Corporations Behaving Badly:
The Ten Worst Corporations of 2001
The U.S. Supreme Court says a corporation is a person, or at least must
be treated like one when it comes to most constitutional protections.
Like the right to speak. And the right to act in the political arena
— giving campaign contributions, lobbying and advocating its agenda.
Now, if a corporation is in fact a person, with full constitutional rights,
then it should act like a moral human person.
And what is the fundamental basis of morality? Caring about others. So,
a corporation, to act like a moral human person, is going to have to care
about others, not just about its own bottom line.
It is going to have to care about its human compatriots.
But the vast majority of major corporations do not give a damn about
human persons. As such, they are immoral to the core. Or, maybe even worse,
they are amoral.
We say, if you are not a human person, and you cannot act like a moral
human person, then you should be stripped of your constitutional protections.
No right to speak, no Fifth Amendment rights, no right to participate
in the political arena. You just produce your products, and go home.
It also makes sense to revisit the legal protections that facilitate
corporate im- or a-morality, particularly the corporation’s defining
characteristic — limited liability for shareholders.
Shareholders, the owners of a corporation, invest a certain amount of
money in a company. Under the rules of limited liability, no matter how
much harm the company does, or how much it owes creditors, shareholders
cannot be required to pay more than the amount they already put in.
Lawrence Mitchell, a professor of law at George Washington University,
believes that limited liability for shareholders leads shareholders —
and therefore corporations — not to care. If your liability is limited,
you will not care as much as if your liability is full.
“We call stockholders owners,” Mitchell says. “You can
hardly be considered an owner if you don’t care, if you don’t
act like it’s your property. Limited liability encourages stockholders
not to care.”
Mitchell, who has written a book, Corporate Irresponsibility: America’s
Newest Export, says that in the absence of limited liability, the corporation
can always buy insurance.
“Insurance internalizes the cost of the risk,” Mitchell said.
“The corporation has to pay based on the insurance company’s
assessment of the risk, rather than some creditor getting stuck holding
the bag if the corporation fails.”
So, yes, Mitchell would strip corporations of their limited liability
protection. Let the chips fall where they may.
Admittedly, these ideas do not appear likely to be implemented soon.
But there may be interim concepts to get us closer.
To determine whether a corporation is acting morally, we propose that
Congress legislate a Corporate Character Commission (CCC). This would
be a 10-person panel, with members chosen from the human person community.
Ideal candidates would be ethicists, philosophers, corporate criminologists
and the like.
The CCC would check on the criminal records, recidivism rates, acts of
immorality and other wrongdoing of the largest corporations.
If the CCC were up and running now, we would propose that it take a close
look at the Ten Worst Corporations of 2001. Clearly they do not care.
They are not moral entities. They should be stripped of their constitutional
protections. Their shareholders should be made fully liable.
There is a precedent for this kind of review at the federal level. The
Federal Communications Commission reviews the character of applicants
for federal broadcast licenses. The FCC does not do a very good job of
it, obviously –– GE routinely gets renewed despite its recidivist
But just because the FCC cannot do it right, does not mean the CCC could
not do it right. Let’s give it a try.
Shamefully Ripping Off the Government
Earlier this year, TAP Pharmaceutical Products Inc., a major U.S. pharmaceutical
manufacturer, was forced to pay $875 million to resolve criminal charges
and civil liabilities in connection with its fraudulent drug pricing and
marketing conduct with regard to Lupron, a drug sold by TAP primarily
for treatment of advanced prostate cancer in men.
TAP is a joint venture started by Abbott Laboratories and Takeda Pharmaceuticals
of Japan to market two particular drugs, one of which is Lupron. Lupron
is designed for the control of prostate cancer. TAP is headquartered in
the Chicago area.
The wrongdoing was brought to the attention of federal prosecutors by
Douglas Durand, the former vice president of sales of TAP Pharmaceutical.
Under the federal False Claims Act, whistleblowers who file qui tam lawsuits
against companies defrauding the government are entitled to 15 to 25 percent
of whatever funds the government recovers in cases where the government
joins the lawsuit.
Durand filed a False Claims Act lawsuit in May 1996. The government intervened,
and earlier this year, Durand was awarded $77 million as his part in the
recovery of the lawsuit.
Durand provided the government with information about free samples and
the implicit encouragement to bill Medicare for free samples, about the
company marketing the spread between Medicare reimbursement and the amount
the doctors had to pay TAP for the product, about unrestricted educational
grants and about extraordinarily lavish entertainment and trips that were
given to doctors who were willing to prescribe Lupron in significant quantities.
He provided information on 2 percent management fees which were given
to high-volume urology practices.
Another whistleblower added some spice to Durand’s case. Dr. Joseph
Gerstein is a urologist at the Tufts Associated Health Maintenance Organization
Gerstein alleged that he was offered a substantial “unrestricted
educational grant” if he would change Tufts’ decision, which
had been to provide patients with the cheaper alternative to TAP’s
product, back to Lupron.
TAP made it fairly clear to Dr. Gerstein that he need not account for
the $25,000 unrestricted educational grant, that there were few if any
restrictions on how he used the money. But it was clearly tied to the
decision by Tufts to go back to using Lupron as the treatment of choice
for prostate cancer.
For a company compelled to enter into such a massive settlement, TAP
was surprisingly belligerent. “We fundamentally disagree with many
of the government’s allegations, but we resolved this matter to make
clear our commitment to proper and ethical business practices, and to
avoid protracted legal battles and ensure uninterrupted availability of
Lupron for many thousands of patients who rely on it,” said TAP President
Thomas Watkins in announcing the company’s plea. Watkins did admit
that TAP provided free samples of Lupron to doctors with the knowledge
that those physicians would seek and receive reimbursement for sales of
the product. But he said that “we fundamentally disagree with government
claims regarding TAP’s pricing and reimbursement policies. We believe
we consistently complied with pricing laws and regulations.”
The TAP fiasco was only the tip of the proverbial iceberg for Abbott.
As the TAP case was being resolved in Boston, the Chicago Tribune reported
that federal prosecutors were investigating whether a division of Abbott
Laboratories and at least three other companies worked with medical-care
providers to bilk government health insurance programs for the poor and
According to the report, at issue is whether the medical product manufacturers
engaged in a kickback scheme to encourage hospitals, nursing homes or
home-care providers to buy pumps and related supplies used to feed seriously
ill people by giving the products away or selling them at a discount.
Some providers then allegedly billed the products at a higher price to
either Medicare, the federal health insurance program for the elderly,
or Medicaid, the federal-state health insurer for the poor.
Abbott wouldn’t elaborate on what investigators from the U.S. attorney’s
office for the Southern District of Illinois are looking at, but said
the North Chicago-based company isn’t the only target of the prosecutors’
probe, the Chicago Tribune reported.
“We are aware of the investigation, and the investigation is inclusive
of the whole industry, which includes manufacturers, distributors and
providers,” said Mary Beth Arensberg, a spokeswoman for Abbott’s
Ross Products division, which makes the equipment.
And when they weren’t seeking to take what wasn’t theirs, Abbott
was allegedly engaging in market practices that addicted patients to the
powerful painkiller OxyContin, a prescription medication given to cancer
patients and those suffering from chronic, moderate to severe pain.
Earlier this year, in an effort to stop the overly aggressive and deceptive
marketing of OxyContin, West Virginia Attorney General Darrell V. McGraw,
sued Abbott and Purdue Pharma, the manufacturers and chief promoters of
With oxycodone — a member of the same family of drugs as opium and
heroin — as one of its main ingredients, OxyContin is also one of
the most commonly abused prescription medications in the Appalachian region.
McGraw alleged that, though they knew the dangers posed by misuse of
OxyContin, the defendants willingly marketed the product in a coercive
and deceptive manner in hopes of achieving a greater margin of profit
and eventually an illegal monopoly on the narcotic pain medication market.
Sometimes Corporate Crime Doesn’t Pay
Sometimes, at least, it turns out that corporate crime and law-breaking
Ask Argenbright, a leader in the privatized airport security business
in the United States. Argenbright controls roughly 40 percent of the market.
Its employees screen passengers and carry-on bags for the airlines, which
have been delegated these responsibilities by the federal government.
Not for long.
In November, the U.S. Congress agreed on legislation that will federalize
airport security operations. The workers doing security checks at airports
will become federal employees, with higher wages and greater professional
requirements. Working conditions should improve, and the extremely high
worker turnover rate should plunge. And Argenbright should fade from the
The move against the trend of privatization and contracting out of government-provided
services was obviously spurred by the September 11 terrorist attacks.
But it was Argenbright’s extraordinarily poor performance record
that confronted Congress with an empirical reality that overcame ideological
resistance to an expansion of government power and closure of a private
Owned by the British firm Securicor, Argenbright in May 2000 pled guilty
to two counts of making false statements to federal regulators and paid
$1.55 million in fines in connection with charges that it failed on a
massive scale to do background checks on security screeners employed at
Philadelphia International Airport, failed to provide them with required
training, and then lied to federal authorities about it.
The government’s sentencing memorandum in the case summarizes the
charges. “During the period January 1, 1995 through December 31,
1998 the Philadelphia district office of Argenbright Security, Inc. [ASI]
hired more than 1,300 untrained pre-departure screeners to work at the
security checkpoints at Philadelphia International Airport over a period
of more than four years. Through its employees in Philadelphia, ASI caused
dozens of criminals to be hired by not checking their backgrounds, but
falsely certifying that the checks had been done. ASI’s district
manager Steven Saffer encouraged and permitted test scores to be falsified
and phony GEDs to be created.”
Federal prosecutors acknowledged going easy on Argenbright. Rather than
piling on the charges, they put their faith in a compliance program and
a three-year probationary period.
Those hopes turned out to be misplaced.
In October 2001, Argenbright agreed to a new plea agreement.
Government papers filed with the U.S. District Court for Eastern Pennsylvania
in advance of the plea contained this amazing list of allegations: “The
government’s investigation and review of Argenbright’s post-sentencing
operation and compliance efforts demonstrates that Argenbright, in violation
of its probation and the court-ordered compliance and audit plan: (1)
has continued to hire pre-departure screeners at Philadelphia International
Airport after the date of sentencing who have disqualifying criminal convictions;
(2) has retained and continued to employ pre-departure screeners with
criminal records after the date of sentencing even though it certified
to the Court that it had re-checked and re-verified every employee’s
background before the date of sentencing; (3) has made new false statements
to the FAA [Federal Aviation Administration] regarding employee background
verifications of a significant percentage (25%) of its Philadelphia employees
whose files have been reviewed by agents of the U.S. Department of Transportation’s
Office of Inspector General; (4) has engaged in many new FAA regulatory
violations in Philadelphia (32% of files randomly reviewed by FAA evidence
new violations and false statements); (5) has failed to conduct audits
in accordance with the audit program that required Argenbright to obtain
independent verifications from third party sources that employee backgrounds
were properly verified in accordance with FAA regulations; (6) failed
to convene a meeting of its compliance management committee until nine
months after the date of sentencing; and (7) has engaged in many new FAA
regulatory violations at the following 13 airports throughout the United
States: Washington, D.C. (Dulles International and Reagan National), Boston
(Logan International), New York (Laguardia), Los Angeles, Trenton, Phoenix,
Las Vegas, Columbus, Dallas-Ft. Worth, Seattle and Cedar Rapids.”
The October 2001 plea extended Argenbright’s probationary period
from three to five years, and required the company to do new background
checks, including fingerprinting, of its employees.
Hopefully, Argenbright will never have a chance to fill out its probationary
period. Its desperate and aggressive lobby campaign to keep the screening
jobs in the private sector failed. There are small loopholes in the federal
aviation security bill that could again give the company a foothold in
the industry, but the company’s future prospects in the U.S. airline
screening business are now very, very bleak.
It’s Been a Bad Year
How’s this for a scam?
Secure a government monopoly to sell your product. When a competitor
challenges the monopoly grant, alleging it transgresses the rules by which
the government awards monopolies, pay the competitor off. Then use your
monopoly power to price gouge consumers. When a public emergency suddenly
compels the government to purchase a huge supply of your product, use
your government-granted monopoly to overcharge the government — and
reap the tremendous publicity value surrounding emergency use of the product.
When the public complains, drop the price, and bask in the positive publicity
— even as you continue to reap windfall profits.
That pretty much sums up the Bayer/Cipro story.
According to the Prescription Access Litigation (PAL) project, a coalition
of more than 60 organizations in 29 states, an agreement between Bayer,
Barr Laboratories and two other generic drug companies is blocking access
to adequate supplies and cheaper, generic versions of Cipro, one of the
leading antibiotics used to treat anthrax. PAL has sued to undo the agreement.
PAL charges that Bayer has unlawfully paid three of its competitors —
Barr Laboratories, Rugby, and Hoechst-Marion Roussel — a total of
$200 million to date to abandon efforts to bring cheaper generic versions
of Cipro to the market.
Bayer denies that its patent is invalid. At the time it settled the generic
manufacturer Barr’s challenge to its patent, according to Bayer,
“Bayer was convinced of the validity of the Cipro patent, but —
like any other party involved in complex litigation — could not completely
rule out all uncertainties of litigation.”
The anthrax outbreak created a public relations bonanza for the company.
Secretary of Health and Human Services (HHS) Tommy Thompson announced
that he wanted to stockpile a supply for 10 million people. When Senator
Charles Schumer, D-New York, and consumer groups called for the government
to purchase generic versions of Cipro, and when it became known that Indian
companies could produce the drug for less than a twentieth of Bayer’s
drugstore price and less than a ninth of its price to the government,
Thompson and Bayer entered into furious negotiations. They agreed on a
price of 95 cents a tablet.
Dr. Wolfgang Plischke, President of Bayer Corporation’s Pharmaceutical
N.A. Division, said, “We are grateful that our researchers developed
a product that is crucial in this hour of need. The people of Bayer are
very motivated and dedicated to playing an important role in assuring
that the American people have adequate quantities of Cipro, which we pray
are never needed.”
The Washington Post reported soon after that HHS pays Bayer 45 cents
per Cipro pill for purchases under a separate government program (still
more than twice the Indian generic price).
While Cipro made news like no drug since Viagra, it wasn’t Bayer’s
only controversy of 2001.
With mounting concern that widespread misuse of antibiotics is contributing
to rapidly rising antibiotic-resistant bacteria, the U.S. Food and Drug
Administration last year proposed a ban on use of a class of drugs, fluoroquinolones,
for poultry. This proposal followed a Centers for Disease Control finding
that its use in poultry was making human versions of the drugs —
used to treat severe food poisoning due to salmonella, among other purposes
— less effective.
Abbott Labs, one of two U.S. poultry fluoroquinolone producers in the
United States, subsequently voluntarily withdrew its product.
But Bayer has refused, instead asking for hearings that could delay a
ban for years.
“By the time the hearing process is complete, the ban may be a moot
point,” says Karen Florini, senior attorney with Environmental Defense.
“As rapidly as resistance to fluoroquinolones is growing, the drug
may be ineffective in humans by the time the FDA is able to issue a final
ban on the use of these drugs in poultry.”
Bayer has responded to pressure on the issue by establishing an initiative
called Libra to address overuse of antibiotics in humans. But it is refusing
to concede on the animal use dispute.
In August, the company was hit with yet another controversy, as it was
forced to withdraw Baycol, a leading cholesterol-reducing drug, from the
market. Especially in combination with another cholesterol-reducing drug,
gemfibrozil (Lopid), Baycol leads to a high rate of rhabdomyolysis, a
severe muscle-weakening disease that can be fatal. Dozens of reported
deaths have been linked to Baycol.
Upon withdrawing Baycol, Bayer said it would have to review its long-term
commitment to remaining in the pharmaceutical business. It also is a world
leader in agrichemicals (and its proposed purchase of Aventis Cropscience
is now drawing U.S. and European Union antitrust scrutiny), chemicals
Perhaps understandably, a company as bruised as Bayer is sensitive to
criticism. But Bayer’s response has been to inappropriately and aggressively
seek to stifle effective criticism. It brought suit against the German
watchdog group, Coalition against Bayer Dangers, for maintaining a BayerWatch.com
website. Although the group should have been able to successfully defend
against Bayer’s trademark claim, it did not have enough money to
litigate the issue.
It is going to take a lot more than legal intimidation tactics to rescue
this company’s reputation, however.
The Real Thing: Coke the Evil Doer
Coke. Where do we begin?
Let’s start with Harry Potter.
Earlier this year, Coca-Cola reportedly paid Warner Brothers (a unit
of AOL Time Warner) $150 million for the exclusive global marketing rights
to the first Harry Potter movie and possibly the sequels. “Harry
Potter and the Sorcerer’s Stone” opened worldwide in November.
Coca-Cola is aggressively marketing to children by featuring Harry Potter
imagery on packages and in advertising for its carbonated (Coca-Cola,
Minute Maid, and other brands) and noncarbonated (Hi-C, Minute Maid) soft
Coke’s Potter promotion, called “Live The Magic,” also
uses contests, games and a web site to entice kids to drink more soft
“Children and adults worldwide are outraged that their beloved Harry
Potter is being used to market ‘liquid candy’ to kids,”
says Michael F. Jacobson, executive director of the Center for Science
in the Public Interest. “Over-consumption of Coca-Cola and other
sugar-laden soft drinks contributes to obesity and diabetes, reduced nutrient
intake and tooth decay.”
The movie won’t include product placements and Coca-Cola says that
its marketing program includes a literacy campaign. But, “the bottom
line is that an adored literary phenomenon is being put to work to sell
more junk food,” says SaveHarry.com organizer Jacobson.
“It is outrageous that Coca-Cola is using the magic of Harry Potter
to lure kids to drink more soda pop. Consumption of soft drinks has soared
over the past two decades, contributing to the doubling in the percentage
of obese teenagers,” says Dr. Patience White, professor of medicine
and pediatrics at George Washington University Medical Center. “That
obesity epidemic is fueling a diabetes epidemic.”
According to U.S. Department of Agriculture (USDA) surveys, 20 years
ago teenagers drank almost twice as much milk as soda pop. Today they
drink twice as much soda pop as milk.
A recent study done at the Harvard School of Public Health found that
increased soft-drink consumption was associated with increased obesity
in sixth- and seventh-grade students.
How about race discrimination?
Late last year, Coke agreed to pay $192.5 million to resolve a federal
lawsuit filed in April 1999 by African-American employees of the Coca-Cola
The settlement requires Coca-Cola to pay the class $58.7 million in compensatory
damages, $24.1 million in back pay, $10 million for promotional bonuses
and $43.5 in pay equity adjustments, as well as make sweeping programmatic
reforms costing another $36 million.
It also grants broad monitoring powers to a panel of outside experts
jointly appointed by Coke and the plaintiffs’ lawyers — an extraordinary
Complicity with death squads?
Earlier this year, in Miami, the United Steel Workers Union and the International
Labor Rights Fund filed a lawsuit against Coke and Panamerican Beverages,
Inc., the primary bottler of Coke products in Latin America and owners
of a bottling plant in Colombia where trade union leaders have been murdered.
The case was initiated by Sinaltrainal, the trade union that represents
workers at the Coke facilities in Colombia. Sinaltrainal has long maintained
that Coke maintains open relations with murderous death squads as part
of a program to intimidate trade union leaders.
Union officials said that Colombia holds the “terrible distinction
of being ranked number one in the world for the number of trade union
leaders murdered each year, and that Coke plays a key role in maintaining
Other plaintiffs include the estate of Isidro Segundo Gil, a trade union
leader who was murdered while working at the Coke bottling plant in Carepa,
Colombia. The plaintiffs charge that the manager of that facility, owned
by an American, Richard Kirby, who is also a defendant in this case, specifically
threatened to kill the leaders of the union if they continued their union
The other plaintiffs are Luis Eduardo Garcia, Alvaro Gonzalez, Jose Domingo
Flores, Jorge Humberto Leal and Juan Carlos Galvis. All are leaders of
Sinaltrainal. All, while employed by Coke, were subjected to torture,
kidnapping, and/or unlawful detention in order to encourage them to cease
their trade union activities.
The lawsuit alleges that Coke employees either ordered the violence directly,
or delegated the job to paramilitary death squads that were acting as
agents for Coke.
“This case is extremely important for trade union and human rights,”
says Daniel Kovalik, assistant general counsel of the Steelworkers and
co-counsel for the plaintiffs. “If we cannot get Coke, one of the
most well known companies in the world, to protect the lives and human
rights of the workers at its world-wide bottling facilities, then we certainly
have a long way to go in making the global economy safe for trade unionists.”
“There is no question that Coke knew about and benefited from the
systematic repression of trade union rights at its bottling plants in
Colombia, and this case will make the company accountable,” says
Terry Collingsworth, who is co-counsel on the case and general counsel
of the Washington, D.C.-based International Labor Rights Fund.
A spokesperson for Coke at its headquarters in Atlanta referred Multinational
Monitor to the company’s spokesperson in Colombia.
“We vigorously deny any wrongdoing regarding human rights violations
in Colombia and are deeply concerned by these allegations against our
company,” says Pablo Largacha, spokesperson for Coca-Cola de Colombia.
“We have been and continue to be assured by our bottlers that behavior
such as that depicted in the claim has in no way been instigated, carried
out or condoned by these bottling companies.”
So your company’s stock goes from $90 to less than a $1 over
the course of a year, and then your company plunges into bankruptcy.
And all of your fans desert you.
Even your old buddy, President Bush, won’t acknowledge your problems.
No bailout for your company, buddy.
On the other hand, things aren’t so bad, at least not for you. You
did pull off one of the historic scams in major corporate history: your
company has acknowledged overstating its earnings over the years, huge
sums were spent on shady insider deals, and your puffing of company stock
at one time had your company ranked among the 10 largest in the United
States. And now that it has all crumbled, your lawyers are looking to
protect you, so you do not have to pay one cent.
You got your multi-million dollar bonus. You are rich. If your workers
lost their life savings, that’s no skin off your back.
You are an executive of the now-bankrupt Enron. Sitting pretty, looking
for another gig on Wall Street.
Yes, the lawyers for the workers want to freeze your assets, alleging
you made them on illegal insider deals.
They say that you reaped your huge profits during the past three years
through a scheme that artificially inflated the price of Enron’s
stock. They say you falsified the company’s financial condition. But that’s
what they always say.
One of the lawyers seeking to seize your assets called your company “a
grotesque fraud — a financial monstrosity of manipulation and falsification.”
Amalgamated Bank, the trustee of equity and bond funds that invest the
retirement savings of union employees, suffered losses of $10.3 million,
part of a $20 billion loss for public investors.
The lawyer for the bank said that Enron cheated millions of investors
out of billions of dollars. Countless lives and retirements have been
“While lining their own pockets and setting themselves up financially
for life, Enron insiders misled many investors who represent working men
and women,” said an Amalgamated vice president. “It’s our
intention to retrieve the ill-gotten gains of the Enron insiders and return
it to the people who were ripped off.”
No one got hit harder than Enron employees. Enron used stock rather than
cash to match employee contributions to their 401(k) retirement fund.
And many of the employees, believing the company’s hype about its
prospects, chose to put even more of their money into company stock. Sixty-two
percent of the assets in the 401(k) were invested in Enron stock. Then,
in October, following the company’s announcement that it was taking
more than a billion dollars in charges to offset bad investments connected
to insider deals — at the exact moment that Enron began to unravel
–– the company “locked down” the pension plan so that
employees could not sell off their Enron stock. The lockdown supposedly
occurred because Enron was changing plan administrators. Trading at $33.84
when the lockdown went into effect, the stocks were worth less than $10
a share a month later, when employees were again permitted to sell the
stock. In the process, many lost their life savings.
Enron says it does not comment on pending litigation.
Meanwhile, Enron board chairman Kenneth Lay, reported cashing in more
than $200 million worth of stock options in the last several years —
before share values started dropping like a stone. Lou Pai, chairman of
Enron unit Enron Accelerator, sold stock in excess of $353 million.
Even Wendy Gramm, the wife of former U.S. Senator Phil Gramm, is reported
to have sold $297,912 in stocks. She served, believe it or not, on Enron’s
What were they doing at audit committee meetings, drinking coffee and
Anyway, these lawyers alleged that you guys set up limited partnerships
that were used as strawmen for keeping debt off Enron’s books.
And your buddies at Arthur Andersen, who oversaw the bookkeeping procedures,
are under the spotlight. Representative John Dingell, D-Michigan, and
the lawyers want to know — what did Arthur Anderson know and when
did they know it?
“How am I going to retire now?” Gary Kemper, 57, of Banks,
Oregon, a maintenance foreman with an Enron affiliate, asked USA Today.
“Everything I’ve worked for for the past 25 years has been wiped
out. Meanwhile, the executives got out while the getting was good.”
King of Global Warming Denial
You know a company is behaving badly when it starts getting cuffed around
by the public relations industry.
That’s why it was so notable in May when O’Dwyer’s, the
leading rag of the PR industry, criticized “ExxonMobil’s stubborn
refusal to acknowledge the fact that burning fossil fuels has a role in
Climate change, now accepted by scientific consensus as fact and acknowledged
by virtually all reputable scientists to be underway, poses enormous environmental,
human health and economic threats in coming decades. Among other consequences:
rising tides due to polar icecap melting are expected to submerge entire
island nations and vast swaths of coastal lands; changing temperatures
are expected to contribute to the spread of deadly tropical diseases;
extreme weather events are expected to become much more frequent; and
countless species are facing endangerment due to rapid shifts in local
weather patterns. Emissions of carbon dioxide from the burning of fossil
fuels such as oil are a leading contributor to the problem of climate
ExxonMobil, the gargantuan of the oil industry, is the world’s leading
obstacle to remotely sensible approaches to address global warming.
It was the largest oil company contributor to George W. Bush’s presidential
campaign/Republican Party — and has seen its investment pay off in
the Bush administration’s resolute failure to sign the Kyoto Protocol,
a global treaty committing countries to binding (though inadequate) reductions
in greenhouse gas emissions, or to take any serious steps to combat climate
The company continues to fund public relations and lobby campaigns denying
the reality and dangers of global warming. It continues to tout the greenhouse
denialists — the handful of industry-backed scientists who have gained
notoriety by their dissent from the consensus statements of more than
1,800 leading climate scientists on the risks of global warming.
ExxonMobil is discernibly worse on the global warming issue than other
oil companies. BP/Amoco and Shell have been the most concessionary in
the industry, acknowledging the seriousness of the issue, ending their
hard-line resistance to Kyoto and other measures to address climate change,
and beginning to invest in renewable energy technologies. The other leading
company, ChevronTexaco, is more recalcitrant, but can’t match ExxonMobil.
Here’s the current ExxonMobil line, delivered by company CEO Lee
Part One: We believe there could conceivably be a global warming problem:
“We agree that the potential for climate change caused by increases
in carbon dioxide and other greenhouse gases may pose a legitimate long-term
Part Two: But we don’t know enough yet to take action: “However,
we do not now have a sufficient scientific understanding of climate change
to make reasonable predictions and/or justify drastic measures. Some reports
in the media link climate change to extreme weather and harm to human
health. Yet experts [he goes on to cite James Hansen, one of the handful
of greenhouse denialists] see no such pattern. … Although the science
of climate change is uncertain, there’s no doubt about the considerable
economic harm to society that would result from reducing fuel availability
to consumers by adopting the Kyoto Protocol or other mandatory measures
that would significantly increase the cost of energy.”
Part Three: So we should study more and rely on voluntary action. “This
does not mean we favor doing nothing. We have redoubled our efforts in
energy conservation at our own operations around the world” and are
investing in fuel cells.
Meanwhile, while obstructing appropriate action on global warming, ExxonMobil
continues with its plunder around the world. What is consistent is its
reckless behavior and efforts to evade the consequences of its actions.
• An Australian jury in June convicted the company’s Esso
Australia unit of 11 charges linked to a 1998 explosion at a gas processing
plant which killed two people.
• ExxonMobil is the lead contractor in the World Bank-backed Chad-Cameroon
pipeline, which threatens to replicate the devastating experience of
Shell’s operations in the Niger Delta, where money flowed to a
corrupt, brutal and repressive national government while local communities
saw their livelihoods destroyed by pollution.
• ExxonMobil has continued to fight against the $5 billion punitive
damage verdict in the Valdez case. In November, a federal appellate
court ruled that the $5 billion award was too high. The appellate court
agreed that Exxon’s conduct in the Valdez case was reckless, but
held that precedent compelled it to reduce the punitive verdict, which
was approximately 17 times the compensatory damages awarded to commercial
fishers in the case.
• It has continued to push for opening of the Arctic National Wildlife
Refuge to oil drilling, which would threaten the ecology of the largest
designated wilderness area in the U.S. National Wildlife Refuge System.
• The company is culpable for some of the mass atrocities committed
by the Indonesian military in Aceh Province, in North Sumatra, a June
lawsuit filed by the Washington, D.C.-based International Labor Rights
Fund alleges. The suit charges that Mobil Oil contracted with the Indonesian
military to provide security for its Arun natural gas project, and controlled
and directed the units assigned to it. ExxonMobil responded in a statement
saying it “condemns the violation of human rights in any form and
categorically denies these allegations. We believe a lawsuit recently
filed by the International Labor Rights Fund (ILRF) containing these
allegations is without merit and designed to bring publicity to their
• A New Orleans jury in May ordered ExxonMobil to pay a Louisiana
judge and his family $1 billion for contaminating their land with radioactivity.
Exxon had leased the land, and an Exxon contractor used the land to
clean radioactive Exxon pipes. The contractor allegedly did not know
the pipes contained radioactive material. Exxon says remediation costs
for the land are minimal, and is appealing the verdict. The punitive
award “was clearly not justified by the evidence,” Exxon’s
lawyer Gregory Weiss told the National Law Journal. “The only thing
that I can conclude is that they hit Exxon because it’s Big Oil.”
Still the Same. Still Killing.
We’ve changed. That’s the line from Philip Morris.
And evidence abounds.
The company is changing the name of its parent operation from Philip
Morris to Altria.
The tobacco giant says it is spending $100 million in the United States
to reduce youth smoking.
Go to the company’s web site and read this: “We agree with
the overwhelming medical and scientific consensus that cigarette smoking
causes lung cancer, heart disease, emphysema and other serious diseases
in smokers. Smokers are far more likely to develop serious diseases, like
lung cancer, than non-smokers. There is no ‘safe’ cigarette.
… We agree with the overwhelming medical and scientific consensus
that cigarette smoking is addictive.”
Ask company representatives about the efforts to negotiate an international
treaty on tobacco control, the Framework Convention on Tobacco Control
(FCTC). Here’s what David Greenberg, senior vice president for corporate
affairs of Philip Morris International told us: “It is time for regulation,”
he said. Around the world, he said, the company is ready to embrace regulation
whether by international institutions and/or at the national level. “We’d
like to see a convention have as broad a reach” as possible, Greenberg
said, “so we know what the rules are.”
The only problem: It is all a sham. Public health experts agree the company’s
youth smoking prevention advertisements and programs are either worthless
or harmful, because they portray smoking as an adult activity and thus
make it more desirable to kids.
Despite the company’s new acknowledgement that the product it hawks
is deadly and addictive, it continues to pioneer new ways of marketing
• Early this year, the company continued its longstanding seduction
of women to the smoking habit with a Virginia Slims “See Yourself
as a King” campaign. Women’s health and tobacco control groups
rushed to denounce the new marketing effort.
“Philip Morris, the world’s largest tobacco company, insults
and degrades women with its new magazine ad for Virginia Slims cigarettes,”
says a statement issued by more than a dozen organizations including
the Boston Women’s Health Book Collective, the American Medical
Women’s Association, the American Lung Association and the Campaign
for Tobacco-Free Kids. “By once again suggesting that women are
empowered by smoking, Philip Morris shows contempt for women’s
“The Virginia Slims ads,” the statement rightfully concluded,
“are the most recent evidence that Philip Morris’ attempts
to portray itself as a socially responsible company are a sham.”
• Philip Morris and the rest of the industry continue to bombard
kids in the United States with cigarette ads. A New England Journal
of Medicine study found that, in 2000, magazine advertisements for youth
brands of cigarettes (defined as cigarettes smoked by more than 5 percent
of eighth, tenth and twelfth graders) reached more than 80 percent of
young people in the United States an average of 17 times each.
• This holiday season, Philip Morris is selling a new cigarette,
called M, with the slogan, “A Special Blend for a Special Season.”
Comments Matthew Myers, president of the Campaign for Tobacco-Free Kids,
“Perhaps Philip Morris should change its slogan to ‘M is for
murder.’ After all, they’re selling the usual blend of addiction,
disease and death.”
At the negotiations of the Framework Convention for Tobacco Control,
Philip Morris is working hand-in-glove with the Bush administration to
obstruct a strong, enforceable treaty. In a November letter to the White
House, Representative Henry Waxman, D-California, wrote that “my
staff has identified 11 specific instances where Philip Morris recommended
deleting provisions of the draft text. In 10 of the 11 instances, your
negotiators proposed or prepared amendments advocating exactly what Philip
These amendments included proposals to: lessen tobacco taxes; permit
tobacco companies to use terms like “light” and “low-tar”
that public health experts say are misleading; preserve duty-free sales
of cigarettes; and impede the World Health Organization from developing
standards for testing, measuring, designing, manufacturing and processing
More revealing than Philip Morris’s “we’ve changed”
public relations line was a company-commissioned study from the Arthur
D. Little consulting firm. Prepared in November 2000 and made public in
the Wall Street Journal in July, the study argued that smoking saved the
Czech Republic government money by contributing to the “early mortality
of smokers.” When smokers die, society saves costs on healthcare,
housing and pensions for the elderly, the report ghoulishly argued.
(But even this conclusion was deceptive, points out Clive Bates of Action
on Smoking and Health (ASH) UK — the acknowledged costs of smoking
in the study (including health care costs and lost income to society from
early mortality) are about 13 times higher than the purported savings.)
The real difference between the new and old Philip Morris? Where the
company would once have belligerently defended the study, the new company
— once caught — is sophisticated enough to be contrite.
“The funding and public release of this study which, among other
things, detailed purported cost savings to the Czech Republic due to premature
deaths of smokers, exhibited terrible judgment as well as a complete and
unacceptable disregard of basic human values,” the company said in
an apologetic statement. “We will continue our efforts to do the
right thing in all our businesses, acknowledging mistakes when we make
them and learning from them as we go forward.”
Empty words from the global leader in an industry whose products are
taking 4.2 million lives this year alone.
21 Dead, $200,000 Fine
Perhaps no prosecution in the history of corporate criminality can compare
in its duplicity to the prosecution in the Ball Park franks fiasco.
Bil Mar Foods is a unit of the Chicago-based giant Sara Lee Corporation,
the maker of pound cakes, cheesecakes, pies, muffins, L’Eggs, Hanes,
Playtex and Wonderbra products — your typical food and underwear
Bil Mar makes hot dogs — Ball Park Franks hot dogs.
In July, Sara Lee pled guilty to two misdemeanor counts in connection
with a listeriosis outbreak that led to the deaths of at least 21 consumers
who ate Ball Park Franks hot dogs and other meat products. One hundred
people were seriously injured. The company paid a $200,000 fine.
According to Kenneth Moll, a Chicago attorney representing the families
of the victims, this is what happened:
Bil Mar has a hot dog facility in Zeeland, Michigan. The company shut
down the facility over the July 4th weekend of 1998 to replace a refrigeration
unit that was above the hot dog processing facility. The hot dogs are
heated at one end and sent down a conveyer belt to the other. Moll’s
theory is that the removal of the air conditioning unit and its replacement
dislodged some dangerous bacteria in the ceiling. When the plant reopened,
steam from the passing hot dogs went up to the ceiling, condensed and
dripped back down with the dangerous bacteria onto the hot dogs.
In November 1998, Paul Mead from the Centers for Disease Control (CDC)
in Atlanta started receiving calls from the state health departments around
the country that had isolated strains of a deadly bacteria, Listeria monocytogenes.
Mead looked at the bacteria and found that they were the same strain.
He sent out questionnaires and discovered there was an open package of
hot dogs in the home of one of the people who died. The CDC tested the
hot dogs and isolated the same bacterial strain — a DNA fingerprint
of the type of bacteria.
According to Moll, Mead went to the Bil Mar plant in Zeeland, Michigan,
tested unopened packages of hot dogs and was able to isolate the same
DNA fingerprint bacteria. In December 1998, Sara Lee ordered a recall
of millions of pounds of hot dogs and deli meats.
According to a series of reports in the Detroit Free Press, plant workers
were regularly testing work surfaces for the presence of cold-loving bacteria
— a class of bacteria that includes the deadly Listeria monocytogenes
as well as some harmless bacteria.
According to the Free Press, beginning in July 1998, after the replacement
of the old refrigeration unit, workers recorded a sharp increase in the
presence of cold-loving bacteria. The number of positive samples remained
high until the company stopped performing tests in November 1998 —
a month before the Sara Lee recall.
“Sara Lee was doing testing of the environment in the plant for
cold-loving bacteria,” says Caroline Smith DeWaal of the Center for
Science in the Public Interest. “Then their tests started coming
up positive, so they stopped testing. They knew they had a problem with
bacteria in the plant. But instead of solving it, they chose to ignore
This is crucial, because if the company knew that it had a Listeria monocytogenes
problem and ignored it, it could be hit with a felony conviction. And
felony convictions have all kinds of collateral consequences, including
possible loss of federal contracts — Sara Lee had a big hot dog contract
with the Department of Defense.
In an interview, U.S. Attorney Phillip Green said there was insufficient
evidence to bring a felony charge.
“There was simply no evidence that Sara Lee Bil Mar knew that the
food product that they were producing and shipping out was adulterated
with Listeria monocytogenes,” Green says.
When asked about the allegations raised by the Free Press that the company
was testing for cold-loving bacteria, Green told us, “the testing
that you are referring to is known as Low Temperature Pathogens testing
— that is a very general test that does not necessarily indicate
the presence of Listeria monocytogenes.”
“The USDA regulations don’t require a plant to conduct testing
on finished products for the presence of deadly pathogens such as Listeria
monocytogenes,” Green said. “And Bil Mar was following accepted
industry practices in conducting general testing for the low temperature
But Green refused to answer specific questions about evidence concerning
a possible felony violation.
Moll — the attorney representing the victims — says that the
evidence “does necessarily indicate the presence of Listeria monocytogenes.”
The CDC’s Mead found studies showing that, had Sara Lee done further
testing for the deadly strain of listeria, almost half of the cold-loving
bacteria could have tested positive for Listeria monocytogenes.
But U.S. Attorney Green never read Mead’s report. He never called
on Mead, perhaps the crucial expert in this case, to testify before the
In fact, it is apparent that federal prosecutors were overpowered by
Sara Lee’s outside lawyers in this case — the Chicago firm of
Jenner & Block, led by former Chicago U.S. Attorney Anton Valukas.
Valukas refused, on advice of his client, to comment.
But the extraordinary degree of the collaboration between Sara Lee and
the federal prosecutors in this case can be seen on Sara Lee’s web
site where it has posted a “joint press release.”
No, that’s not a typo. The U.S. Attorney and Sara Lee issued a joint
press release announcing the plea agreement in which no mention is made
of Ball Park Franks hot dogs.
The issuance of a joint press release is an extraordinary event. U.S.
Attorney Green can’t name another case where the prosecutor and convict
issued a joint press release announcing their plea agreement. Neither
can the current chief of the Criminal Division at the Department of Justice,
Michael Chertoff. He calls it “unusual.”
In a number of ways, the Sara Lee prosecution brings home the double
standards in the criminal justice system.
A company pleads guilty to a crime that leads to the death of 21 human
beings. The company pleads to two misdemeanors. The company is fined $200,000.
Think about that.
Dirty Money and Dirty Air
One of the dumber provisions in U.S. environmental law is the “grandfather
clause” in the Clean Air Act. This provision exempts power plants
built before 1970 from Clean Air Act standards. At the time of adoption,
it was viewed simply as a transition mechanism, with utilities arguing
that old, grandfathered plants would rapidly be replaced. That hasn’t
Instead, utilities like Southern Company — the largest in the United
States — continue to rely on grandfathered facilities, especially
dirty coal plants, to generate substantial portions of their electricity.
According to the U.S. Public Interest Research Group (PIRG), grandfathered
plants represent approximately 40 percent of Southern’s generating
By now, three decades after passage of the Clean Air Act, the grandfather
clause is a major loophole in the U.S. clean air rules. Its persistence
in the U.S. code is a prime example of the nexus between dirty money and
dirty air. And Southern is at the center of this morass.
Southern was the most polluting utility in the United States in 1999,
according to U.S. PIRG, emitting more sulfur dioxide, more nitrogen oxides
and more carbon dioxide than any other power company. Sulfur dioxide and
nitrogen oxides cause or exacerbate an array of respiratory ailments such
as asthma and are associated with tens of thousands of deaths in the United
States annually, and are the principle components of acid rain. Carbon
dioxide is the most significant greenhouse gas.
Southern is the largest utility polluter not just because it is the largest
company. It pollutes at higher rate than other utilities. For example,
according to U.S. PIRG, it emits sulfur dioxide at a rate nearly 50 percent
higher than the national average for utilities, and more than 400 percent
higher than it would with new facilities. The company itself reports that
it has the seventh highest sulfur dioxide emission rate in the country.
The company says it is doing everything it reasonably can to reduce emissions,
alleging it has spent $4 billion on environmental improvements in the
last decade. It says it is gradually shifting to natural gas and de-emphasizing
coal. It brags that it has reduced sulfur dioxide emissions by a third
and nitrogen oxides by more than 20 percent since 1990. (It admits major
increases in carbon dioxide emissions, and even an increase in its carbon
dioxide emission rate.) It says it is taking steps to reduce emissions
in the future. And it touts its support for various environmental initiatives,
notably sponsorship of the Nature Conservancy’s 2001 annual meeting,
marking the group’s fiftieth anniversary.
(What is the president of the Nature Conservancy doing praising Southern
Company’s “commitment to environmental stewardship”?)
It does not just happen that Southern can get away with polluting the
U.S. skies and the atmosphere so badly. It takes a lot of work, and money.
Southern dumps more money into the political process than any utility,
according to U.S. PIRG. In the first six months of the 2002 election cycle,
according to U.S. PIRG, Southern has outdistanced every energy company
in the United States, including the profligate political spenders in the
oil and gas industry. The company spends millions on lobbyists, and employs
nearly a dozen outside lobby firms. It runs a network of political action
committees to funnel money to candidates, and is a major donor to political
parties. Its campaign cash targets key members of energy and environment
committees, who work hard to deliver the goods.
Using the leverage gained from its political investments, Southern has
enmeshed itself in an array of legislative and administrative battles
over air pollution rules. When it has faced enforcement actions for clean
air violations, it has sought to change the clean air rules. When legislators
have sought to tighten pollution rules and to eliminate the gra
Author: Russell Mokhiber and Robert Weissman
News Service: Multinational Monitor
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