step back and review the state of corporate transparency. Do we know enough about the workings of the huge private institutions that dominate so much of modern life?

Of course, the answer is no. Yet the quantity and quality of disclosure vary greatly depending on the structure of a given company and the aspect of its operations one chooses to examine. Depending on which piece of the business elephant we touch, corporations may seen somewhat translucent or completely opaque.

It’s also worth remembering that there are two main forms of disclosure: information that companies, especially those whose stock is publicly traded, are compelled to reveal and the data that government agencies collect about firms and release to the public. What corporations release on their own initiative is, given its selective nature, self-serving spin rather than disclosure.

Most of what U.S. companies are required to disclose is contained in the financial filings required by the Securities and Exchange Commission. It’s great that the SEC makes these documents readily available via its EDGAR online system, but the information required from companies is meant to serve the needs of investors rather than those of us concerned with corporate accountability. There is thus an abundance of data on financial results and a meager amount on a company’s social impacts. Here’s a rundown and critique of disclosure practices regarding the latter.

LEGAL PROCEEDINGS. Each company filing a 10-K annual report has to include a section summarizing significant litigation and other legal proceedings in which it is involved. For some companies, these sections can go on for pages, which says a lot about the corporate tendency to run afoul of the law. Even so, these sections are often incomplete, since companies are given discretion in deciding which cases are “material,” meaning that fines and other penalties could have a significant impact on earnings.  To get a fuller picture of corporate legal entanglements, you need to search the dockets on the PACER subscription service, which for large companies will be voluminous, or use the free summaries on the Justia website.

EXECUTIVE COMPENSATION. The annual proxy statements filed by publicly traded companies provide exhaustive details on the salaries, bonuses and other compensation received by top executives (and directors).  Designated in the EDGAR system as Form DEF14A, these documents seem to try to drown the reader in details to downplay the impact of lavish pay packages. Note that what is called the Summary Compensation Table does not include essential information such as the amount (shown elsewhere) that an executive realized from the exercise of stock options.

EMPLOYMENT ISSUES. Companies are required to disclose their total number of employees but do not have to provide a geographical breakdown. Some do so voluntarily, but many others can hide the tendency to create many more jobs in foreign cheap-labor havens than at home. Because the penalties are usually small, companies tend not to disclose violations of federal rules regarding overtime pay, the minimum wage and other Fair Labor Standards Act issues.  Fortunately, the Department of Labor has included wage and hour compliance information in its new enforcement website.

OCCUPATIONAL SAFETY AND HEALTH. Companies also rarely mention violations of occupational safety and health, for which penalties are also meager. The U.S. Occupational Safety and Health Administration, to its credit, makes available a database of all workplace inspection results going back to the creation of the agency; the DOL enforcement website provides access to this as well. Unfortunately, there are no summaries of the compliance records of large companies across their various establishments.

LABOR RELATIONS. Companies are required to report on labor relations issues only if there is a likelihood of a work stoppage that could affect corporate profits. With the decline of unions in the U.S. private sector, many companies do not bother to mention labor relations at all. Disputes that result in a formal ruling by the National Labor Relations Board will show up on that agency’s website.

ENVIRONMENTAL COMPLIANCE. Companies frequently discuss environmental regulation in the 10-K filings and will mention major enforcement actions. Yet these accounts are usually incomplete.  The Environmental Protection Agency fills in the gaps with its Enforcement and Compliance History Online (ECHO) database.

TAXES. Buried in the notes to the company’s financial statements is a section with details on how much it paid (or in many cases did not pay) in the way of taxes. This information is presented with a high degree of obfuscation, so it is fortunate that Citizens for Tax Justice publishes reports that summarize the extent to which large U.S. companies engage in flagrant tax avoidance.

SUBSIDIES. Corporate filings usually say little or nothing about the subsidies received from government, and it is often impossible to learn from other sources what those amounts may be when it comes to subsidies that take the form of federal tax breaks. There is much more company-specific data available on subsidies from state governments. In my capacity as research director of Good Jobs First, I have collected that data and assembled it in the Subsidy Tracker database.

GOVERNMENT CONTRACTS. Companies will report on government contracts only if they make up a substantial portion of their total revenue. Thanks to the work of OMB Watch in creating the FedSpending database, which the federal government adapted for its USASpending tool, it is possible to learn a great deal about how much business a given firm is doing with Uncle Sam. Data on contracts with state governments can often, though not always, be found via state procurement websites.

LOBBYING AND POLITICAL SPENDING. Corporations are not eager to disclose their efforts to shape public policy, and the SEC does not require them to do so. The Center for Political Accountability, on the other hand, was created to put pressure on companies to be more open about their political spending. The group has succeeded in getting about 100 corporations to adopt political disclosure. The inadequate information that gets disclosed at the behest of the Federal Election Commission can be found on websites such as Open Secrets, while state-level electoral data is summarized on the Follow the Money site. Both also provide access to the available data on lobbying.

Inadequate political disclosure by corporations is not limited to the United States. A recent study by Transparency International on 105 of the world’s large companies found that only 26 engaged in satisfactory reporting of political contributions. That was just one component of an analysis that looks at a variety of transparency measures that relate broadly to anti-corruption initiatives. Some of the worst results concern the simple matter of whether firms provide full country-by-country data on their operations and financial results.

The latter shows how disclosure issues of concern to investors and financial analysts can intersect with those relating to corporate accountability. When a company is allowed to use excessive forms of aggregation in its reporting, it may be hiding either poor management or corporate misconduct or both.

Note: The information sources discussed above as well as many others are discussed in my guide to online corporate research.

The Permanent Corporate Crime Wave

For an issue that concerns a technical feature of global finance, the LIBOR scandal has had a surprisingly strong impact. There is speculation that banks could face tens of billions of dollars of damages in lawsuits that have been filed over their apparent manipulation of the interest rate index.

What makes the situation even more unusual is that the efforts by bankers to depress LIBOR not only worked to their benefit but also inadvertently helped millions of consumers by lowering rates on financial products such as adjustable-rate mortgages. Some individuals experienced lower returns from certain investments, but the big victims were municipal governments that were prevented from taking full advantage of the interest rate swaps many had purchased at the urging of Wall Street.

Apart from the direct financial impacts, the scandal has triggered a new crisis of confidence in major corporations and financial institutions. The New York Times just ran an article headlined The SPREADING SCOURGE OF CORPORATE CORRUPTION that poses the question: “Have corporations lost whatever ethical compass they once had?”

Citing academic research, the piece considers whether corporate wrongdoing may be cyclical or may be growing as a side effect of globalization. The article ends by bemoaning the damage to “Americans’ trust in the institutions that underpin the nation’s liberal market democracy.”

There is good reason for that trust to be eroding. The LIBOR controversy comes on the heels of a series of discomfiting revelations about the behavior not only of financial institutions but also that of other sectors of big business. For instance, GlaxoSmithKline recently had to pay a record $3 billion to settle charges of illegal marketing of prescription drugs. The federal Pipeline and Hazardous Materials Safety Administration just issued a scathing report on Enbridge Energy’s handling of a pipeline accident that spilled more than 800,000 gallons of oil in Michigan two years ago.

As troubling as this spate of cases may be, is it really anything new?

While the current scandals have been erupting, I’ve been reading a six-decade-old book that turns out to be surprisingly relevant. Edwin Sutherland’s White Collar Crime, published in 1949, was the first systematic assessment of the degree to which large corporations and those who work for them are inclined to break the law.

Defying the prevailing principles of criminology, which held that lawbreaking was a reflection of the personal and social pathologies of the lower classes, Sutherland marshaled a mountain of evidence to show that respected business executives regularly and unhesitatingly violated a wide range of civil and criminal statutes. His book focuses first on a sample of 70 large manufacturers and retailers and then on 15 major utility companies.

In his original manuscript, Sutherland identified companies in discussing their transgressions, but under pressure from a publisher worried about libel suits he removed the names. It was not until 1983 that an unexpurgated version of the book was issued.

Sutherland and his publisher had good reason to worry about corporate legal harassment. The book concludes that every one of the 85 companies was crooked one way or another. Using an expansive definition of criminality, Sutherland looks at both outright fraud and price-fixing as well as offenses such as securities violations, false advertising, food and drug adulteration, patent infringement, unfair labor practices and infringement of wartime price regulations.

The 70 manufacturers and retailers were found to have had a total of 980 offenses, or an average of 14 per company. The companies with the most were meatpackers Armour and Swift, with 50 each. As striking as all these numbers are, Sutherland argues that they probably do not reflect the full extent of misconduct, given the limitations of the information sources that were available to him and his researchers.

He concludes that the business world has a serious problem with recidivism: “None of the official procedures used on businessmen for violations of law have been very effective in rehabilitating them or in deterring other businessmen from similar behavior.” Sutherland also finds that many of the types of violations he examined were pervasive in various industries, and given that they often involved collaboration of people from different companies, they were the equivalent of organized crime.

Sutherland anticipates many of today’s discussions about corporate capture of regulatory agencies and the role of the revolving door between the public and private sectors in weakening government oversight of business. As is also the case today, he shows that “businessmen customarily feel and express contempt for law, for government, and for government personnel.” Whereas this view is now taken for granted, Sutherland regarded it as anti-social, saying it showed that in this respect corporate executives are “are similar to professional thieves, who feel contempt for law, policemen, prosecutors and judges.”

As new business scandals continue to surface, it’s important to retain a sense of outrage while also remembering that widespread corporate wrongdoing is nothing new and will not disappear anytime soon.

Liar’s LIBOR

Mainstream economics would have us believe that interest rates are determined by the “invisible hand” of the market, except on those occasions when the Federal Reserve or other central banks intervene to modulate borrowing costs. One of the benefits of the current scandal embroiling the British bank Barclays is that it reveals the flimsy and fishy nature of one of the key rate-setting mechanisms of the global financial system.

That mechanism is the British Bankers’ Association’s London Interbank Offered Rate, an interest rate index that has been around since the 1980s. While LIBOR’s primary function is to represent what it costs big banks to borrow from one another over the short term, it has become the linchpin of hundreds of trillions of dollars of financial transactions ranging from complex interest-rate swaps to adjustable-rate home mortgages.

One would think that something so crucial to the efficient functioning of capitalism would be determined in a rigorous way. LIBOR rates, it turns out, are assembled in a remarkably arbitrary manner. They are based on figures submitted each day by major banks on what they think they would have to pay at that time to borrow in ten different currencies for 15 different periods of time. The upper and lower ends of the range are removed before the actual index is calculated by Thomson Reuters on behalf of the bankers’ association, but the figures are still based on what the banks decide to report as their perceptions.

While there has been debate since the beginning about the use of perceptions rather than actual transactions, serious questions about the integrity of LIBOR date back to the early stages of the financial meltdown in 2008. In April of that year the Wall Street Journal noted growing concerns that banks, whose individual LIBOR figures are made public, were adjusting those submissions downward to disguise the fact that their increasingly shaky condition was forcing them to pay higher rates for short-term loans.

The Journal then published its own analysis concluding that banks such as Citigroup and J.P. Morgan Chase, to avoid looking desperate for cash, had been reporting significantly lower borrowing costs to LIBOR than what other indicators suggested should have been the case.

By 2011, LIBOR discrepancies had moved from the realm of financial analysis to that of government oversight. The Swiss bank UBS disclosed that its LIBOR submissions were being reviewed by U.S. and Japanese regulators, and there were reports that other institutions were involved in the probes. It soon emerged that a group of megabanks were being investigated in various countries for colluding to manipulate the LIBOR rate. This, in turn, prompted a wave of lawsuits filed by institutional investors as well as by municipal governments whose interest rate swaps became less beneficial because of artificially low LIBOR rates.

Barclays is the first bank to be penalized for LIBOR shenanigans. The $453 million it is paying to U.S. and U.K. regulators to settle the case is more an embarrassment than a serious financial burden. Moreover, no executives or traders were charged, despite the smoking-gun emails quoted in the UK Financial Services Authority’s summary of the case. And, in an arrangement that is standard operating procedure for corporate miscreants these days, Barclays negotiated a deal with the U.S. Justice Department that allows it to avoid a criminal conviction.

It was satisfying to see the bank’s CEO Robert Diamond (phot0) forced to resign after the revelation of evidence suggesting that senior executives knew very well what was going on with the LIBOR manipulation. (Diamond, an American, also had to step down as a co-host of a fundraising event in London for Mitt Romney.) Yet we then had to put up with the ridiculous spectacle of Diamond testifying to a parliamentary committee that regulators were partly to blame.

The highlight of the hearing was when Labour MP John Mann told Diamond: “Either you were complicit, grossly negligent or incompetent.” After a pause, Diamond asked. “Is there a question?”

There is no question that the big banks are corrupt and that an interest-rate-setting system that depends on honest reporting by representatives of those institutions has no legitimacy.

The Unlikley Regulator

Since the Citizens United ruling in January 2010, it has appeared that the U.S. Supreme Court was doing everything possible to increase the dominion of corporations. Yet in its astonishing ruling on the Affordable Care Act (ACA), the Court, among other things, affirms the right of the government to put far-reaching restrictions on one of the country’s most powerful industries.

Even more remarkable is that the majority decision was written by Chief Justice John Roberts, a former corporate lawyer thought to be firmly in the anti-regulatory camp.

What made the healthcare case so unusual is that, strictly speaking, none of the parties were overtly opposing the provisions of the ACA regulating the heinous practices of the private insurance industry, such as discriminatory pricing, denial of coverage to those with “pre-existing conditions” and cancellation of coverage after a subscriber gets seriously ill. Both the oral arguments and the written opinions were filled with pro-regulation comments by normally laissez-faire-minded Justices.

Opponents of the law chose instead to focus their attack on the constitutionality of the individual mandate, which was at the heart of the deal the Obama Administration and Congressional Democrats made with the insurance industry under which the companies agreed not to fight the regulations in exchange for which they were guaranteed millions of new compulsory customers paying subsidized premiums.

Thanks to the defection of the Chief Justice based on a narrow interpretation of the mandate, the stratagem of the anti-healthcare reform camp turned out to be a colossal miscalculation. It also looks like the insurance companies have been snookered about the extent to which they will benefit from the law.

It will be of some consolation to conservatives that the Roberts opinion contains a strident rejection of the idea that Congress was justified in imposing the individual mandate through its constitutional power to regulate interstate commerce. The Chief Justice devotes many pages of his decision to a recitation of the argument that the mandate was in this sense an overreach, in the course of which he even reprises the broccoli analogy used by Justice Scalia during the hearings on the case.

Yet he then pivots and embraces, along with the Court’s four liberal justices, the secondary argument that the mandate was justified as an exercise of the taxing power of Congress, the tax being the financial penalties contained in the ACA for those without coverage who refuse to purchase individual policies.

What’s interesting is that in order to depict the penalties as a legitimate tax, Roberts has to argue that they are not overly punitive. In doing so, he writes that “for most Americans the amount due will be far less than the price of insur­ance, and, by statute, it can never be more. It may often be a reasonable financial decision to make the payment rather than purchase insurance.”

Roberts is thus highlighting one of the rarely discussed features of the ACA’s individual mandate: the penalties for disobeying it are far from draconian. Overheated rhetoric by the Right notwithstanding, no one will ever be thrown in jail for not having health coverage, nor will the penalties drive anyone into penury. In fact, it is not clear that the requirement will ever be enforced to any significant extent.

Moreover, any penalties that are collected will go to the Treasury, not to the private insurers missing out on premium payments from scofflaws. If enough of the defiantly uninsured realize the relatively low risks of non-compliance, the individual mandate may not create as many new customers as the insurance industry had hoped.

Of course, the ACA will create new customers from among the ranks of the uninsured who want coverage but have not been able to afford it without the subsidies the law will create. But many of these will be families who will make significant use of the coverage, as opposed to the young invincibles who never go to the doctor. In other words, the industry will end up with more of the less profitable end of the market.

Reading the Roberts opinion, one gets the impression that he was grasping for a way to uphold the ACA and rise above the unalloyed conservative partisanship that has tainted the recent history of the Court. While history may look kindly on his decision, in the shorter term he is bound to become a whipping boy for disappointed opponents of healthcare reform. Back in the 1960s rightwing fringe groups campaigned to have then-Chief Justice Earl Warren impeached for his supposedly pro-Communist rulings. Calls to “Impeach John Roberts” are already emerging from Red State America.

Whatever the Roberts legacy turns out to be, the bigger question is what will become of the U.S. healthcare system. It is encouraging that the most egregious insurance company behavior will be outlawed, but who knows what other tricks the industry will devise to torment its customers. The uproar over the ACA does not change the fact that the only real solution is to take the profit out of health coverage.

Corporate Capture in Rio and at Home

The 50,000-person United Nations conference on sustainable development in Rio de Janeiro is bound to be followed by recriminations about what the nations of the world failed to accomplish. Perhaps the real story is what the planet’s giant corporations did accomplish in Rio — to advance their own interests.

Rio +20 is following what is now a familiar pattern in which governments drag their feet while major companies try to give the impression that they are the vanguard of environmental reform. The extent to which the United Nations — whose Centre on Transnational Corporations was once somewhat critical of big business — has embraced this dynamic can be seen on the website Business.UN.org, whose tagline is “Partnering for a Better World.” Corporations can post their sustainability goals on the site under the misleading category of Commitments. Whether the various goals are timid or ambitious, they are all, of course, voluntary in nature and thus unenforceable by the UN or any other body.

More is at work here than simple image-burnishing by many of the planet’s biggest polluters. According to a report issued for Rio +20 by Friends of the Earth International, large corporations and business associations have in effect hijacked the UN’s policymaking process: “There is increased business influence over the positions of national governments in multilateral negotiations; business representatives dominate certain UN discussion spaces and some UN bodies; business groups are given a privileged advisory role.”

“An even greater cause of concern,” the FOEI report goes on to say, “is the emergence of an ideology among some UN agencies and staff that what is good for business is good for society. This is reflected in a shift away from policies and measures designed to address the role of business in creating many of the problems that we face, towards policies that aim to define these problems in terms dictated by the corporate sector, meeting their needs without tackling the underlying causes of the multiple crises.”

All of this constitutes what FOEI calls “corporate capture” of the UN, a phrase that echoes the term “regulatory capture” used to describe what happens when the interests of corporations come to dominate the proceedings of government oversight agencies. FOEI has issued a statement with other NGOs decrying the excessive corporate influence over UN deliberations that has been endorsed by more than 400 groups from around the world.

It’s heartening that so many groups are willing to speak out, but it’s discouraging to realize that the same criticisms have been made for more than a decade, to little avail. At the time of the 2002 UN earth summit in Johannesburg, CorpWatch issued a report called Greenwash +10 that was already warning about the risks of the UN’s increasing commitment to corporate partnerships. It noted that one of those partnerships, Global Compact, claimed to be promoting business support for UN sustainability goals yet included among its members companies such as mining giant Rio Tinto with atrocious environmental records.

Rio Tinto is one of the companies singled out in the new FOEI report for continuing to engage in the same kind of hypocrisy. The mining company is also one of the main targets (along with BP and Dow Chemical) of the Greenwash Gold campaign, which  accuses the companies of covering up environmental destruction “while pretending to be a good corporate citizen by sponsoring the Olympic games” being held this summer in London.

Undue corporate influence over climate policy is also the theme of a recent report by the Union of Concerned Scientists.  While acknowledging that some U.S. companies have taken “consistent and laudable” actions in support of science-based climate reforms, it finds that others have worked aggressively to undermine such progress.

Most interesting is its finding that some large corporations have taken contradictory positions depending on the circumstances. For example, some companies are found to make legitimate statements of concern over climate change on their websites and in their filings with the Securities and Exchange Commission while misrepresenting the state of climate science in their comments submitted to Environmental Protection Agency proceedings. Companies that fall into the contradictory category — such as Alcoa, ConocoPhillips and General Electric — are said to be standing in the way of meaningful change.

Whatever positions corporations take, there will always be tension between their interests and the common good. The fact that those two goals may occasionally coincide does not justify the outsized role that corporations now have in policymaking at both the national and international levels. Progress on climate change and many other fronts will be a lot easier when we are free from corporate capture in all its forms.

Patriotism is for the Little People

ING’s “Your Number” ad campaign touts the financial services company’s ability to help customers figure out how much they need to save for retirement.  We’ve just learned that ING’s own number is $619 million, the amount it had to pay to settle charges of having violated federal law by systematically concealing its prohibited transactions with Iran and Cuba.

The penalty agreed to by Netherlands-based ING is the largest in a series of cases in which major banks have been accused of doing business with countries targeted by U.S. economic sanctions. One of those banks is JPMorgan Chase, whose CEO Jamie Dimon just appeared before Congress to explain billions of dollars in trading losses and was treated with deference by most members of the Senate Banking Committee. It was just ten months ago that JPMorgan paid $88 million to resolve civil charges related to thousands of prohibited funds transfers for Iranian and Cuban parties.

JPMorgan got off a lot cheaper than some European banks, which were hit with criminal as well as civil charges. Apart from ING, Lloyds Banking Group paid $350 million in 2009, Credit Suisse paid $536 million that same year, and Barclays paid $298 million in 2010. Yet even those amounts did not cause much pain for the large institutions. In fact, they were undoubtedly happy to pay the penalties as part of arrangements that allowed them to avoid more serious legal consequences. They all were granted deferred prosecution deals under which they avoided a formal criminal conviction by vowing to clean up their act. A frustrated federal judge in the Barclays case called the settlement a “sweetheart deal” but approved it nonetheless.

The most comprehensive U.S. economic sanctions currently in force are aimed at Cuba, Iran, Burma/Myanmar, Sudan and Syria. More limited sanctions regimes apply to various other countries such as North Korea and Somalia. The Cuban sanctions, which date back to 1962, were adopted under the rubric of the World War I-era Trading with the Enemy Act. More recent restrictions are based primarily on the International Emergency Economic Powers Act of 1976.

Starting in the George W. Bush Administration, attention was directed from countries as a whole to designated individuals and organizations from those countries and others deemed to be acting against U.S. interests, including alleged terrorists and terrorist financiers. These parties are included in a list of Specially Designated Nationals and Blocked Persons maintained by the Treasury Department’s Office of Foreign Asset Controls (OFAC), which enforces the civil provisions of the sanctions laws.

Violations of these laws did not begin with the recent bank cases. In 2002 the Corporate Crime Reporter obtained documents from OFAC revealing previously unreported enforcement actions against companies such as Boeing, Citigroup, General Electric, Merrill Lynch and Morgan Stanley. The agency had brought 115 cases over a four-year period. Over the past decade, OFAC has been more open about its enforcement actions, but fewer U.S. companies are being targeted.

The reason is not that American firms have gotten more ethical, but rather because many of them have in effect been allowed to sidestep the law. In December 2010 the New York Times revealed that the Treasury Department has been granting licenses to many large companies to sell goods to Iran under an exceedingly broad interpretation of the agricultural and humanitarian exemptions. Among the products that sneaked in under those loopholes were cigarettes and chewing gum.

Whatever one thinks of the wisdom or efficacy of economic sanctions, the way in which large companies have related to them says a lot about corporate power. It’s clear that, whenever possible, they will put their commercial interests ahead of strict compliance with the law and adherence to the foreign policy objectives of their own government and those of its allies. When individuals collaborate with enemy nations they risk indefinite detention. When corporations do so, they receive affordable fines while avoiding serious legal consequences. Even admitted violators such as ING, Credit Suisse, Lloyds and Barclays do not end up on OFAC’s blacklist.

The late real estate tycoon Leona Helmsley once said that paying taxes is only for the little people; apparently, patriotism falls into the same category.

The Collapse of Wal-Mart’s Social Responsibility Charade

For the past eight years, Wal-Mart has pursued an image campaign apparently inspired by the Marx Brothers line: “Who you gonna believe, me or your own eyes?”

Despite the preponderance of evidence of its unenlightened practices, the company has tried to give the impression that it is really a model corporate citizen. Recent events suggest that the giant retailer’s social responsibility charade is now crumbling.

Through all of its scandals and controversies over the years, Wal-Mart could at least count on the support of its institutional shareholders, which for a long time turned a blind eye to the company’s transgressions and focused on its growth. Now even that is changing. The recently released results of voting at the company’s annual meeting indicate unprecedented discontent with its leadership. Not counting the large bloc of shares controlled by descendants of founder Sam Walton, more than 30 percent of the votes were cast against CEO Mike Duke, board chair Rob Walton and former CEO and board member Lee Scott. In the past, Wal-Mart board members typically had approval rates close to 100 percent.

The high degree of no-confidence this time around is largely attributable to the fallout from an 8,000-word exposé by New York Times alleging that high-level executives at the company quashed an internal investigation of foreign bribery. Before the annual meeting, the California State Teachers’ Retirement System filed a lawsuit against current and former Wal-Mart executives and board members for breach of their fiduciary duties in connection with the bribery scandal.

That scandal also appears to have played a significant role in Wal-Mart’s decision to cave in to calls to suspend its membership in the American Legislative Exchange Council, which is under siege for its role in promoting “stand your ground” laws such as the one in Florida linked to the shooting of Trayvon Martin. In the past, Wal-Mart, long a stalwart member of ALEC, would have ignored pressure of the kind being exerted by the anti-ALEC campaign.

By all rights, the disintegration of Wal-Mart’s responsibility image should have come from its retrograde labor and employment practices, which were the main reason for the public relations effort but which didn’t substantially change during the campaign. The company has never strayed from its uncompromising opposition to unions (except for toothless ones in China). The Organization United for Respect at Walmart is not a conventional union-organizing effort, yet the company recently fired several activists in the group in an apparent act of intimidation.

In its 1.4 million-employee U.S. retail operations, Wal-Mart has maintained a low-road approach of meager wages, inadequate benefits and overuse of part-timers. Workers at its more than 100 distribution centers had enjoyed somewhat better conditions, but it appears that is no longer the case. A new report from the National Employment Law Project finds that the company is increasingly using logistics subcontractors and temp agencies that engage in rampant wage-and-hour abuses and other labor-law violations.

In the latest in a long line of its own fair labor standards cases, Wal-Mart was recently forced by the U.S. Labor Department to pay $5.3 million in back pay, penalties and damages for violating overtime rules. Although the U.S. Supreme Court came to Wal-Mart’s rescue last year by blocking a massive class-action sex discrimination case, several non-class actions have been brought in recent months making the same allegations on behalf of thousands of women.

One area in which Wal-Mart believes it has attained a measure of legitimacy is environmental policy. It has succeeded in winning over some green groups, which cannot resist the temptation of working with such a mammoth company to change industry standards.

Yet the funny thing about Wal-Mart’s green initiatives is that most of them involve changes that the retailer is requiring from its suppliers, who are expected to bear the costs of altering their products and their packaging. This is consistent with Wal-Mart’s longstanding practice of forcing suppliers to cut their wholesale prices to the bone. When Wal-Mart does take steps on its own, such as in reducing energy usage in its facilities, those reforms are ones that reduce its operating costs and thus add to its bottom line.

Even if you believe it is okay for Wal-Mart to boost its profits while pressing suppliers to be more environmentally responsible, it’s important to remember that many of those suppliers are in countries such as China where oversight is difficult. A recent investigative report in Mother Jones found that Wal-Mart’s monitoring of Chinese plants left a lot to be desired and that this is causing frustration among some of the environmentalists who have been working with the company.

A report by Stacy Mitchell of the Institute for Local Self-Reliance finds that Wal-Mart’s domestic green initiatives, such as using more renewable energy sources, are also faltering, while the company ignores the detrimental environmental impacts of its land use practices. All this is compounded, Mitchell notes, by Wal-Mart’s extensive political contributions to candidates who are global warming deniers or otherwise have poor voting records on the environment.

The demise of  Wal-Mart’s phony social responsibility initiative poses a fascinating question: Can the company return to its old critics-be-damned stance, or will it finally have to make some genuine reforms in the way it does business?