Dirt Diggers Digest

Will Democracy Invade the Boardroom?

board meeting Life has been tough for the Securities and Exchange Commission, what with the power grab at its expense by the Federal Reserve and new revelations that its investigators acted like Keystone Kops when looking into tips about the suspicious behavior of Bernie Madoff. Now the SEC has the opportunity to do some good. The question is whether it has the nerve to stand up to powerful corporate interests.

In May the SEC voted to propose rule changes that would enable shareholders to nominate directors for corporate boards. The Commission issued a 250-page description of the proposed changes in June and asked for public comments. A decision is expected this fall.

The process of selecting board candidates makes a mockery of the idea of corporate democracy. Except in those rare instances when a takeover effort leads to a proxy fight, potential directors are chosen by management and run unopposed. This helps ensure that the ranks of outside (non-executive) directors, who are supposed to function as watchdogs, are filled with agreeable souls.

The proposed SEC rules would be a vast improvement, but they would allow shareholders to name no more than one-quarter of the candidates, and they would limit nominating rights to large shareholders (those with at least 1 percent of big companies and larger percentages in smaller ones). However, alliances of shareholders would be able to use their combined holdings to meet the threshold.

Comments flooded into the SEC over the summer. As a review of the comments conducted by the Wharton School of Business shows, the reactions have been highly polarized, with large companies warning of doom and proponents such as large pension funds predicting the changes would be a boon for shareholder rights.

The Business Roundtable weighs in with more than 150 pages of comments, posing dozens of plausible and not-so-plausible objections, including the hilarious claim that the rules would violate a corporation’s First Amendment rights by forcing it to include comments by outside candidates in its proxy statement.

Revealing a fear that the rule changes would undermine the clubbiness that characterizes the current system, comments submitted by McDonald’s Corporation fretted that shareholders might nominate someone “who may not have even met the existing members of the Board.” Another laughable objection is one made, for example, by Sara Lee Corporation claiming that the change would result in directors who represent a special interest rather than the interests of all shareholders. Sara Lee conveniently forgets that under the current system outside directors are often chosen because of their affiliation with a financial institution or other entity that has a significant relationship with the company—a suspicious practice known as corporate interlocks or interlocking directorates.

Some commenters, including a joint submission by 26 large corporations, support a compromise that, instead of imposing new proxy rules on all publicly traded companies, would make it easier for shareholders to seek changes in the nominating process on a company-by-company basis. This seems like little more than an attempt to undermine the whole idea.

But perhaps the saddest thing about the comments is the surprisingly large number of submissions by owners of small businesses—from a dog bakery called For Pampered Pooches to Dreamland Daycare—who have somehow been brainwashed by some trade association into thinking that a reform aimed at major corporations is somehow going to threaten their privately held enterprise.

Here’s hoping that the SEC ignores the preposterous arguments of both large and small companies and injects some measure of democracy into Corporate America.

Will Corporate Cash be Allowed to Overwhelm Elections?

nast moneybag2 If the United States were a country truly committed to democracy, we would now be having a national discussion on limiting the role of big money in politics. After all, we are still recovering from a financial crisis brought on by an orgy of deregulation instigated by Wall Street interests that spent lavishly to influence members of Congress from both major parties and then had to be bailed out by taxpayers. Major auto companies such as General Motors, which for years successfully lobbied to weaken fuel-economy standards, also had to be bailed out when they could no longer sell gas-guzzling SUVs.

Instead, the role of corporate money is stronger than ever. Rather than having the decency of withdrawing from the policy arena, bailed-out companies have continued to lobby for weaker regulation. At the same time, the insurance industry has thrown a monkey wrench into long-overdue healthcare reform by making hefty contributions to conservative Democrats. The energy industry used its resources to weaken the climate bill.

And now the U.S. Supreme Court may be preparing to open the floodgates completely. In June the high court took the unusual step of announcing it would hold a special hearing this September on a case involving a rightwing advocacy group, Citizens United, which ran afoul of the McCain-Feingold campaign finance law in connection with its distribution of a film attacking Hillary Rodham Clinton during the last presidential campaign. Instead of ruling narrowly on the case, which involves some of the technicalities of McCain-Feingold, the Court signaled that it wanted to reconsider the entire question of corporate political spending. Direct corporate contributions to federal campaign were first banned in 1907, and independent campaign expenditures by business corporations were prohibited in 1947.

There is little doubt that this unusual move was promoted by conservative justices such as Scalia and Thomas who think that any restrictions on corporate electoral spending are violations of the First Amendment. And it is no surprise that pro-business groups are generally praising the Court for taking on the issue, conveniently discarding their usual disdain for judicial activism.

Meanwhile, progressive watchdog groups such as Public Citizen are sounding the alarm, warning that eliminating limits on corporate spending would allow large companies to use their resources to buy elections with impunity.

The cynical way of looking at this is that Big Business already manages to dominate the electoral system through its political action committees and lobbying expenditures, so uncontrolled spending would not make much difference. The danger, however, is that eliminating the restrictions would allow capital to completely overwhelm the electoral system. And it would be a huge boon for the destructive principle of corporate personhood, the basis on which business interests exercise such outsized influence over American life.

What makes this issue trickier is that the cases in question deal not only with political expenditures by business corporations but also ones made by labor unions and non-profit corporations. Unfortunately, there is a long legal tradition of treating democratic organizations such as unions as equivalent to business corporations, which are undemocratic entities that should have no constitutional rights.

That is not going to change anytime soon. Meanwhile, we can only hope that reason prevails and the Supreme Court does not turn the electoral system into a total financial free-for-all.

Fighting Dirty on Healthcare Reform

gangs You’ve got to hand it to the health insurance corporations and their front groups for knowing how to play hardball. To protect the interests of the industry, they have been willing to spread outlandish allegations about euthanasia, gambling that the ensuing uproar will force nervous Dems to dilute their plan.

It remains to be seen whether the streetfighters ultimately prevail, but for now they have succeeded in reframing the debate. The country has been talking about pulling the plug on grandma when we should be discussing pulling the plug on the likes of Aetna, Cigna and Humana.

Unfortunately, the Obama Administration and the Democratic leadership in Congress have ruled out euthanizing the for-profit health insurance, leaving us with the alternative of a public plan that would compete with the commercial carriers and supposedly “keep them honest,” as Obama likes to put it.

Since the industry doesn’t seem interested in becoming virtuous, it has instead encouraged opposition to the public option. Apart from whatever behind-the-scenes role it has played in the town hall disruptions carried out by the rightwing lunatic fringe, the major insurers are cultivating the fifth column that is undermining the public option from within the Democratic Party. It’s widely known that members of the Blue Dog Coalition have been showered with campaign contributions from the industry. A recent Business Week cover story entitled “The Health Insurers Have Already Won” details other ways the big insurers have cozied up to and co-opted conservative Dems.

I’ve already written about the suspicious role the Lewin Group, owned by UnitedHealth Group but purportedly editorially independent, has played in the reform debate. Business Week describes how UnitedHealth itself feeds self-serving data to “information-starved congressional staff members.” The magazine depicts an especially close relationship between the company and Sen. Mark Warner of Virginia, who “echoes UnitedHealth’s contention that a so-called public option could be a ‘Trojan horse for a single-payer system.'”

The infatuation of Warner and some other Dems with UnitedHealth is all the more baffling in light of the controversy over the company’s Golden Rule Insurance subsidiary, which has repeatedly been fined by state regulators for deceptive practices. Golden Rule was one of the companies singled-out in a recent House Energy & Commerce Committee hearing on abuses in the individual health insurance market.

Business Week reports that the health insurers consider the battle against the public option already won and are now focusing on shaping the terms under which they will be providing new subsidized coverage. They are, the magazine says, pursuing the “aim of constraining the new benefits that will become available to tens of millions of people who are currently uninsured.”

How long will it be before Obama, having abandoned the public option, finds himself pressured by the health insurers and their surrogates to give ground on other aspects of the reform plan, such as the elimination of lifetime benefit caps? Or the prohibition on denying coverage based on pre-existing conditions?

The insurance reform effort will continue its slide toward irrelevance until Obama recognizes that he is engaged not in a boxing match with Marquis of Queensberry rules but rather a knife fight in which anything goes.

Corporations and the Amazon

These days just about every large corporation would have us believe that it is in the vanguard of the fight to reverse global warming. Companies mount expensive ad campaigns to brag about raising their energy efficiency and shrinking their carbon footprint.

Yet a bold article in the latest issue of business-friendly Bloomberg Markets magazine documents how some large U.S.-based transnationals are complicit in a process that does more to exacerbate the climate crisis than anything else: the ongoing destruction of the Amazon rain forest.

While deforestation is usually blamed on local ranchers and loggers, Bloomberg points the finger at companies such as Alcoa and Cargill, which the magazine charges have used their power to get authorities in Brazil to approve large projects that violate the spirit of the country’s environmental regulations.

Alcoa is constructing a huge bauxite mine that will chew up more than 25,000 acres of virgin jungle in an area, the magazine says, “is supposed to be preserved unharmed forever for local residents.” Bloomberg cites Brazilian prosecutors who have been waging a four-year legal battle against an Alcoa subsidiary that is said to have circumvented the country’s national policies by obtaining a state rather than a federal permit for the project.

Bloomberg also focuses on the widely criticized grain port that Cargill built on the Amazon River. Cargill claims to be discouraging deforestation by the farmers supplying the soybeans that pass through the port, but the Brazilian prosecutors interviewed by Bloomberg expressed skepticism that the effort was having much effect.

Apart from the big on-site projects, Bloomberg looks at major corporations that it says purchase beef and leather from Amazonian ranchers who engage in illegal deforestation. Citing Brazilian export records, the magazine identifies Wal-Mart, McDonald’s, Kraft Foods and Carrefour as purchasers of the beef and General Motors, Ford and Mercedes-Benz as purchasers of leather.

The impact of the Amazon cattle ranchers was also the focus of a Greenpeace report published in June. That report put heat on major shoe companies that are using leather produced by those ranchers.

Nike and Timberland responded to the study by pledging to end their use of leather hides from deforested areas in the Amazon basin. Greenpeace is trying to get other shoe companies to follow suit.

Think of the Amazon the next time a company such as Wal-Mart tells us what wonderful things it is doing to address the climate crisis.

Corporate Lobbying Goes from Fake to Fraud

bonner As the Yes Men have shown with their impersonations, misrepresentation is sometimes the best way to convey a larger truth. That same lesson has been demonstrated, albeit unintentionally, by the lobbying firm Bonner & Associates, which was just exposed as having forged letters from non-profit organizations to members of Congress expressing opposition to the climate bill. In this case, the larger truth is that much of the support that corporate interests claim for their policy positions is bogus.

The story came to light thanks to the Charlottesville (Virginia) Daily Progress, which revealed that the office of Rep. Tom Perriello had received letters urging him to vote against the climate bill from two local civil rights organizations–Creciendo Juntos and the Albemarle-Charlottesville branch of the NAACP–that were discovered to be forgeries. Additional faked letters were later reported by two other members of Congress.

Soon it was revealed that the letters had been sent out by Bonner, which had been hired by Hawthorn Group to help in its work on behalf of the American Coalition for Clean Coal Electricity (ACCCE), a major coal industry front group. Bonner, which specializes in fabricating what it calls “strategic grassroots/grasstops” campaigns for large corporations, apologized for the phony letters but insisted they were the work of a rogue employee who has been terminated. This has not prevented a firestorm of criticism and calls from the likes of MoveOn.org and the Sierra Club for a Justice Department investigation of the matter.

Environmental groups are entitled to their righteous indignation, but some of this is akin to expressing shock that gambling is taking place in Casablanca. The entire point of the Astroturf work done by the likes of Bonner is to be deceptive–to give the misleading impression that there is a groundswell of support for the policy positions of big business.

The Bonner firm, founded in 1984 by former Congressional aide Jack Bonner (photo), made its name creating bogus campaigns on behalf of clients such as the banking industry (to fight proposals to lower permissible interest rates on credit cards) and the auto industry (to fight stricter fuel efficiency standards). In 1997 Ken Silverstein wrote a piece in Mother Jones describing Bonner as “a leader in the growing field of fake grassroots” lobbying.

In other words, Bonner is in the business of generating communications to members of Congress that are “real” messages from fake organizations. The current case involves fake messages from real organizations. It’s too soon to tell whether this represents a new tactic by the firm or an employee simply got confused about which aspects of the messages are supposed to be bogus. But either way, firms such as Bonner are helping large corporations co-opt political discourse.

Even more ominous are the supposedly spontaneous disruptions of town hall meetings being held by members of Congress. These confrontations are being carried out by rightwing opponents of healthcare reform–such as the group FreedomWorks–serving the interests of the for-profit medical establishment. It is bad enough when agents of business try to manipulate “civilized” communication with members of Congress; it is much worse when they begin to act like storm troopers trying to intimidate elected officials from diverging from the corporate line.

Toyota to California: Drop Dead

nummi The U.S. market, especially in states such as California, has played a major role in Toyota’s ascent to the top of the global automobile industry. Now the company is showing its appreciation by announcing plans to put nearly 5,000 people out of work in the San Francisco Bay Area by closing its New United Motor Manufacturing Inc. (NUMMI) operation. The move came shortly after the new federally subsidized General Motors decided to exit what had been a 25-year joint venture between the two companies.

If Toyota ignores the pleas of California public officials and proceeds with the shutdown, the closing would represent a sharp break with the company’s paternalistic traditions. “It’s as if a long-held doctrine at Toyota – that it doesn’t shut down factories and it doesn’t fire workers – has crumbled,” a Japanese auto analyst told the New York Times. “Some would say this is a new era for Toyota.”

To be accurate, Toyota’s paternalism has not extended to the contingent workers it has employed at home and in the United States, and earlier this year it used voluntary buyouts to thin the ranks of regular workers at various U.S. plants.

Conditions are admittedly tough for Toyota. It posted its first annual loss in half a century for the fiscal year ending in March amid the sharp economic downturn. Yet it cannot be an accident that the only one of the company’s ten U.S. manufacturing plants to be put on the chopping block is the one where the workers are unionized.

Toyota, like other foreign automakers, has made sure to keep its U.S. operations non-union. NUMMI was a special case. It was created at a time when GM thought it needed to learn the secrets of Japanese auto production, Toyota was looking for ways to increase its U.S. market share without inflaming anti-import sentiments, and the United Auto Workers union was willing to experiment with new work rules that raised productivity amid rising industry layoffs.

The UAW took a lot of grief for its “jointness” arrangement at NUMMI, where the intensified pace of production was denounced by critics as “management by stress.” The contracts negotiated by the UAW have forced workers to earn a portion of their pay in the form of production bonuses. Earlier this year, the U.S. Labor Department ordered NUMMI to pay its workers an additional $862,000 because the company had miscalculated the bonuses for 2008 (Labor Relations Week, 6/25/09).

Despite the extent to which the UAW and NUMMI workers bowed to Toyota’s way of doing business, the company did not hesitate to shut down the operation once GM was out of the picture. Toyota has apparently given little thought to the impact of the closing on California’s economy amid the recession and the state’s fiscal crisis, which was resolved only by enacting cruel cuts in education and other public services. Instead, it is complaining about labor costs at NUMMI compared to its non-union plants in places such as Kentucky.

Not long ago Bloomberg reported that Toyota was considering using the NUMMI plant to produce its popular Prius. That would be appropriate, given the hybrid’s popularity in California. But the company quickly quashed that rumor and insisted that instead it would add Prius capacity at its planned plant in Mississippi once the market begins to recover. The Mississippi facility is slated to receive some $300 million in state economic development subsidies and, of course, will be run without a union.

Despite all that California has done for Toyota, the company’s message to the Golden State is: drop dead.

Wal-Mart’s (Un)sustainability Index

Wal-Mart has taken the latest in a long series of steps to make itself look good by imposing burdens on its suppliers. The mammoth retailer, which is thriving amid the recession, recently announced plans to require its more than 100,000 suppliers to provide information about their operations that would form the basis of a product sustainability index.

Rating products is a good idea. It’s already being done by various non-profit organizations that bring independence and legitimacy to the process. Wal-Mart, by contrast, brings a lot of negative baggage. In recent years, Wal-Mart has used a purported commitment to environmental responsibility to draw attention away from its abysmal record with regard to labor relations, wage and hour regulations, and employment discrimination laws. It also wants us to forget its scandalous tax avoidance policies and its disastrous impact on small competitors. The idea that a company with a business model based on automobile-dependent customers and exploitative supplier factories on the other side of the globe can be considered sustainable should be dismissed out of hand. Yet Wal-Mart is skilled at greenwashing and is, alas, being taken seriously by many observers who should know better.

On close examination, Wal-Mart’s latest plan is, like many of its previous social responsibility initiatives, rather thin. All the company is doing at first is to ask suppliers to answer 15 questions. Ten of these involve environmental issues such as greenhouse gas emissions, water use, waste generation and raw materials sourcing. The final five questions are listed under the heading of “People and Community: Ensuring Responsible and Ethical Production.”

Two of them involve “social compliance.” It is an amazing act of chutzpah for Wal-Mart, which probably keeps more sweatshops in business than any other company, to claim moral authority to ask suppliers about the treatment of workers in their supply chain.

The questions in this category seem to assume that suppliers don’t do their own manufacturing. This is a tacit acknowledgement of how Wal-Mart has forced U.S. manufacturers to shift production offshore, and often to outside contractors. Now Wal-Mart has to ask those companies to be sure they know the location of all the plants making their products and the quality of their output.

The point about quality was one that CEO Mike Duke (photo) emphasized when announcing the rating system. This is also highly disingenuous. For years, Wal-Mart was notorious for pressing suppliers to reduce the quality of their goods to keep down prices. Now the behemoth of Bentonville is suddenly a proponent of products that “are more efficient, that last longer and perform better.” Will Wal-Mart pay its suppliers higher prices to cover the costs of improving quality?

I can’t bring myself to jump on Wal-Mart’s bandwagon. If I want product ratings I will turn not to Mike Duke but rather to someone like Dara O’Rourke, who founded a website called Good Guide that rates consumer products and their producers using independently collected data from social investing firms such as KLD Research and non-profits such as the Environmental Working Group. It uses criteria such as labor rights, cancer risks and reproductive health hazards that are unlikely to ever find their way into the Wal-Mart index.

Good Guide also rates companies, including Wal-Mart, which receives a mediocre score of 5.3 (out of 10), and it reaches that level thanks to its marks on p.r.-related measures such as charitable contributions and some but not all environmental measures. In the category of Consumers it gets a 4.1, Corporate Ethics 3.9, and for Labor and Human Rights 4.1 (which is generous).

Maybe Wal-Mart should focus on improving its own scores before presuming to rate everyone else.

CIT: R.I.P.?

cit1 When CIT Group realized it was in really big trouble, the commercial finance company apparently thought it could count on Uncle Sam to come to the rescue. About a week ago, it leaked the news that it was considering bankruptcy and waited for the Treasury Department to respond to dire warnings about the consequences for the small and medium businesses that make up most of the company’s customer base.

After all, CIT had already received $2.3 billion in TARP money last year after converting itself to a bank holding company. Other struggling TARP recipients, like Citigroup, had been able to come back for additional infusions as Tim Geithner showed himself to be a soft touch for large financial institutions.

To the surprise of CIT, it got rebuffed by the Obama Administration and will now have to file for Chapter 11 unless some deep-pocketed investors step in. CIT, with assets of about $75 billion, is a large but not a giant institution. It thus does not seem to meet the Geithner standard: it is not too big to fail.

While it is possible to understand CIT’s frustration, the company does not deserve too much sympathy. Putting size aside, there are reasons why CIT was not exactly a worthy candidate for a taxpayer handout. This is a case in which perhaps the right question to ask was whether the company in need was too flawed to save.

For decades, CIT played a useful function in the business system with services such as commercial lending, factoring and equipment leasing. But in 1980 it developed an identity crisis as it was acquired by RCA in the first of what would be a long series of ownership changes. Two decades later it came under the control of Tyco International, the shady conglomerate headed by Dennis Kozlowski, who would later be convicted of misappropriation of corporate funds and become infamous for the extravagant lifestyle–including a $6,000 shower curtain–he enjoyed with those funds.

CIT split from Tyco in 2002 and sought to make a new name for itself. Unfortunately, the way it did that was to get into two very sleazy businesses. In 2005 it entered the student loan market. Within two years, CIT’s Student Loan Xpress was being investigated by New York Attorney General Andrew Cuomo for paying kickbacks to university officials who steered students into predatory loans. Faced with a scandal, CIT agreed in May 2007 to sign a code of ethical conduct drawn up by Cuomo. It then booted out the president of Student Loan Xpress and later exited the business.

The other new endeavor was subprime home mortgages. For a while this dubious business boosted CIT’s earnings, but when the subprime market turned sour, the company took a big hit. In 2007–shortly after telling Investment Dealers Digest that “our subprime profile is strong”–it started posting losses and was forced to write down the value of its subprime portfolio by $765 million. It ended up leaving this field as well. CIT lost some $633 million in 2008.

CIT’s reputation was also tarnished in 2005, when it and two other leasing companies agreed to a $24 million settlement of charges brought in two dozen states about their links to the crooked telecom services company NorVergence.

In recent years, CIT has promoted itself using an advertising campaign based on the tag line Capital Redefined. Apparently, the new definition of capital is to engage in unethical business practices and then expect the federal government to come to your assistance when market conditions turn against you. Large or small, that kind of company is not worth saving.

Corporate Cookie Monsters

hartong The Pyrrhic victory achieved by the Stella D’Oro workers in the Bronx — they won an eleven-month strike but are slated to lose their jobs anyway — says a lot about what is wrong with American capitalism.

One lesson is obvious: there is no fairness in a collective bargaining system in which employers can make unreasonable demands (which in this case included a 20 percent pay cut and elimination of paid vacation and sick days), pretend to bargain until an impasse is reached and then bring in strikebreakers when the workers are compelled to walk off the job.

The Stella D’Oro situation was unusual in that a National Labor Relations Board administrative law judge finally ordered the reinstatement of the strikers, but that was only because he found that management failed to provide the union, Local 50 of the Bakery Workers, an audited financial statement to substantiate company claims of financial distress.

Whatever satisfaction the workers, who exhibited amazing solidarity during the strike, took in the NLRB ruling was dampened by the company’s subsequent announcement that it plans to shut down the plant, which has been in operation for more than half a century. The company abided by its WARN Act notice obligation, but in the current economic climate it will be difficult for workers to find other employment within 90 days.

Much has been made of the fact that Stella D’Oro is now owned by Brynwood Partners, one of those bloodsucking private equity firms. Brynwood — headed by Hendrik Hartong Jr. (photo) — certainly deserves plenty of scorn for its treatment of the workers. This is a firm, after all, that did not hesitate to accept taxpayer funds in the form of a 2008 Manufacturing Assistance Grant of $175,000 from the Empire State Development Corporation. It has also received property tax abatements from New York City.

Apparently Brynwood, whose website brags that its investments have earned a 28.8 percent overall rate of return, thought it was under no obligation to give back to the community and to its workers. It is unfortunate that among the investors in Brynwood are public pension funds such as the Pennsylvania State Employees Retirement System.

While the Stella D’Oro dispute is certainly a case of private equity behaving badly, it should be admitted that the cookie company was not always a model employer under its previous owner, publicly traded Kraft Foods, which in 2006 sold the business to Brynwood. In 2002 and 2003 Teamsters Local 550, which represented the company’s delivery drivers, clashed with Stella D’Oro management during negotiations on a new contract. The Teamsters struck the company in February 2003 to block what the union said was a plan to replace union drivers with non-union ones, and soon the walkout spread to other Kraft facilities in the New York metropolitan area. It appears the union got crushed.

The behavior of the Cookie Monsters who have run Stella D’Oro shows that removing barriers to union organizing is not the only urgent task for labor law reform. The system also needs to be changed to prevent unscrupulous employers from undermining unions already in place.

An Independent Corporate Front Group?

sheils Would a consulting company owned by Exxon be considered an impartial source of analysis on global warming, or would such a firm owned by Xe (formerly Blackwater) be regarded as a good judge of federal policy on the use of mercenaries? Probably not; in fact, they would, in all likelihood, be seen as front groups for the interests of their corporate parents.

Then how is it that one of the most influential consulting firms on healthcare policy is the Lewin Group, which is owned by a subsidiary of UnitedHealth Group, the largest of the for-profit medical insurance corporations and thus a very interested party when it comes to the current deliberations in Congress on major healthcare reform?

Lewin claims to be “objective” and “impartial,” but some of its analysis is repeatedly being used in very partisan ways by Republican members of Congress (such as John Boehner and Orin Hatch) and conservative commentators (the Heritage Foundation and Rich Lowry of National Review) to attack the idea of a public option in legislation that would seek to provide coverage to the uninsured. They typically do not mention Lewin’s relationship to UnitedHealth, which will benefit greatly if the public option is eliminated.

Those seeking to shield for-profit insurers from a competing federal plan are trumpeting Lewin research purporting to show that the existence of at least some versions of a public option would result in a mass exodus from employer-provided plans with higher premiums. Lewin claims that some 119 million of the 171 million people covered by employer plans could migrate to Uncle Sam’s offering. Given the assumption that taxpayers will be subsidizing participants in the public plan, such a shift is seen as creating a fiscal disaster for the federal government and the collapse of private plans. The rabidly pro-corporate group Conservatives for Patients’ Rights uses the Lewin research in a TV ad that depicts a public plan as a bulldozer that could “crush all your other choices, driving them out of existence.”

Lewin insists that it has “editorial independence,” but it is difficult to believe that its judgments are not influenced by the identity of its corporate parents. Its immediate parent, by the way, is Ingenix, a major player in healthcare information technology, especially billing systems. Ingenix, of course, also has a vested interest in protecting the for-profit medical bureaucracy. Ingenix and its parent UnitedHealth have paid out hundreds of millions of dollars to settle class-action lawsuits stemming from investigations spearheaded by New York Attorney General Andrew Cuomo charging that Ingenix promoted a database product that allowed insurers to underpay their members when reimbursing for out-of-network expenses.

Lewin was in existence for three decades when Ingenix and UnitedHealth acquired it in 2007. It’s interesting that before that deal Lewin was often in the news in connection with reports it produced for states such as California, Hawaii and Vermont showing the potential benefits of state single-payer systems. The firm released one such report (for Colorado) after being acquired by Ingenix, but these days Lewin seems to focus more on the hazards of expanded government involvement in healthcare. Lewin Senior Vice President John Sheils (photo) told the Associated Press that “the private insurance industry might just fizzle out altogether” if a public option were enacted.

Sheils insists he is impartial, but he has been aggressive in spreading the word about the potential drawbacks of the public option. He confronted President Obama directly on the issue last week as one of the questioners in an ABC News special whose host, Charles Gibson, seemed determined to bash government involvement in health insurance.

The Lewin Group acquisition added an insignificant amount to UnitedHealth’s annual revenues but it turned out to be a valuable investment for the $80 billion insurance giant. While playing the role of a neutral analyst, the consulting firm is in reality defending the interests of its corporate parents and the rest of the for-profit health insurance business. The most effective business front group is one that believes it is independent.