Dirt Diggers Digest

A Corporate Full-Body Scan

The one redeeming feature of the abominable Supreme Court ruling on corporate electoral expenditures is the majority’s retention of the rules on disclaimers and disclosure. While opening the floodgates to unlimited business political spending, the Court at least recognizes that the public has a right to know when a corporation is responsible for a particular message and a right to information on a corporation’s overall spending.

Writing for the majority, Justice Kennedy states: “The First Amendment protects political speech; and disclosure permits citizens and shareholders to react to the speech of corporate entities in a proper way. This transparency enables the electorate to make informed decisions and give proper weight to different speakers and messages.”

There’s no question that steps must be taken to mitigate the Citizens United ruling, whether through changes in corporation law, shareholder pressure, enhanced public financing of elections, or even a Constitutional amendment.

Yet while these efforts progress, it is also worth taking advantage of the Court’s affirmation of the principle of transparency and push for even greater disclosure than what we have now. Groups such as the Sunlight Foundation are already moving in this direction.

The effort could begin with pressing the Federal Election Commission to tighten the existing reporting rules on what are known as “electioneering communications” and to enforce them more diligently. But that’s not enough.

In the wake of Citizens United, we’ve got to demand more information on the many ways corporations exercise undue influence not only on elections but also on legislation, policymaking and public discourse in general. Now that Big Business is a much bigger threat to popular democracy, we have to subject corporations to intensive full-body scans to find all their hidden weapons of persuasion. The following are some of the areas to consider.

Lobbying. In his State of the Union Address, President Obama said that lobbyists should be required to disclose every contact with the executive branch or Congress. That’s fine, but why stop there? Many corporations do their lobbying indirectly, through trade associations which disclose little about their sources of funding. How about rules that require those associations to disclose the fees paid by each of their members and require publicly traded companies to disclose exactly how much they pay to belong to each of their various associations?

Front Groups. Corporations also indirectly seek to influence legislation and public opinion by bankrolling purportedly independent non-profit advocacy groups. Such front groups—such as those taking money from fossil-fuel energy producers to deny the reality of the climate crisis—do not have to publicly disclose their contributor lists. Why not require publicly traded companies, at least, to reveal all of their payments to such organizations?

Union-Busting. Encouragement of collective bargaining is still, in theory, official federal policy. Yet many companies violate the principle—and the rights of their workers—by using corporate funds to undermine union organizing campaigns. The existing rules on the disclosure of expenditures on anti-union “consultants” are too narrow and not vigorously enforced. That should change.

These are only a few of the ways that undue political influence and other forms of anti-social corporate behavior could be addressed through better disclosure. Yet, as we’ve seen, transparency by itself does not counteract corporate power unless something is done with the information.

This came to mind in reading the last portion of the Citizens United ruling. Not all five Justices in the majority went along with the idea of maintaining the disclaimer and disclosure rules. Parting with Kennedy, Roberts, Scalia and Alito, Justice Thomas argued not only that corporate independent expenditures should be unrestricted, but also that they should be allowed to take place under a veil of secrecy.

He bases his argument not on legal precedent, but rather on dubious anecdotal evidence that some supporters of California’s anti-gay-marriage Proposition 8 were subjected to threats of violence after their names appeared on public donor lists. Thomas thus suggests that corporations should be able to make their political expenditures anonymously to avoid retaliation.

While I am in no way advocating violence, I think activists need to use the information that becomes public as the result of expanded disclosure to make corporations pay a price for any attempts to buy our political system. If we can get them to worry about (non-violent) retaliation to the point that they limit their expenditures, then we will have gone a long way toward neutralizing the pernicious effects of the Citizens United ruling.

Haiti: Corporate Charity or Reparations?

After the New Orleans region was struck by Hurricane Katrina in 2005, Wal-Mart scored a public relations coup by delivering emergency supplies quickly while government agencies stumbled. Ignoring the fact that the company’s vast distribution network made the feat relatively easy, awestruck journalists hailed the giant retailer as a “savior” for many of the storm’s victims.

The Behemoth of Bentonville has apparently not been performing any major logistics miracles for the people of Haiti in the wake of the recent devastating earthquake. The company is working mainly through the Red Cross, initially providing $500,000 in cash and food kits worth $100,000.

Although the company’s outlays have apparently increased a bit since its January 13 press release, the amount is still in the neighborhood of $1 million. To put that number in perspective, in 2008 Wal-Mart had profits of $22 billion, which works out to some $2.5 million an hour—every day of the year.

It is hard to be impressed at a commitment of 30 minutes worth of profits to help deal with a disaster of the magnitude facing Haiti. But this is not just an abstract issue of generosity.

Over the years, Wal-Mart has earned huge sums from the impoverished nation. Haiti is one of the low-wage countries where garment contractors have produced the goods that, despite Wal-Mart’s vaunted low prices, can be profitability sold in its network of Supercenters. It’s been going on for many years. A 1996 report on Haiti by the National Labor Committee noted that Wal-Mart was a major customer of sweatshops paying garment workers as little as 12 cents an hour.

In this time of dire need, Wal-Mart should feel pressure to make a commitment to the Haitian people of a magnitude comparable to the wealth it has extracted from the country over the years.

The question of the obligation of a company such as Wal-Mart to a situation such as Haiti is particularly relevant in light of the outrageous ruling by the Supreme Court in the Citizens United case. Thanks to the High Court’s corporate shills, Wal-Mart executives are probably already fantasizing about the unlimited slush funds they will have to sway elections and pressure incumbents to do their bidding.

Now is a good time to launch a movement to push corporations to do something with their money other than buying the political system. The outpouring of support for Haiti could be the springboard for a campaign that demands that Wal-Mart—and other major corporations that have benefited from the country’s cheap labor—provide not a bit of charity but rather a substantial amount in the form of reparations.

Perhaps the way to start is to call for disclosure of an estimate of how much value Wal-Mart has extracted from the Haitian people. Rather than letting the company brag about its pittance of a voluntary contribution, it would be much more satisfying to see it have to negotiate an amount that would make a real difference for the country.

Pecora Weeps

After J.P. Morgan was questioned by Congressional investigator Ferdinand Pecora during a 1930s investigation of the causes of the Great Crash, the legendary financier complained that Pecora (photo) had “the manners of a prosecuting attorney who is trying to convict a horse thief.” Morgan was also embarrassed when a Ringling Bros. publicity agent placed a diminutive circus performer on his lap in the middle of the proceedings.

At this week’s public hearing of the Financial Crisis Inquiry Commission, the nation’s most powerful bankers were, unfortunately, treated with a lot more deference. Sure, there was one satisfying exchange between FCIC Chairman Phil Angelides and Goldman Sachs CEO Lloyd Blankfein in which Angelides likened the firm’s practice of betting against the very securities it was peddling to clients to that of selling someone a car with faulty brakes and then buying an insurance policy on the buyer.

But those moments were rare. For the most part, the bankers came away unscathed. Most of the ten commissioners treated them not as suspected criminals whose misdeeds needed to be probed, but rather as experts whose opinions on the causes of the crisis were being solicited. This gave the bankers abundant opportunities to pontificate about industry and regulatory practices while avoiding any incriminating admissions about their own firm’s behavior.

For example, Commissioner Heather Murren, CEO of the Nevada Cancer Institute, asked Blankfein whether there should be “more supervision of the kinds of activities that are undertaken by investment banks?” This allowed him to babble on about the “sociology…of our regulation before and after becoming a bank holding company.”

The bankers seemed to have expected tougher questioning. Their opening statements sought to soften the interrogation by conceding some general culpability, though it was done in a mostly generic way. Jamie Dimon of JP Morgan Chase admitted that “new and poorly underwritten mortgage products helped fuel housing price appreciation, excessive speculation and core higher credit losses.” John Mack of Morgan Stanley acknowledged that “there is no doubt that we as an industry made mistakes.” And Brian Moynihan, the new CEO of Bank of America, noted: “Over the course of the crisis, we, as an industry, caused a lot of damage.”

But much too little time was spent by the commissioners exploring how the giant firms represented on the panel contributed to that damage. A search of the transcript of the hearing produced by CQ Transcriptions and posted on the database service Factiva indicates that the word “predatory” was not used once during the time the four top bankers were testifying.

The commissioners failed to challenge most of the self-serving statements made by the bankers to give the impression that, despite whatever vague transgressions were going on in the industry, their own firms were squeaky clean. Even Angelides failed to pin them down. When he asked Blankfein to state “the two most significant instances of negligent, improper and bad behavior in which your firm engaged and for which you would apologize” the Goldman CEO admitted only to contributing to “elements of froth in the market.” Angelides asked whether that included anything “negligent or improper.” Blankfein again evaded the question and the Chairman gave up.

The bankers also went unchallenged in making statements that were incomplete if not outright erroneous. When Blankfein, for example, claimed that Goldman deals only with institutional investors and “high-net-worth individuals,” no one pointed out the firm’s ties to Litton Loan Servicing, which has handled large numbers of subprime and often predatory home mortgages.

The Goldman chief also made much of the fact that he and other top executives of the firm took no bonuses in 2008. That’s true, but he failed to mention that, according to Goldman’s proxy statement, he alone became more than $25 million richer that year when previously granted stock awards vested.

The bankers were at their slipperiest when it came to the few questions about the issue of being too big to fail. They would not, of course, admit to being too big, but in spite of every indication that the federal government would never allow another Lehman Brothers-type collapse to occur, they labored mightily to argue that they could conceivably go under. This notwithstanding the fact that a couple of them had just thanked U.S. taxpayers for the financial assistance their firms had received.

I suppose it’s possible that the Commission is saving its best shots for later stages of the investigation and its final report, but its handling of the banker hearing deprived the public of a chance to see some of the prime villains of the current crisis get a much-deserved tongue-lashing.

Back to the Barricades?

The news that Byron Dorgan and Christopher Dodd will not run for reelection has Democrats fretting that they will lose their 60-vote supermajority in the Senate and will no longer be able to get anything accomplished.

But what have we got to show, with regard to checking corporate abuses, for the past 12 months of Democratic control over the legislative branch as well as the White House? Last year this time, excitement over Obama’s election and the Democratic gains in Congress persuaded many activists that great things could once again happen in Washington. The big business agenda would supposedly no longer reign supreme, and progressives anticipated major legislative gains regarding healthcare coverage, financial regulation, the climate crisis and union organizing.

Now those expectations seem hopelessly naïve. Rather than radical changes, we’ve ended up with a disappointing series of half-measures, quarter-measures, and stalemates.

The biggest frustration is in the healthcare arena. We seem to be on the verge of getting a new system that will expand coverage and curb some of the most egregious insurance industry abuses, but these improvements come at a high cost. The final bill will likely have a strict individual mandate compelling those without coverage to become customers of a bunch of blood-suckers yet a weak employer mandate allowing many companies to avoid providing decent coverage to their workers. It will not seriously regulate insurance rates yet may end up penalizing union workers who gave up wage increases to get more generous benefits. The bill that squeaked through the Senate and is expected to form the basis of the final legislation is so compromised that veteran reformers such as Physicians for a National Health Program have called for its defeat.

After crippling the economy through reckless investments and forcing millions of homeowners into foreclosure, the big banks have largely been treated with deference by Congressional Democrats and the Obama Administration. Nothing has been done to break up institutions deemed too big to fail and thus able to extort massive taxpayer-funded bailouts. Despite loud complaints from bankers used to sumptuous pay packages, the federal government’s restrictions on executive compensation have been pretty indulgent. The bill that passed the House in December creates a new consumer protection agency for financial services, but it is unclear how much power it will have. And the bill lacks aggressive regulation of the exotic financial instruments that helped bring about the crisis. Separate legislation on credit cards that was enacted curbs some of the industry’s most outrageous practices but does nothing about usurious interest rates.

The climate bill passed by the House in June not only shunned strict emission limits in favor of the dubious cap-and-trade system, but it would allow many major polluters to avoid paying for their emission allowances for up to 20 years. And the overall emission reductions the bill envisions are far below the level needed to make a substantial dent in global warming.

And then there’s the Employee Free Choice Act, the key priority of the labor movement, which did so much to get Obama and many Democrats elected. The legislation has been in suspended animation for many months as Senate leaders apparently cannot muster enough votes to overcome intransigent opposition not only from Republicans but also from some Dems. EFCA remained stalled even after the AFL-CIO signaled it was open to compromise on the key issue of card-check organizing.

Overall, corporate interests have been remarkably successful over the past year in avoiding serious restraints on their freedom of action. Much of what the Democrats are accomplishing amounts to the appearance of reform. It gives the impression that corporate misbehavior is being addressed but is actually inoculating business against more stringent regulation. In the case of healthcare, the situation is even worse: by turning millions into captive customers, Congress is granting unprecedented power and legitimacy to a discredited industry.

There are plenty of obvious explanations for this dismal performance. It is easy to point to the corrupting effect of corporate campaign contributions and lobbying by former Congressional staffers as well as the pernicious role of conservative Democrats and egomaniacs like Joe Lieberman.

But the progressive movement also deserves some of the blame. The euphoria following the 2008 election gave rise to another bout of the delusion that serious change requires nothing more putting in office a certain number of people with the preferred party designation.

During the 1930s FDR is supposed to have told activists in a private meeting: “I agree with you, I want to do it, now make me do it.” Although that quote has showed up in several blogs over the past year, the underlying message seems to have been lost on many of today’s activists. With the absence of substantial popular pressure, it has been easier for Congressional Democrats to succumb to the siren song of the corporate interests.

Ironically, it has been the woefully ignorant and confused tea party movement—serving as a witting or unwitting stalking horse for the corporate elite—that has lately shown the power of grassroots mobilization. Their positions make no sense, but the tea baggers have made sure that Congressional Republicans maintain a hard-right stance on everything.

Perhaps we will accomplish more if we return to our own barricades.

Are Strange-Bedfellows Alliances the Way to Cut the Big Banks Down to Size?

glass-steagall-act Bipartisanship is rare these days, and rarer still are cases in which Democrats and Republicans come together to urge new restrictions on business. Yet here we have Democratic Senator Maria Cantwell of Washington joining Arizona Republican John McCain to propose a reinstatement of the Glass-Steagall Act. The long shot idea would turn back the clock on a key facet of ruinous financial deregulation.

In case you have forgotten, Glass-Steagall was one of the signature reforms of the New Deal era, signed into law by FDR as part of the Banking Act of 1933 (photo). Reacting to Wall Street’s excesses of the 1920s and the stock market crash, the law mandated a separation between the speculative world of investment banking and the supposedly more prudent business of commercial banking. This forced big institutions such as J.P. Morgan to spin off their securities operations, leading to the formation of firms such as Morgan Stanley.

While many credited Glass-Steagall with promoting financial stability, by the 1980s commercial banks began clamoring to get back into the more exciting (and potentially more profitable) game of underwriting corporate securities and providing other investment services. Little by little, the Federal Reserve gave in, which only emboldened the big players. In 1998 wheeler-dealer Sandy Weill directly defied Glass-Steagall by arranging a merger of Travelers Group and Citicorp, thus creating the behemoth we know today as Citigroup. What was left of Glass-Steagall was repealed by the 1999 Gramm-Leach-Bliley Act.

The near-meltdown of the financial system has engendered new interest in the principles that had been embodied in Glass-Steagall. McCain and Cantwell are not the only ones talking about reviving the 1930s legislation. Several progressive members of the House made a similar proposal earlier this month. The idea has also been endorsed by former Federal Reserve Chairman Paul Volcker and prominent economist Joseph Stiglitz.

Glass-Steagall redux would not, by itself, solve the problems of the U.S. financial system, and it is not a substitute for wide-ranging reform. But it would put a significant crimp in the casino culture that has taken root throughout the banking world. Another advantage is that it would by necessity bring about a reduction in the size of many mega-institutions that are now considered “too big to fail” and thus must be bailed out when they screw up in a spectacular way.

The McCain-Cantwell bill, for example, would require the likes of Citigroup and Bank of America to decide within a year whether they wanted to focus on lending or securities. B of A, for instance, would have to give up its branches or its ownership of Merrill Lynch. At the same time, a purer investment bank such as Goldman Sachs could no longer pretend to be a bank holding company, the designation it adopted last year to qualify for TARP funds.

If the bill proceeds, it could also serve as the foundation for an aggressive left-right response to the financial mess. Ever since the Bush Administration and the Federal Reserve started on the road to bank bailouts last year, many progressives and many conservatives have expressed outrage at the practice but have generally talked past one another. This has helped the banks avoid having any serious strings put on their rescue packages. And it let them sidestep the most obvious solution to the problem of having financial institutions deemed too big to fail: cutting them down to size.

The biggest obstacle to restoring Glass-Steagall and otherwise curtailing the power of the big banks may turn out to be not the financial lobby but rather the Obama Administration, whose chief economist, Larry Summers, championed the final repeal of Glass-Steagall while heading the Clinton Administration Treasury Department a decade ago. Despite Obama’s recent swipe at “fat cat” bankers, he and his advisors seem to think that it’s preferable to let the financial leviathans remain in place while putting some modest restrictions on their operations.

The problem is that the giant banks have become increasingly addicted to activities such as trading — the main source of the supposed rebound in the sector — and show less and less interest in mundane matters such as lending to businesses and consumers. The Obama Administration thus comes across as a defender of aloof Big Finance while the country struggles to finance an economic rebound. The fact that progressives can find more common ground on this issue with someone like McCain suggests that strange-bedfellows alliances may accomplish more than toeing the pro-business centrist line.

Needed: A New Contract with Big Finance

banks A widely circulated rumor that Goldman Sachs executives were loading up on firearms to protect themselves against a populist uprising turned out to be spurious, but the leaders of the bank are clearly worried about rising discontent over Goldman’s prosperity amid continuing economic distress for most everyone else.

The announcement that Goldman’s top 30 executives will be denied cash bonuses this year is one of the most significant concessions Wall Street has ever made to public outrage. The members of Goldman’s management committee won’t be denied bonuses entirely but will receive them in the form of “shares at risk” – stock that cannot be sold for five years and is subject to recapture if the recipient engages in “materially improper risk analysis” or fails “sufficiently to raise concerns about risks.”

It is unclear whether these rules, which would require prudence rarely seen in the casino culture of investment banking, will be applied stringently. Goldman’s announcement that it will allow a shareholder advisory vote on compensation practices will make it a bit more difficult to flout the rules entirely.

While the ultimate impact of the Goldman move is uncertain, Britain and France are putting a real and immediate dent in bloated banker pay by imposing a 50 percent windfall tax on bonuses. Financiers in London and Paris are up in arms over the moves, with one investment banking chief telling the Financial Times that as a result of the tax the “contract between government and business is broken.”

And what exactly is that contract? As far as the financial sector is concerned, the traditional contract was that banks were expected to provide the capital needed for the “real” economy, and government did not regulate the market too strictly. A decade ago, financiers got the regulatory regime loosened even more, which in the United States meant an end to the separation between commercial banking and investment banking. The new contract seemed to be that a fully liberated financial sector would magically create wealth to make up for the travails of the productive portion of the economy.

The crisis of the past two years put an end to that notion, and the contract we’ve been left with seems to be little more than an obligation by government to prop up a teetering financial sector with bailouts and access to virtually free funding. There is no quid pro quo imposed on bankers, who are allowed to deny credit to businesses and individuals alike and use their cheap money to rack up trading profits. And those profits serve mainly to pay for outsized bonuses for the bankers themselves.

It’s always been questionable whether big finance capital served a legitimate social purpose. Now it is clear that the big banks exist mainly for the enrichment of their own executives. About half of total revenue at these banks is set aside for compensation of executives and other employees.

That’s why Bank of America and Citigroup are so eager to repay their bailout money and free themselves from the constraints of the federal pay czar. And it’s why the big banks have felt no compunction about opposing the financial regulatory reforms now before Congress.

While financial industry lobbyists twist arms behind the scenes, Goldman is playing good cop with its bonus restrictions and the quasi-apology its CEO Lloyd Blankfein issued in November. Yet neither voluntary actions by the likes of Goldman nor modest regulatory reforms are sufficient. The current “contract” between big finance and not just government but all of society needs to be rewritten, and this time we shouldn’t let bank lawyers draft the document.

When Malfeasance Becomes a Corporate Mission Statement

Forbes loves to compile lists; in fact, for many people the magazine is synonymous with its annual ranking of the 400 richest Americans. Recently, the publication allowed its list mania to overwhelm its other obsession — defending big business — when it came out with a feature on “The Biggest CEO Outrages of 2009.”

Writer Helen Coster frames the story as an assessment of how corporate malfeasance has been faring since the arrest of world-class Ponzi schemer Bernard Madoff a year ago. She finds that “nobody managed to top Madoff’s crimes in 2009, but 10 executives showed enough greed, hubris and chutzpah to give him a run for his (stolen) money.”

Her list ranges from other alleged fraudsters such as R. Allen Stanford to accused insider trader Raj Rajaratnam of the Galleon Group hedge fund to convicted tax evader Robert Moran. She also includes Edward Libby of AIG and former Merrill Lynch head John Thain for their role in enabling questionable bonuses. Also on the list is Lloyd Blankfein of Goldman Sachs, whose main sin, according to Coster, seems to have been his comment that he was just a banker doing “God’s work.”

All of these individuals deserve some disapprobation, but Coster manages to gloss over a major distinction with regard to executive misbehavior: the difference between improper actions taken to benefit oneself and those undertaken to benefit the corporation.

Individual fraud, embezzlement, tax cheating and other forms of self-dealing are reprehensible, but do they begin to compare in their impact to major misdeeds committed in the name of advancing corporate interests? This point is especially relevant given that these days we are marking not only the first anniversary of the Madoff scandal but also the 25^th anniversary of the Bhopal disaster.

Madoff brought financial ruin to numerous individuals and non-profit organizations, but what critics charge was systematic negligence on the part of executives of Union Carbide (now part of Dow Chemical) killed or seriously injured thousands of residents in Bhopal, making it the worst industrial accident ever. Madoff pleaded guilty to his crimes, but Warren Anderson, the CEO of Union Carbide, remained a fugitive rather than face criminal charges brought against him in India, and Dow Chemical has refused to take responsibility for providing adequate compensation to the Bhopal victims.

Over the past year there have been various instances of outrageous acts committed to advance corporate goals that do not begin to compare with Bhopal but have caused considerably more harm than the ones catalogued by Forbes.

Take, for example, the case of Stewart Parnell and his now defunct Peanut Corporation of America, accused earlier this year of knowingly shipping salmonella-tainted food products from a filthy plant in Georgia, thereby contributing to one of the country’s worst outbreaks of food poisoning, including about nine deaths.

Then there’s the case of the managers at Bayer CropScience, who, according to a Congressional report released in April, withheld critical information from emergency responders during an accident at a plant in West Virginia that nearly resulted in the release of methyl isocyanate, the same chemical involved in the Bhopal catastrophe.

Or what about the executives at pharmaceutical giant Pfizer who illegally marketed the painkiller Bextra, causing the company to have to agree in September to pay $2.3 billion to settle civil and criminal charges brought by federal prosecutors? One Pfizer sales rep told prosecutors: “If you didn’t sell drugs illegally, you were not seen as a team player.”

It’s one thing for an individual executive to go bad. The real harm comes when the misbehavior becomes, in effect, the mission statement of the corporation. That, dear Forbes, is what is truly outrageous.

Can the Redlining of U.S. Workers Be Stopped?

wind turbine We’re meant to believe that corporations make their investment decisions based on carefully considered financial and competitive considerations. Yet a recent announcement by a Chinese manufacturer of turbines for wind energy shows how political pressure can quickly change business priorities.

In late October the company, A-Power Energy Generation Systems, announced that it had been chosen to supply some 240 turbines for a large wind farm planned for Texas. That would have been just another in a long series of manufacturing-goes-to-China stories, but for reports that the group launching the $1.5 billion project—a joint venture of China’s Shenyang Power, Texas-based Cielo Wind Power and private equity firm U.S. Renewable Energy Group—was intending to take advantage of U.S. government funding through the Recovery Act.

New York Senator Chuck Schumer raised a stink about this in an open letter to Energy Secretary Steven Chu, highlighting reports that while the Texas wind farm would create a modest number of local jobs, the much bigger employment impact—2,000 to 3,000 jobs—would be felt at A-Power’s factories in China.

The ensuing uproar—with protests coming from figures as divergent as Steelworkers union president Leo Gerard and rightwing Missouri Senator Kit Bond—got the joint venture’s attention. While not abandoning the plan to import turbines for the Texas wind farm, A-Power and U.S. Renewable Energy Group announced on November 17 that they would construct a new wind turbine factory in the United States with a workforce of about 1,000.

That’s good news for the job-starved American economy, but all the attention given to A-Power has obscured a set of larger problems concerning the U.S. renewable energy industry.

The first is that the operation of facilities such as wind farms does not generate much employment—once built, they basically run themselves. The real employment potential is in manufacturing the turbines and other components used to generate wind and solar energy.

The disturbing fact is that, with the exception of General Electric, large U.S. companies have shown little interest in domestic production of these components. This has created an opening for foreign firms such as Gamesa (from Spain), Vestas (Denmark), Siemens (Germany) and Sanyo (Japan) to capture a large share of U.S. production of wind and solar components. Over the past few years they have invested hundreds of millions of dollars in plants from Pennsylvania to Oregon—and have often received lavish state and local economic development subsidies for doing so.

Unfortunately, the economic crisis has taken its toll on this sector, and expansion plans are being curtailed or postponed. For example, wind turbine maker Vestas, which has invested heavily in Colorado and planned to boost its workforce in that state to 2,500, recently said it would slow its pace of hiring.

To make matters worse, some of the newer U.S.-based wind and solar manufacturing companies that claim to be interested in domestic production have been lured by the siren call of cheap overseas labor. Evergreen Solar, for instance, recently revealed that it plans to shift assembly of solar panels from its heavily subsidized plant in Devens, Massachusetts to Wuhan, China. It would follow in the footsteps of U.S. firms such as First Solar, which already does most of its manufacturing in Malaysia, and TPI Composites, which produces wind turbine blades in Mexico and China.

It’s also not the case that foreign firms are always worse than domestic ones when it comes to respecting the rights of workers. Within the wind and solar sector there are U.S. companies that seek to weaken their unions (such as GE) or keep them out altogether (e.g., DMI Industries, which fought a Teamsters organizing drive). At the same time, there is Spain’s Gamesa, which accepted the desire of its workers in Pennsylvania to unionize and has developed a cooperative relationship with the Steelworkers.

From a labor perspective, the issue is not whether a company is foreign or domestic. What counts is whether it is redlining U.S. workers or giving them a chance to participate in producing the components of the economy of the future.

Misbehaving Contractors are Recovery Act Winners

The federal government has awarded about $17 billion in direct contracts under the various provisions of the American Recovery and Reinvestment Act (ARRA). Given the Administration’s commitment to accountability, one hopes that the contractors were chosen with the utmost care and that any companies with serious blemishes on their record were excluded.

If the timing had been a bit different, such a review could have been accomplished much more easily. The General Services Administration is in the process of implementing legislation passed by Congress last year that mandates the creation of a database on the integrity and performance record of federal contractors and grantees. In September GSA published a notice in the Federal Register about its plans for what is being called the Federal Awardee Performance and Integrity Information System, or FAPIIS. The comment period on the plan ended earlier this month. Perhaps the system will be operational before ARRA reaches the end of its two-year life.

Unfortunately, the public will never know the details of how FAPIIS is used to vet contractors for ARRA or any other program. The reason is that Congress caved in to pressure from the contractor community and prohibited public disclosure of the database, which will be available only to federal agencies for internal use.

Fortunately, the public still has access to the Federal Contractor Misconduct Database (FCMD), which was created and is maintained by the non-profit Project On Government Oversight (POGO). It served as the inspiration for FAPIIS, though POGO and other watchdog groups pushed for a public version of the federal database. The FCMD, which covers the 100 largest federal contractors, documents more than 700 cases of misconduct since 1995 that resulted in more than $26 billion in fines and penalties. It covers a wider range of misconduct than will FAPIIS.

Apparently, most federal agencies did not pay close attention to the FCMD in awarding their ARRA contracts. An examination of the national Recovery Act contractor spreadsheet shows that many of those companies appear in POGO’s database as having been involved in cases of misconduct. They account for more than $6 billion in Recovery Act contract awards.

There are 12 contractors with more than one instance of misconduct and ARRA contracts of at least $150 million.* Here they are (listed by volume of ARRA contracts):

CH2M ($1.8 billion in ARRA contracts; 6 instances of misconduct with penalties of $2.8 million)
URS ($737 million in contracts; 4 instances and $2.4 million in penalties)
Northrop Grumman ($596 million in contracts; 29 instances and $821 million in penalties)
Battelle Memorial Institute ($522 million in contracts; 7 instances and $1.3 million in penalties)
Honeywell International ($472 million in contracts; 31 instances and $641 million in penalties)
Fluor ($469 million in contracts; 23 instances and $198 million in penalties)
SAIC ($312 million in contracts; 10 instances and $14 million in penalties)
Bechtel ($270 million in contracts; 15 instances and $359 million in penalties)
University of California ($270 million in contracts; 25 instances and $67 million in penalties)
Lockheed Martin ($180 million in contracts; 50 instances and $577 million in penalties)
University of Chicago ($163 million in contracts; 4 instances and $22 million in penalties)
Jacobs Engineering ($161 million in contracts; 2 instances and $37 million in penalties)

When the nation’s largest contractors have track records such as these, it is not surprising that Congress chose to keep its misconduct database a secret.

* In the case of joint ventures, the amount of the contract award is divided equally among the companies or institutions involved.

Stimulus Lobbying Pays Off for Major Contractors

K street Last spring, when the ink was barely dry on the $787 billion American Recovery and Reinvestment Act (ARRA), there was already concern about an emerging frenzy of lobbying on behalf of corporations seeking a slice of the stimulus pie.

The Obama Administration enacted rules designed to make ARRA lobbying more transparent. That didn’t work out very well, but the Recovery Accountability and Transparency Board recently completed the release of the first round of quarterly disclosure reports by ARRA recipients. In part, these reports serve as a score card showing which companies won the great stimulus lobbying competition.

Beginning with a list of the largest direct federal contracts, I ran the names of the prime contractors through the invaluable lobbying database maintained by the Center for Responsive Politics. Many of the largest contracts went to joint ventures set up by major engineering companies to do clean-up work at nuclear facilities owned by the Department of Energy. In those cases I searched the names of the individual parent companies (and some universities) involved.

There are a total of 52 companies and institutions involved with the 50 largest ARRA contracts. Of these, 34 show up as clients in the Center’s lobbying database. These include large corporations such as Bechtel, Lockheed Martin, Northrop Grumman, General Motors and Ford—as well as smaller players. Also on the list are educational institutions such as the University of California, Stanford University and the University of Chicago.

So far in 2009, the 34 have spent a total of $65 million on lobbying the federal government. Of course, not all that lobbying can be attributed to the quest for stimulus contracts, but it shows in general terms that the ARRA winners include some of the biggest influence-peddlers in Washington.

Moreover, there is every reason to think that a significant portion of their lobbying efforts were focused on stimulus contracts. I searched the database of lobbyist disclosure reports provided by the Senate Office of Public Records. Of those 34 contractors, 24 show up as clients in 2009 lobbying reports in which the word “recovery” or “stimulus” is mentioned in the description of the specific issues on which the lobbyists reported working.

It’s not possible to determine how much of their spending went specifically to ARRA issues. But whatever portion of the $65 million was involved, it was money well spent for the contractors. The 24 that definitely had lobbyists working on ARRA matters ended up with stimulus contracts worth some $7.4 billion. That’s an impressive return on political investment.

Now we can only hope that these and other stimulus contractors crank up their hiring so taxpayers also get something significant out of this bonanza. According to the recent ARRA recipient reports, some of the projects being carried out by those two dozen firms have already created (or retained) a substantial number of jobs. Yet others, in a pattern seen in the overall ARRA contractor data, report few or no jobs despite having already received substantial sums for the projects.