Corporate Terrorism in West, Texas

The Full Weight of Justice
by RUSSELL MOKHIBER


In his first statement in response to the Boston bombings, President Obama said that “Michelle and I send our deepest thoughts and prayers to the families of the victims in the wake of this senseless loss.”

In the his first statement in response to the explosion outside Waco, Texas, President Obama said that “our prayers go out to the people of West, Texas in the aftermath of last night’s deadly explosion at a fertilizer plant.”

In his statement on Boston, President Obama said that “any responsible individuals, any responsible groups will feel the full weight of justice.”

But when it came to the explosion in Texas, President Obama said nothing about responsible individuals, responsible groups or the full weight of justice.

Why not?

Because when it comes to street crime, President Obama is the top cop.

When it comes to apparent corporate crime and violence, he’s the enabler in chief.

Make no mistake, if it becomes clear that the Texas explosion was triggered by a terrorist attack, a la the Oklahoma City bombing, then Obama will begin talking about “the full weight of justice.”

But if the focus is corporate crime and violence, corporate recklessness, workplace safety, “full weight of justice” rhetoric won’t see the light of day.

After all, it was Obama’s Justice Department that in December 2011 settled the case of the April 2010 Massey Energy Upper Big Branch explosion, which killed 29 miners, with a “non prosecution agreement.”

Outrageously, the Justice Department said it would not criminally prosecute Massey even though the Labor Department concluded that Massey’s “unlawful policies and practices” were the “root cause of this tragedy.”

Massey had a track record of skirting the law and even kept two sets of books for at Upper Big Branch — one for internal use, which kept track of workplace hazards — and one for law enforcement, which did not.

David Uhlmann, the former head of the Department of Justice’s Environmental Crimes Section, and now a Professor at the University of Michigan Law School, says had he been in charge of the Massey Energy case, he would have criminally prosecuted Massey.

In his tenure at the Justice Department, he criminally prosecuted many major corporations for wrongdoing arguably less serious than one that results in the deaths of 29 workers.

And he says that the Massey non prosecution agreement is just part of a disturbing trend, one that has accelerated under the Obama administration, toward settling major corporate crime cases with deferred and non prosecution agreements.

Blackout on Corporate Crime Enforcement

Lawyers Behind Closed Doors

by RUSSELL MOKHIBER

 

Put top corporate crime law enforcement officials and defense attorneys behind closed doors for two days at a posh resort outside of Washington, D.C.

Call it the American Conference Institute’s National Conference on the Foreign Corrupt Practices Act (FCPA).

Charge $2,000 to $4,000 per person to attend.

And for 90 percent of the conference sessions, slam the door shut on the press.

Is that any way to discuss foreign bribery in a democracy?

Probably not.

But that’s what’s happening at the Gaylord National Resort just south of Washington, D.C. later this week.

Reporters will be allowed to cover the keynote address by Justice Department Criminal Division Chief Lanny Breuer and two other sessions.

But they will not be allowed to cover twenty other sessions, including ones where top FCPA law enforcement officials will be speaking.

So, for example, Tracy Price, the assistant director of the Securities and Exchange Commission’s (SEC) FCPA unit, will speak on Friday at a session titled “FCPA Internal Controls amid Increased SEC Expectations: What Your Books and Records Need to Accomplish.”

Reporters are not allowed to cover her talk.

Sean McKessy, the SEC’s top whistleblower official, will be speaking on Thursday at a session called “Creating a Home for the Whistleblower: How to Facilitate Open Communication and Appropriately Respond to Allegations in a Bounty Hunter Environment.”

Reporters are not allowed to cover his talk.

Nathaniel B. Edmonds, assistant chief at the Criminal Division’s Fraud Section will be speaking at a session called “Friend or Foe?: A Dissection of a Monitorship from Start to Finish.”
Reporters are not allowed to cover his talk.

James M. Koukios is another assistant chief at the Fraud Section.

He’ll be speaking at a session titled “Where Companies Go Wrong on FCPA Compliance: What Not To Do and Lessons Learned from the Most Costly Mistakes.”

Reporters are not allowed to cover his talk.

Jason Jones, another assistant chief of the Fraud Section, will be speaking at a session titled “10 Trip Wires to Avoid When Conducting an FCPA Internal Investigation.”

Reporters are not allowed to cover his talk.

The American Bar Association (ABA) has never prohibited press from covering their sessions – including last month when the ABA held it’s Foreign Corrupt Practices Act 2012 Conference at the Westin Hotel in Georgetown.

In fact, according to the ABA’s Earnestine Murphy, the ABA has an open meetings policy – which means that all conference sessions – with the exception of business meetings – are open to the media.

Mike Koehler, who runs the FCPA Professor blog and is an Assistant Professor of Law at Southern Illinois University, recently questioned the wisdom of putting law enforcement officials and corporate defense attorneys behind closed doors to discuss FCPA policy.

“Should public servants be allowed to speak at private conferences and events that charge thousands of dollars to attend?” Koehler asked. “Should public servants be used as pawns by corporate conference organizers to boost attendance and thus revenue? Should the enforcement agencies release all speeches, comments and remarks, including answers to questions posed by the audience? Do small to medium size enterprises have the resources to attend such events?”

The Tobacco Conspiracy

Whenever people say large scale conspiracies are impossible, I point to the tobacco industry:

Payoff in the Pit of the Plutocracy

Burning Every Bridge

by RUSSELL MOKHIBER

 

Jeff Connaughton was a lobbyist, a Senate aide and a White House lawyer. He says he came to Washington, D.C. as a Democrat and left as a Plutocrat.

Now he’s written a book – The Payoff: Why Wall Street Always Wins (Prospecta Press, August 20, 2012.)

This book is about corporate crime – although that phrase doesn’t appear anywhere in its 288 pages.

It is in fact one of the best books on how corporate criminals manipulate the system to get away with their crimes.

One way is to enforce silence among the elites who know how the system works.

“Party cohesion and the desire to make a munificent living in DC go a long way to enforce silence,” Connaughton writes.

But Connaughton is silent no more.

“I’m willing to burn every bridge,” he writes. “Now that I’ve mutinied and fled to a remote place, I want to set flame to the ship that would take me back there.”

Connaughton says there have been no Wall Street prosecutions because the Obama Justice Department failed “to take a timely, targeted, all-in approach to the problem.”

“The truth is, the Justice Department never made investigating these actions a high priority,” he writes. “It never formed strike forces of investigators and lawyers that had sufficient resources and backing to doggedly pursue the obvious potential wrongdoers as long as it took to bring a fraud case.”

Prosecutors never used provisions in the Sarbanes-Oxley Act, which put in place tough criminal sanctions in the wake of Enron and other cases of massive corporate frauds, to indict those executives responsible for misleading financial reports.

“If Obama had appointed aggressive trial lawyers – and (Vice President Joe) Biden knew plenty of them – to these Justice Department positions and backed their efforts, there’s a good chance they would’ve hunted the worst Wall Street fraudsters relentlessly.”

“If the explanation for the inadequate effort is corruption (the administration could not afford to anger Wall Street contributors), the revolving door, or a belief that the health of the financial industry is more important than legal accountability, then we have an actual double standard. I don’t know the explanation, but in terms of faith in our institutions, it may not matter whether the double standard is real or apparent. That double standard has torn the social and moral fabric of our country in a way I find to be unforgivable.”

Connaughton says that two sources were telling him that Christine Varney, the assistant attorney general for the Antitrust Division, “was complaining to friends that Rahm Emanuel, then White House chief of staff, had sent her a message – in effect, throttle back on antitrust enforcement, because the top priority is economic recovery.”

“I was concerned that Attorney General Holder had gotten the same message about investigating Wall Street crime,” he writes.

Connaughton quotes Secretary of the Treasury Timothy Geithner as saying – “The stuff that seemed appealing in terms of…Old Testament justice…penalize the venal, would have been dramatically damaging to the basic strategy of putting out the panic, getting growth back, making people feel more confident in the future.”

“Geithner’s statement would seem to indicate that he believes utilitarian outcomes justify overlooking potentially criminal behavior by banks,” Connaughton writes.

Connaughton worked as chief of staff for Senator Ted Kaufman (D-Delaware.) Kaufman was appointed as Biden’s replacement and dedicated his two years in office to demanding accountability for Wall Street’s crimes.

During one meeting with Justice Department Criminal Division Chief Lanny Breuer, Breuer said the department was dependent on the “pipeline” to bring forward cases against Wall Street banks and their executives.

“That’s when I lost my temper,” Connaughton writes. “‘Lanny, you need to go down into your pipeline and make sure the FBI and U.S. attorney’s offices are making this a top priority.

Organize and shake your pipeline hard and get it to bring you cases. Don’t just sit back and wait.’”

“I also couldn’t resist invoking our mutual history in the White House Counsel’s office and even exhorting him to emulate the tactics of our former antagonist,” he writes. “‘You need to be like Ken Starr. You need to target some of these guys like they were drug kingpins, just like Starr targeted Clinton, and squeeze every junior person around them until you can get one to flip and give evidence against the senior people.”

The scene at the Securities and Exchange Commission (SEC) was not much better.

SEC Enforcement Division Director Robert Khuzami, when asked about federal judges rebuking the SEC for paltry fines, said to Kaufman: “I’m not losing any sleep over them.”

And SEC chair Mary Schapiro wasn’t much more responsive.

“Near the end of the [October 2009] meeting [Kaufman] told [SEC Chairman Mary] Schapiro, ‘I don’t believe you’re going to do anything about high-frequency trading.’ Looking him straight in the eye, she replied, ‘You just watch.’”

“We watched for nearly three years,” Connaughton writes. “It wasn’t until July 2011 and June 2012 that the SEC approved minimalist rules that would force market participates to collect the data that would enable the SEC to begin – begin – the process of understanding HFT’s impact on markets. In effect, Ted and I and America are still watching and waiting for the SEC to take meaningful action.”

“If my tenure as Ted’s chief of staff taught me anything, it’s that the C in SEC doesn’t stand for the speed of light.”

Kaufman introduced legislation with Senator Sherrod Brown (D-Ohio) to break up the big banks.

But Brown-Kaufman could muster only 33 votes in the Senate.

“Senator Diane Feinstein – one of the most liberal members of the Senate – asked [Senator Dick] Durbin, the majority whip, ‘What’s this amendment?’ [referring to the Brown-Kaufman amendment to break up the mega-banks]. According to Durbin, he replied: ‘To break up the banks.’ Giving the thumbs-down sign, Feinstein said bemusedly: ‘This is still America, isn’t it?’
Connaughton and Senator Kaufman tried to get enforcement authorities to move aggressively against Wall Street criminality. They tried to break up the big banks. To no avail.
They were up against The Blob.

And The Blob won.

“The Blob – its really called that – refers to the government entities that regulate the finance industry – like the Banking Committee, Treasury Department, and SEC – and the army of Wall Street representatives and lobbyists that continuously surrounds and permeates them,” Connaughton writes. “The Blob moves together. Its members are in constant contact by e-mail and phone. They dine, drink, and take vacations together. Not surprisingly, they frequently intermarry. No lobbying restrictions yet promulgated can prevent pillow talk between Blob spouses.”

Connaughton holds out hope for reform – but not until there is another Wall Street crisis.
In the meantime, he says it’s time to “stop voting for the lesser of two evils” – and stand on principle.

He has burned his bridges.

And he wants you to burn yours, too.

Too Big to Jail

Brandon Garrett and Corporate Crime

by RUSSELL MOKHIBER

 

Brandon Garrett has pulled together a database of all the deferred and non prosecution agreements and plea agreements since 2001. And he’s sliced and diced them.

And now he’s writing a book for Harvard University Press about what he’s finding.

The working title?

Too Big to Jail: How Prosecutors Take On Corporations.

Garrett is a Professor at the University of Virginia Law School.

Garrett wonders, for example, why the Justice Department secures guilty pleas for environmental crimes while getting primarily deferred and non prosecution agreements in Foreign Corrupt Practices Act (FCPA) cases.

“There is nothing inherent in environmental crimes that requires guilty pleas and FCPA that requires deferred prosecution agreements, right?”

“No, if anything they are kind of similar,” Garrett said in an interview last week.

“For environmental cases – are customers going to stop buying the products of a company that makes plastics or steel because their factory was out of compliance with the Clean Water Act or the Clean Air Act? Customers may not know.”

“It may not hurt the company’s reputation so that it will be the death knell.”

“And we know that there have been companies convicted multiple times, seemingly without significant effect.”

“But the same might be true of foreign bribery. When Siemens was convicted for bribery around the globe, did that affect whether someone bought a Siemens coffee maker or not? Probably not. It might cause a government to have doubts when walking into negotiations for a major contract.”

“The difference in the way FCPA and environmental cases are handled just has to do with different divisions at Main Justice that are handling those cases and how they have developed their own practices over the years.”

And Garrett is troubled by the wording and details of the deferred and non prosecution agreements.

“The fines are sometimes not particularly impressive at all,” Garrett says. “There are many agreements with no fines.”

“And if the purpose of these agreements is to not necessarily impose the most severe penalty or fine to a corporation, but to instead trade off of that to insure compliance, to rehabilitate the company – I’m not convinced that rehabilitation is being taken seriously enough either.”

“The bargain reflected in these agreements may not be strong enough. Some of these agreements have pretty detailed terms about what compliance is supposed to look like going forward, but in plenty of them, it is quite vague.”

“Some of these agreements impose monitors, but even there, the duties of the monitors are left somewhat vague.”

“And we have no idea what the monitors are doing – or even who the monitors are in many cases.”

“So, it’s pretty hard to tell from the outside whether these agreements are performing or not.”
Do we get access to monitor reports?

“No one has ever seen monitor reports, except for a prologue that was released in one case, but that was really more of an extended press release,” he says.

“My understanding is that in most of the cases, the company retains the monitor. The agreement typically says that the monitor reports are to remain confidential, that they will be disclosed to prosecutors and maybe regulators, but to no one else.”

“And there may be portions of those reports dealing with employment matters and the like that shouldn’t be public.”

“But the public should know more about what the companies have done and what has happened.”

“When the deferred prosecution agreement is entered, there is a lot of detailed information describing the nature of the alleged crimes – what employers did, what employees did, maybe without naming them – describing the pattern of criminal behavior, what was the breakdown in corporate governance that permitted it to happen.”

“And then identifying, sometimes specifically, what needed to be done to repair the company.”
“And you would think that there could be a similar report at the end of the agreement – maybe not every monitor’s quarterly report – but some detailed accounting of – this is where things stand now – two or three years after the agreement was entered into.”

Garrett says corporate crime cases differ from street crime cases in fundamental ways.

“One of the many ways corporations are not like regular criminal defendants is that in regular criminal cases, prosecutors and police have access to some of the best information about what really happened,” Garrett said.“In violent crimes that I have been looking at, you worry about Brady violations, you wonder whether prosecutors and police are doing a good investigation and getting accurate evidence.”

“But it all gets flipped around in these corporate cases, where the corporation may have the best information about what really happened. They all have access to e-mails and documents, to any interviews their own lawyers did investigating it.”

“And the cases can be incredibly complicated with millions and millions of documents. They are incredibly difficult cases for prosecutors to bring. If you have conduct that occurred around the globe, can the FBI really take on the job of sorting through it all or trying to get a hold of millions of documents distributed around the globe?”

“Both the corporations and the executives can afford brilliant top lawyers.”

“In regular criminal cases, it is the defendant that may find out later – what evidence did the police gather? When the police are investigating the crime scene, there might not even be a defendant who has a lawyer. There might be a suspect later.”

“It is all reversed in corporate cases. In some ways, you have to applaud prosecutors for taking more of these on. And you can understand why they need to negotiate these agreements. Without the cooperation of the companies, they might not easily get access to those documents and records to find out what happened.”

“It’s not a surprise that in the hardest cases to bring, in these antitrust cases where there is a cartel, they need special tools like the leniency program to crack that nut and encourage defection, encourage corporation-on-corporation snitching.”

“What you see is that prosecutors are able to bring more and more of these cases in areas where they can leverage their admittedly sometimes thin resources to produce more self-reporting and cooperation.”

“How are they supposed to find out about ocean dumping at sea? The statute has whistleblower provisions to encourage shipmates to come forward, take pictures on their cell phones and get a share of the fine.”

“And prosecutors offer companies similar rewards. They can say – we can offer you significant leniency if you come forward, self-report and cooperate – give us the documents and help us prosecute individual employees that committed wrongs.”

“If we really are going to take these difficult cases more seriously, it’s going to be a question of resources.”

“You would think those resources should flow to the prosecutors working on these cases, since they are, after all, bringing in significant fines and money.”

“I would like to learn more about the degree to which some of that can be sent back to the people doing these cases – so they have the resources to get more agents working on future cases.”

A Remarkable Week for Corporate Crime

The 10 Ten Stories

by RUSSELL MOKHIBER

 

It’s been a remarkable week in corporate crime.

And it’s only Wednesday.

This week drives home the reality – corporate crime inflicts far more damage on society than all street crime combined.

Once again, it’s not the black kid with the hood on the street.

It’s the corporate executive with the lawyer in the suite.

So, without further ado, let’s go to the Top Ten Corporate Crime Stories of the Week.

Number Ten: Sunoco to Pay $2.2 Million to Resolve Double Dipping Charge. The Massachusetts Attorney General alleges that the oil company falsely sought reimbursement from a state reimbursement fund when it was also seeking reimbursement from its insurers.

Number Nine: Merck to Pay $322 Million Criminal Penalty. A federal judge in Boston ordered Merck to pay a $322 million criminal penalty for improperly marketing its Vioxx painkiller a decade ago.

Number Eight: Pharmacy Fraud Kills Three. Gary D. Osborn and his corporation, ApothéCure Inc., pled guilty in federal court in Dallas to criminal violations of the Food, Drug and Cosmetic Act (FDCA). The pleas are in connection with ApothéCure’s interstate shipment of two lots of misbranded colchicine injectable solution that led to the deaths of three people in the Pacific Northwest.

Number Seven: Walgreens to Pay $7.9 Million to Settle Whsitleblower Lawsuit. Walgreens, the largest drugstore chain in the nation, has paid the United States and participating governments $7.9 million to settle allegations that it paid kickbacks to illegally induce the transfer of prescriptions to its pharmacies.

Number Six: Minnesota AG Takes Down Medical Debt Collection Agency. The Minnesota AG said that Accretive – one of the nation’s largest medical debt collectors – overstepped its bounds by embedding debt collectors as employees in emergency rooms and demanding that patients pay before receiving treatment.

Number Five: Military Contractor Rips Off the Army. ATK Launch Systems will pay $36,967,160 to resolve allegations that ATK sold dangerous and defective illumination flares to the Army and the Air Force.

Number Four: Freeport-McMoRan Pays $6.8 Million to Settle Pollution Charge. Freeport-McMoRan Morenci will pay $6.8 million to settle allegations that it polluted areas around its Morenci copper mine in southeastern Arizona. Federal officials alleged that surface waters, terrestrial habitat and wildlife, and migratory birds have been injured, destroyed or lost as a result of releases sulfuric acid and metals at the site.

Number Three: Giant Construction Company Ripped Off NYC. Australian construction giant Lend Lease Construction LMB Inc. – formerly Bovis Lend Lease LMB Inc. – and James Abadie, the former executive in charge of Bovis’s New York office, were criminally charged in a major fraud scheme. The company will pay $50 million and get a deferred prosecution agreement. Federal officials alleged that Abadie explicitly and fraudulently directed his subordinates to carry out the practice of adding unworked hours to labor foremen’s time sheets, knowing that these unworked hours were billed to clients who were unaware that they were the victims of fraud. Affected projects included – the United States Post Office/Bankruptcy Court in Brooklyn, New York, the Bronx Criminal Courthouse in the Bronx, New York, Grand Central Terminal, the Deutsche Bank building deconstruction in New York, New York, Citifield in Queens, New York, and the very United States Courthouse in which Bovis was charged and Abadie pled guilty.

Number Two: First Criminal Prosecution in BP Case is an Individual, not a Corporation. Kurt Mix, a former engineer for BP plc, was arrested on charges of intentionally destroying evidence requested by federal criminal authorities investigating the April 20, 2010, Deepwater Horizon disaster. David Uhlmann, the former head of the Environmental Crimes Section at he Justice Department is puzzled why the government has yet to bring criminal charges against BP and the other companies involved. “The government has a slam dunk criminal case against BP, TransOcean and Halliburton for the negligence that caused the Gulf oil spill,” Uhlmann told Marketplace Radio yesterday “They should bring those criminal charges.”

Number one: Wal-Mart Bribery. The number one slot goes to Wal-Mart. In a shocker, New York Times reporter David Barstow penned a major investigative report on Wal-Mart bribery in Mexico. Paying $24 million in bribes to fuel Wal-Mart expansion in Mexico is a big deal. How Wal-Mart covered up the bribery in Mexico is a big deal. Wal-Mart had a state of the art anti-bribery compliance program. The New York Times story will likely put an end to the Chamber of Commerce’s drive to weaken the Foreign Corrupt Practices Act and drive public support for more corporate crime prosecutions.

One lesson after living through this week in corporate crime?

Support your local police. Urge a crack down on corporate crime.

The Regulation Killers

Making the People Pay
by RALPH NADER
The Republican Party has a sense of humor, however inadvertently. It’s ardent advocates regularly accuse the Obama Administration of heavy handed regulation of business.

Tell that to the hundred federal poultry inspectors who just picketed the Department of Agriculture in opposition to a proposal that would allow those crammed, bacterial poultry slaughterhouses to do their own inspections. The picketers fear that with this license, the poultry bosses will speed up the slaughter rate to 175 birds per minute from the present 70.

Tell that to the Securities Exchange Commission that will have to allow the return of the notorious boiler room practices where “start-ups” with up to $1 billion in annual revenues can sell stock to investors like the old Wild West days with little discourse or regulation. After the recent devastating Wall Street crash and bailout, here they go again—just throw the federal cop off the corporate crime beat.

Tell that to Donald Michaels, the superbly qualified head of the Occupational Safety and Health Administration who can’t get the White House to approve issuance of long-overdue life-saving safeguards for worker health and safety. Fear of Republicans by the Obamaites in an election year super-cedes their oath to enforce laws that save lives in hazardous workplaces. Nearly 60,000 workers lose their lives to workplace-related diseases and trauma every year. That is equivalent to nineteen 9/11 casualty tolls every year.

Tell that to a strapped Environmental Protection Agency that at long last was trying to reduce the toxic materials in your air and water. President Obama personally intervened on two of their forthcoming regulations to stop them.

Tell that to the Food and Drug Administration (FDA) that was the subject of a front page New York Times article on April 3, 2012 titled “White House and the F.D.A. Often at Odds.” It seems that President Obama’s deputy chief of staff, Nancy-Ann DeParle, has been leaning on FDA Commissioner, Dr. Margaret A. Hamburg to drop proposed rules requiring labeling of calories for foods served on airplanes and movie theaters, as well as regulation of sunscreen and asthma inhalers.

The Obamabush White House objected to what the Times said was “the enforcement of an agency decision on a drug to prevent premature births.”

The FDA believed that the Obama “hope and change” campaign in 2008 would start a new day from the years of George W. Bush who believed, for example, that the agency should not issue rules preventing contamination of eggs and other produce. Alas, said a top FDA official to the Times: “Employees here waited eight long years for deliverance that didn’t come.”

Mr. Obama, as with his other choices of White House staff, set himself up by choosing the “regulation czar,” Cass R. Sunstein who can give thumbs down on agency safety proposals. Professor Sunstein, who thinks harder than he feels the pain of victims of non-regulation (or law and order) has a philosophy known as “libertarian paternalism”. (Google it if you wish to discover its meaning.)

FDA scientists sadly recall Mr. Obama’s White House ceremony to sign a memorandum in 2009 to replace Mr. Bush’s politicization of science in government with scientific integrity and to listen to scientists “even when it’s inconvenient—especially when it is inconvenient.” Once again, words, words, words, succumb to the power of corporatism.

Obama’s regulatory agency officials receive constant pressure from Congressional corporatists on their meager enforcement budgets. They are made to behave as if they should fear the criminals and defrauders they are supposed to be catching to protect the American people.

All of them are envious of the new Consumer Financial Protection Bureau (CFPB) created by Congress to shield consumers of credit, mortgages, payday loans and other financial transactions from the Wall Street-driven crime wave. You see, the CFPB resides inside the Federal Reserve and receives its $500 billion budget from the Fed, which gets its budget from bank frees and is free of the Congressional hammers.

Still, the CFPB and its sterling staff (with few exceptions) is an agency waiting to start producing long-needed rules of decent business behavior. It is not clear what is causing the delay, but it couldn’t be Congress now. It may be the high hurdles that the Bureau has to overcome vertically with its supervisory council—real or fancied.

Occupy Washington needs to mass in front of these agency buildings soon to highlight the truth about Obama’s weak-kneed regulatory agencies. In a perverse way, the Obamaites would probably welcome such protests as enhancing their corporate fundraising efforts.

Meanwhile the people pay!

No Fault Corporate Crime

Holding Holder to Account
by RUSSELL MOKHIBER

Ten years ago, if you wanted to quickly find out what was going on in the world of corporate crime, you would just type in the word “fined” into a news database.

Up would come a series of penalties or fines brought against big corporations by federal law enforcement officials in Washington, D.C.

Exxon fined for pollution.

Or ADM fined for antitrust violations.

But over the past decade, corporate lobbyists have worked their will in Washington, and enforcement against corporations has been watered down to the point where now corporate crime enforcement is way down the list.

Last night I typed “fined” into Google News – and these were the top five stories that came up:

1. A french perfume executive was fined for making racist remarks.
2. Fifteen people were fined for spitting in India.
3. The NBA fined Los Angeles Clippers foward Reggie Evans $25,000 for making an obscene gesture.
4. Only twenty five dog owners in northeast Scotland have were fined in the last year for dog fouling.
5. And the Houston Dynamo soccer midfielder Colin Clark was fined for using a gay slur at a ball boy.

Story number six did have to do with corporate crime – but it was from Europe.

Last week, the EU fined 14 air-shipping companies a combined $225 million for price fixing.

Now, try typing in the phrase “corporate crime” into Google News.

The phrase has been pretty much banished from American journalism and politics.

So, when you type in the words “corporate crime” into Google News, you will primarily see reports from overseas say the Irish Times or a newspaper in Australia – or you will see a quote from Ralph Nader, or a story from Corporate Crime Reporter.

Last night, I typed in the words “corporate crime” into Google News, and much to my surprise the first thing that came up was a Reuters story about the U.S. Attorney General Eric Holder.

I have been reporting on Holder since he took office three years ago.

As far as I can tell, last month was the first time in his three years as Attorney General that he uttered the phrase “corporate crime.”

And this is what he said at a meeting of state Attorney Generals in Washington.

“We’re gonna make some news with regard to holding individuals responsible for things we tend to think of as corporate crimes,” Holder said.

Get it?

We’re going to hold individuals responsible.

Not hold corporations responsible.

Hold individuals responsible for things we tend to think of as corporate crimes.

Now, what Holder said here is important.

Because he comes from a corporate law firm – Covington & Burling – where he represented primarily corporations, not individuals.

And when he leaves office, Holder most likely will return to Covington & Burling.

Where he will represent primarily corporations – not individuals – against federal law enforcement officials, in their increasingly weakened state.

Every week in Corporate Crime Reporter, we run a question/answer format interview with someone who has something to say about corporate crime.

When we started Corporate Crime Reporter 25 years ago this month, our first ever interview – the first of now over 1,200 interviews – was with Rudy Giuliani – who at the time was the U.S. Attorney in Manhattan.

At the time, Giuliani believed that if you were to bring a case against a major American corporation, you secured a guilty plea, or took the case to trial.

Or you just didn’t bring the case.

And Giuliani’s view was the view of federal law enforcement back then.

Bring a criminal charge if you have a criminal case. And secure a guilty plea. Or don’t bring the case.

As a result, major American corporations were convicted of crimes on a regular basis.

Because they engaged in crimes on a regular basis.

And the message was sent – you commit a crime, you will be convicted and publically shamed.

Today, major American corporations are still committing crimes on a regular basis.

But the difference is today major American corporations are rarely convicted of their crimes.

It’s not that they no longer engage in corporate criminal behavior.

It’s that they have set up a system where they no longer have to plead guilty to their crimes.

Instead, they settle these major corporate crime cases with deferred and non prosecution agreements.

These are the criminal equivalents of the neither admit nor deny consent decrees used for decades by the Securities and Exchange Commission and that recently have come under fire by federal judge Jed Rakoff in New York.

And so, if you are a criminal defense attorney at Holder’s former firm of Covingon & Burling, this is how you practice corporate crime law:

1. Your client comes to you with evidence of criminal wrongdoing by the corporation.
2. You approach the Justice Department and disclose it.
3. The Justice Department offers you a deal.
4. The Justice Department says to you – if you cooperate in the criminal investigation against the individuals involved at the company, we will let you off the hook with a deferred or non prosecution agreement.
5. There will be no criminal conviction against your corporate client.
6. But you must cooperate against the individuals involved.
7. And those individuals will likely be convicted and go to jail.

Thus, Holder’s statement – “We’re gonna make some news with regard to holding individuals responsible for things we tend to think of as corporate crimes.”

Last month, we interviewed David Uhlmann.

Uhlmann is the former head of the Environmental Crimes Section at the Justice Department.

And he’s currently a Professor of Law at the University of Michigan Law School.

When Uhlmann was head of the Environmental Crimes Section, he didn’t use deferred and non prosecution agreements in corporate crime cases.

Uhlmann says that deferred and non prosecution agreements have no place in major corporate crime cases.

These agreements were originally meant for minor street cases, not major corporate crime cases.

When the Department entered into a non-prosecution agreement last year to resolve criminal investigation into the Upper Big Branch mine disaster, Uhlmann wrote a scathing opinion article in the New York Times titled For 29 Dead Miners, No Justice.

“Twenty-nine miners died in West Virginia. They died because Massey had a history of mine safety violations,” Uhlmann told us.

“They died at a facility where the company kept a double set of books – one for internal purposes, which documented violations, and one for mine safety officials that covered up those violations.”

“To enter a non-prosecution agreement in a case where 29 people died and there is so much evidence of criminal wrongdoing reflects poorly on the Justice Department.”

Uhlmann says that the Environmental Crimes Section to this day does not settle corporate crime cases with deferred and non prosecution agreements.

Maybe that’s why Holder and his aides stripped the Environmental Crimes Section of authority over the criminal investigation into the Gulf oil spill cases and gave it to the Criminal Division.

Uhlmann believes that it will be a travesty of justice if the Department doesn’t secure guilty pleas in the Gulf oil spill cases.

But they didn’t in the Massey Energy case.

And the odds are not good that they will in the BP oil spill cases.

Not that crimes weren’t committed in the Gulf oil spill cases. They clearly were. But after all, Holder is from Covington & Burling. And he’s going back to Covington & Burling. And his top deputies came from corporate law firms and they are going back to corporate law firms.

Obviously, this practice of no fault corporate crime has taken hold at the top and been filtered right down through the entire federal enforcement system.

Last month, I caught this headline from a Canadian newspaper:

“Wal-Mart Pleads Guilty in Teen’s Death.”

The story began:

“Walmart Canada pled guilty Tuesday in the case of a teenager who was electrocuted on the job last year."

When I saw that, I went to our federal OSHA web site and searched for a similar case. And I found one also from last month where a Verizon worker was electrocuted on the job. OSHA proposed a civil fine of $140,700.

The point is that a criminal conviction sends a message that a civil fine or a deferred and non prosecution can’t.

A criminal conviction says to the corporation – what you have done is serious and we are bringing out our most serious weapon to bear – a criminal conviction.

Corporations get it.

What big corporations fear most is the reputational hit of that headline –“Wal-Mart Pleads Guilty in Teen’s Death." Corporations will do – and have done – everything in their power to avoid that headline.

So, our criminal justice system is out of whack.We must get back to the days of when you brought a case, you secured a guilty plea or you went to trial. Like Professor Uhlmann says, deferred and non prosecution agreements have no place in corporate crime practice.

And now the question becomes – how to bring back some balance to our corporate criminal justice system?

There is a clear power imbalance in Washington with the corporate law firms holding the upper hand. Young law students would much rather go for the fancy offices and big salaries of a corporate law firm than a Justice Department cubicle.

When I was a teenager, I had an uncle who would warn me about U.S. colleges being high priced tool factories for the corporations. The choice of which college or law school to go to was not nearly as important as the choice of what you did with your education.

Education for what? – was the question we were asked. And it was made clear to us that a decision to work for a corporate law firm or not was a moral choice.

And that’s what is missing. A moral code and a shaming mechanism to enforce it.

We were told, in effect, – shame on you if you decide to slave away working to undermine the criminal justice system on behalf of Wal-Mart and BP or Massey Energy.

Sure, every corporation deserves legal representation. But it doesn’t have to be you.

We must also shame our public officials into securing convictions when convictions are warranted. To insist on corporate criminal prosecutions in worker death cases where warranted. To do away with deferred and non prosecution agreements in corporate crime cases. To demand action where action is due.

It’s shameful that more than three years since the financial crisis crippled the American economy there has not been a single prosecution of a Wall Street firm even though fraud and financial misrepresentations played a significant role in the meltdown.

Even Sixty Minutes pointed this out in December of last year.

But still, nothing.

And before he goes back to Covington & Burling, Eric Holder has to be held to account.

It is shameful that Holder cares more about individual wrongdoing than he does about corporate wrongdoing.

Most importantly, we need to support our local corporate crime police, to bolster their enforcement budgets, to begin to level the playing field between corporate criminals and the police.

Corporate Crime in the Pharmaceutical Industry

The Scandal of Reincarnated Rats
by RUSSELL MOKHIBER

John Braithwaite is back.

The famed Australian corporate criminologist is teaming up with a former European pharmaceutical executive – Graham Dukes – and together they are completing a new book on corporate crime in the pharmaceutical industry.

The working title – Corporations, Crime and Medicines.

It’s due out early next year.

Thirty years ago, Braithwaite finished his magnum opus – Corporate Crime in the Pharmaceutical Industry (Routledge Kegan & Paul).

The book documented widespread fraud and corruption worldwide.

“In the latter part of the 1980s, I thought that the pharmaceutical industry was actually improving in its standards,” Braithwaite told Corporate Crime Reporter in an interview. “Ciba Geigy was one company that had come under particularly aggressive attack from the consumer movement. And Ciba Geigy was responding and setting up corporate social responsibility policies with a new risk management initiative that it was trying to get other companies to join up with.”

“Pfizer became the number one company in the industry. It was sending senior executives to Australia to talk to me. They were really interested in what kind of internal procedures they could be putting in place to make sure that folks like Graham and I would not be making the kinds of critiques that were in Corporate Crime in the Pharmaceutical Industry.”

“I was encouraged by that. I think actually I wasn’t conned. In the course of the 1980s, there was progress.”

“I actually finished the research for Corporate Crime in the Pharmaceutical Industry in 1980. But the book was held up for concerns about libel.”

“But 30 years on, the situation has in fact become worse in most respects. Perhaps there has been some improvement in terms of safety and manufacturing processes among the majors. But on the other hand, the largest pharmaceutical corporations in the world have done a major disservice in the way they have approached the generic industry and, in a sense, stigmatized the generic industry.”

“In Corporate Crime in the Pharmaceutical Industry, we concluded that 19 of the 20 largest U.S. pharmaceutical companies had engaged in serious corrupt activities in the course of the 1970s. And there was really no other industry in the United States that had such a consistent pattern. There were other industries – like the defense industry – that were doing terribly corrupt things. But in terms of top to bottom corruption, the pharmaceutical industry was the worst in the United States.”

“And in some ways, we are inclined to conclude that today it is even worse.”

In the area of research fraud, things are again worse 30 years later.

“A big part of the 1984 book was fraud in safety and testing of drugs,” Braithwaite said. “Remember the GD Searle company, of which Donald Rumsfeld was a CEO? They had the scandal of reincarnated rats. The rats would die when a drug was tested on them. And they would be replaced with living rats. That kind of blatant fraud is not dead in the pharmaceutical industry. There is a lot more sophisticated fraud in the form of suppression of negative safety and efficacy studies. And the boosting of positive studies.”

“But still, there is quite a lot of plain old fashion losing of negative data. And that is the same as the throwing away of the dead rat and replacing the dead rat with the reincarnated rat.”

“You generate data that a drug does not work. And you just suppress that data. It’s as if the study were never conducted and you start again and do another study until you get one that shows you what you want to find. Go to another university professor who will tell you what you want to hear.”

“That situation is, if anything. worse rather than better.”

On the Wall Street meltdown, Braithwaite says the situation could have easily been prevented.

“There was a lot of evidence that there was systemic mortgage fraud – liar loans, false representation of income and employment status of people on loans,” Braithwaite said. “And that had to do with a shift of the nature of capitalism. Banks issuing loans were no longer as interested as they should have been in assessing the capacity of the borrower to repay. Why? Because it was a move from a risk management financial sector to a risk shifting financial sector. You just slice and dice the loans and spread the risk around to a lot of other banks.”

“But it seems to me that there was a ready regulatory response to that. It was knowable that there was a problem. You had the FBI reporting as early as 2004 and 2005 that there was an epidemic of mortgage fraud in the United States. You had this huge trend up in housing loan defaults starting in the mid 2000s. These were very clear red flags.”

“The simple regulatory strategy was for prudential regulators to go to mortgage brokers and banks and say – look, your portfolio of loans has twice the default rate of the average in our state. We want to sit down with you and look into why that is. And if that very simple regulatory inspection measure had been taken, it would have quickly become apparent that there was a pattern of fraud in the loans that they were issuing. And that would have been the early preventive step.”

“And you wouldn’t have necessarily had to prosecute those banks. You would have wanted to go around the country and stop the problem. That would be the most important thing. You would prosecute the ones with the worst patterns of conduct. But the more important thing would be return to integrity in the way loans are issued. Banks return to being interested in ensuring that these were levels of repayment that could be made.”

Top 100 Corporate Crime Stories of 2011

Saturday, December 17, 2011 by Corporate Crime Reporter

by Russell Mokhiber

 

Here’s the other difference between the one percent and the rest of us –

The crimes of the one percent inflict far more damage on society than those of the 99 percent.

And they tend to get away with their crimes.

While we tend to get nailed.

The big multinational corporations, which are the primary delivery systems of wealth to the 1 percent, have rigged the justice system so that when they get in trouble with the law, they either aren’t prosecuted for their crimes, of if they are, they get special treatment – non prosecution or deferred prosecution agreements.

If they end up in the civil courts, they also get special deals – like neither admit nor deny consent decrees.

True, they pay fines, often in the tens or hundreds of millions of dollars, but this is pocket change to them – the equivalent of a parking ticket for serious wrongdoing.

They marinate the halls of power with campaign cash, flood them with lobbyists, and lubricate the revolving door – all to undermine our system of justice.

Out of the more than 500 stories we’ve written for Corporate Crime Reporter this year, here are the Top 100 – selected by our crack editorial team.

Just scan the the headlines, and you’ll get a sense of the enormity of the corporate crime wave.

And remember – Corporate Crime Reporter is only a weekly newsletter. We publish 48 times a year.

We’re considering making it a daily – just to keep up.

Top 100 Corporate Crime Stories of 2011

100. SEC Delivers First Non Pros Baby
99. Simon Johnson: Break Up the Big Banks
98. Grassley Asks: Why are Health Care Fraud Cases Stagnating?
97. Guidant to Pay $296 Million for FDA Crimes
96. Former Chase Bank Official Convicted of Taking Bribes
95. Oregon Sues Johnson & Johnson for Phatom Recall of Motrin
94. Grain Elevator Deaths Due to Lax OSHA Enforcement
93. Insider Trading Defendants Avoid Jail in 44 Percent of Cases
92. Lockheed to Pay $2 Million to Resolve False Claims Charge
91. Grossman Drafts Legislation to Criminalize the Corporate Form
90. Pentagon Spent Billions on Companies that Committed Fraud
89. Legal Challenge to Blanket Immunity in BAE Settlement
88. Maxwell Gets FCPA Prosecution Deferred, Pays $8 Million Criminal Fine
87. Nader Calls Jeep Grand Cherokee Modern Day Pinto for Soccer Moms
86. Oracle to Pay $46 Million To Settle False Claims Charge
85. Coalition: Negligent Doctors and Big Pharma Should Not Be Shielded
84. Chevron Found Guilty in Ecuador, Fined $9 Billion
83. Tyson Foods Gets Prosecution Deferred, Pays $4 Million FCPA Fine
82. Rolling Stone: Why Isn’t Wall Street in Jail?
81. Criminal Investigation Against Mozilo Closed
80. Horizon Lines to Plead Guilty, Pay $45 Million Criminal Fine
79. Walmart State and Local Tax Avoidance Exceeds $400 Million Annually
78. Wheelchair Fraud Results in $6 Million Fine
77. Feds Intervene in False Claims Case against KBR
76. Jack Abramoff, Whipping Boy
75. HHS Fines Cignet Health $4.3 Million
74. Arch Coal to Pay $4 Million
73. Forest Pharma Hit with $145 in Criminal Penalties
72. Goldman Sachs Board Member Charged with Insider Trading
71. CSPI Urges Feds to Ban Caramel Color from Sodas
70. Avaya and CIT Group Pay over $16.5 Million To Settle False Claims Case
69. Two NY York Lawmakers, Albany Lobbyist, Hospital CEOs Busted in Corruption Probe
68. USA Today: Fines Not Being Collected
67. The Dark Side of the Cruise Ship Industry and the Silence of The Nation Magazine
66. Audit Firms: Too Few to Fail?
65. Astrazeneca to Pay $68.5 to Settle Anti-Psychotic Drug Case
64. Japan Nuclear Reactor Design Caused GE Scientist to Quit in Protest
63. Chamber Hires Mukasey to Weaken FCPA
62. Consol to Pay $5.5 Pollution Fine
61. French Judge Charges Airbus with Manslaughter
60. Heart Association Endorses Stomach Surgery after $100K Gift from Lap-Band Maker
59. IBM to Pay $10 Million to Settle FCPA Action
58. Samsung SDI to Pay $32 Million Criminal Fine
57. PG&E to Pay $6 Million Criminal Fine
56. Occidental Oil to Pay $2 Million in False Claims Case
55. HHS Launches Health Care Fraud Fugitive List
54. How Milton Friedman and Chicago Economics Undermined America
53. Rakoff Rips Neither Admit Nor Deny SEC Settlements
52. Insider Trading Scandal Hits Congress
51. Antitrust Institute: T Mobile/AT&T Merger Anti-Competitive
50. Cell Phones, Brain Cancer and Devra Davis
49. JGC Gets FCPA Prosecution Deferred, Will Pay $218.8 Million Criminal Penalty
48. Verizon Pays $93.5 Million To Resolve False Claim Charge
47. Comverse Technology Gets Non Prosecution FCPA Agreement
46. Johnson & Johnson Gets FCPA Prosecution Deferred, to Pay $21.4 Million Criminal Penalty
45. Spitzer Calls on Holder to Prosecute Goldman Sachs or Resign
44. Stokes Sours on Obama’s Antitrust Effort
43. Honeywell Pleads Guilty, to Pay $11.8 Million
42. NPR, Electric Trolleys and Corporate Crime
41. Warren: Banks Want to Knife Consumer Bureau in the Ribs
40. DynCorp to Pay $8.7 Million to Settle False Claims Charge
39. Serono Pays $44 Million to Settle False Claims Charge
38. UBS Gets Non Pros Agreement, to Pay $160 Million
37. 29 Coal Miners Dead and Alpha Gets Non Prosecution Agreement
36. FedEx to Pay $8 Million to Settle False Claims Probe
35. Andy Cochran and the Coming War Between Constitutionalists and Corporatists
34. Quest Diagnostics in $241 Settlement
33. Wall Street Analyst: Goldman Too Big to Prosecute
32. Fresenius Ordered To Pay $82.6 Million
31. Friedrichs Baffled by NYT’s Claim That Major Crimes are in Decline (Answer: NYT Didn’t Look at Corporate Crime)
30. Novo Nordisk to Pay $25 Million to Settle False Claims Charge
29. Still No Criminal Charge in 2007 Utah Mine Disaster
28. Whistleblowers Call on Public Interest Groups to Rescind Obama Transparency Award
29. Fluor Corporation to Pay $4 Million to Settle False Claims Charge
28. Anadarko, Kerr-McGee To Pay $17 Million to Settle False Claims Charge
27. JP Morgan to Pay $153.6 Million To Settle SEC Probe
26. 60 Minutes: Why No Wall Street Prosecutions?
25. Boeing Overcharged Army Millions for Spare Helicopter Parts
24. MHSA: Massey Kept Two Sets of Books
23. State AGs Settle with Glaxo for $40 Million
22. Antitrust Activists Feel Sucker Punched as Varney Leaves to Cravath
21. JP Morgan Chase to Pay $92 Million in Bid Rigging Case
20. Armor Holdings Gets Non Pros FCPA Agreement, to Pay $10 Million Criminal Penalty
19. Kentucky Nursing Home Accused in Deaths of Five Residents
18. Richard Grossman 1943-2011
17. Dickie Scruggs, Huey Long and the Politics of Crime in Mississippi
16. SEC Charges Liquor Giant Diego with FCPA Violations
15. Pew Report Hits Water Pollution from Chicken Plants
14. Wachovia Gets Non Pros Agreement, to Pay $148 Million
13. Taibbi: Is the SEC Covering Up Wall Street Crimes?
12. Jane Barrett on the Need for a Federal Workplace Homicide Statute
11. Gary Aguirre Says Shut Down the SEC, Start Over
10. Chevron to Pay $24 Million to Settle SEC Lawsuit
9. Maxim Healthcare Gets Prosecution Deferred, to Pay $150 Million
8. Accenture to Pay $68 Million to Settle False Claims Charge
7. Amoco to Pay $20 Million to Settle False Claims Charge
6. Oracle to Pay $199 Million to Resolve False Claims Charge
5. Activists Draft Law to Criminalize Fracking
4. Judge Rakoff Throws Out SEC/Citigroup Settlement
3. Pfizer to Pay $14 Million to Settle False Claims Charge
2. UMW Says UBB Mine Disaster Was Industrial Homicide
1. Glaxo to Pay $3 Billion to Settle False Claims Charge

TEPCO: Fukushima Radiation Isn’t Our Problem

Adding Insult to Injury

by JOHN LaFORGE

 

In the amoral milieu of the corporate bottom line, you can’t blame Tokyo Electric Power Co. for trying.

Tepco owns the 6-reactor Fukushima complex that was wrecked by Japan’s March 11 earthquake and smashed by the resulting tsunami. It faces more than $350 billion in compensation and clean-up costs, as well as likely prosecution for withholding crucial information that may have prevented some radiation exposures and for operating the giant station after being warned about the inadequacy of its protections against disasters.

So when the company was hauled into Tokyo District Court Oct. 31 by the Sunfield Golf Club, which was demanding decontamination of the golf course, Tepco lawyers tried something novel. They claimed the company isn’t liable because it no longer “owned” the radioactive poisons that were spewed from its destroyed reactors.

“Radioactive materials that scattered and fell from the Fukushima No. 1 nuclear plant belong to individual landowners there, not Tepco,” the company said. This stunned the Court, the plaintiffs and the press. An attorney for the golf club said, “We are flabbergasted….”

The court rejected Tepco’s notion that its cancer-causing pollution is owned by the areas it contaminated. But you have to hand it to Tepco. For brash balderdash there’s hardly a match in the world.

Even Union Carbide, whose toxic gas in Bhopal, India killed 15,000 people in 1984, hasn’t tried that one. Dow Chemical, which bought Union Carbide in 2001, is still fighting India’s demand for $1.7 billion in compensation. Perhaps Dow could try Tepco’s dodge: “The gas belongs to the breather now, since possession is nine-tenths of the law.”

Meanwhile, babies in Japan may be in for a life of debilitation and disease because radioactive cesium-137 and cesium-134 was recently found in infant milk powder. A December 6 announcement by the Meiji Holdings Company, Inc. said it was recalling 400,000 cans of its “Meiji Step,” powdered milk for babies older than 9 months. The powder was packaged in April — at the height of Fukushima’s largest radiation releases — distributed mostly in May and has an October 2012 expiration date.

The amount of cesium in one serving of the milk powder was about eight percent of the total contamination allowed by the government. But no one knows how much formula individual babies may have consumed prior to the recall. It is well known that fetuses, infants, children and women are harmed by doses of radiation below officially allowed exposures. Most exposure standards have been established in view of radiation’s projected effect on “Reference Man,” a hypothetical 20 to 30 year old white male, rather than women and children, the most vulnerable.

Even tiny amounts of internal radioactive contamination can damage DNA, cause cancer and weaken the immune system. Fukushima’s meltdowns dispersed radioactive contamination found in vegetables, milk, seafood, water, grain, animal feed and beef. Green tea grown 250 miles from Fukushima was found contaminated. Rice harvested this fall from 154 farms in Fukushima Prefecture was found in November to be poisoned with cesium 25 percent above the allowable limit. Shipments of rice from those farms were banned, but not before many tons had been sold. Presumably, that radiation is now the property of each consumer under the inventive assertion of Tepco’s corporate attorneys.

Weeding Out Corporate Psychopaths

Thursday, November 24, 2011 by the Toronto Star

by Mitchell Anderson

 

Given the state of the global economy, it might not surprise you to learn that psychopaths may be controlling the world. Not violent criminals, but corporate psychopaths who nonetheless have a genetically inherited biochemical condition that prevents them from feeling normal human empathy.

Scientific research is revealing that 21st century financial institutions with a high rate of turnover and expanding global power have become highly attractive to psychopathic individuals to enrich themselves at the expense of others, and the companies they work for.

A peer-reviewed theoretical paper titled The Corporate Psychopaths Theory of the Global Financial Crisis details how highly placed psychopaths in the banking sector may have nearly brought down the world economy through their own inherent inability to care about the consequences of their actions.

The author of this paper, Clive Boddy, previously of Nottingham Trent University, believes this theory would go a long way to explain how senior managers acted in ways that were disastrous for the institutions they worked for, the investors they represented and the global economy at large.

If true, this also means the astronomically expensive public bailouts will not solve the problem since many of the morally impaired individuals who caused this mess likely remain in positions of power. Worse, they are the same people advising governments on how to resolve this crisis.

To tackle this problem, we must instead examine this rare and curious condition, and why recent corporate history may have elevated precisely the wrong type of people to positions of great power and public trust.

Unfeeling, but not insane

Psychopathy should not be confused with insanity. It is best described by Robert Hare, global expert and psychologist, as “emotional deafness” — a biochemical inability to experience normal feelings of empathy for others.

This shark-like fixation on self-interest means that psychopaths often feel a clear detachment from other people, viewing them more as sheep to be preyed upon than fellow humans to relate to. For instance, psychopaths in prison often use group therapy sessions not as a healing process, but as an opportunity to learn how to simulate normal human emotions.

Studies on twins have revealed that psychopathy shows a strong genetic signature and there remains no effective treatment. Recent research has linked the condition to physical abnormalities in the amygdala region of the brain.

Only a small subset of psychopaths become the violent criminals so often fictionalized in film. Most simply seek to blend in and conceal their difference in order to more effectively manipulate others. This frightening condition has existed throughout human history, though likely in a marginal and socially parasitic way.

While psychopaths are often portrayed by Hollywood as brilliantly clever, a hypothetical race of Hannibal Lecters would likely perish since they lack the ability to trust each other. Put another way, the human race — a relatively weak, slow, hairless tropical primate — has succeeded so spectacularly in every ecosystem on the planet not because we are so bad, but because we are so good.

Most dangerous 1%

The human ability to build social capital means that people can cooperate and trust each other. We can reliably predict the behavior of others even if we have never met them. Social capital is the glue that holds together our communities, complex societies, large institutions and the economy. The one and only superpower possessed by psychopaths is their ruthless ability to spend the social capital created by others.

Scientists believe about 1% of the general population is psychopathic, meaning there are more than three million moral monsters among normal United States citizens. There is emerging evidence that this frequency increases within the upper management of modern corporations. This is not surprising since personal ruthlessness and fixation on personal power have become seen as strong assets to large publicly traded corporations (which some authors believe have also become psychopathic).

However, appearance and performance are two different things. While psychopaths are often outwardly charming and excellent self-promoters, they are also typically terrible managers, bullying co-workers and creating chaos to conceal their behavior.

When employed in senior levels, their pathology also means they are biochemically incapable of something they are legally required to do: act in good faith on behalf of other people. The banking and corporate sector is built on the ancient principle of fiduciary duty — a legal obligation to act in the best interest of those whose money or property you are entrusted with. Asking a psychopath to do that is like recruiting a pyromaniac to be a firefighter.

The folly of mixing psychopathy and senior corporate management has been borne out by recent history. At the end of the last decade, numerous banking institutions representing hundreds of years of corporate financial stability ceased to exist within a few short months due to the reckless acts of a few individuals — none of whom has ever been charged with a crime.

And therein lies the rub. As ruthless as psychopaths are, their pathology dictates that they will ultimately act to the detriment of the organizations and investors they are paid so well to represent.

Fertile for psychopaths: New corporate culture

If this theory is correct, how did this become such a crisis in recent decades? Boddy suggests that corporations have changed from relatively stable institutions where psychopaths would have a difficult time concealing themselves, to highly fluid organizations where it is much easier for them to disappear within the chaos in their wake. Boddy writes:

“(The) whole corporate and employment environment changed from one that would hold the Corporate Psychopath in check to one where they could flourish and advance relatively unopposed. As evidence of this, senior level remuneration and reward started to increase more and more rapidly and beyond all proportion to shop floor incomes and a culture of greed unfettered by conscience developed. Corporate Psychopaths are ideally situated to prey on such an environment and corporate fraud, financial misrepresentation, greed and misbehavior went through the roof, bringing down huge companies and culminating in the Global Financial Crisis that we are now in.”

Boddy is not hopeful that the current round of expensive public bailouts will solve the problem. If psychopaths have in fact installed themselves in the upper reaches of the world’s financial institutions, their genetic deficiency dictates that their greed knows no bounds. They will continue to act in anti-social, remorseless ways, amplified by their enormous corporate influence until the institutions they represent and perhaps the entire global economy collapses. Obviously, more academic research in this area is urgently needed.
Boddy concludes his recent paper with this grim prediction:

“Writing in 2005, this author . . . predicted that the rise of Corporate Psychopaths was a recipe for corporate and societal disaster. This disaster has now happened and is still happening. Across the western world, the symptoms of the financial crisis are now being treated. However, this treatment of the symptoms will have little effect because the root cause is not being addressed. The very same Corporate Psychopaths, who probably caused the crisis by their self-seeking greed and avarice, are now advising governments on how to get out of the crisis. That this involves paying themselves vast bonuses in the midst of financial hardship for many millions of others is symptomatic of the problem. Further, if (this theory is correct) then we are now far from the end of the crisis. Indeed, it is only the end of the beginning. Perhaps more than ever before, the world needs corporate leaders with a conscience . . . Measures exist to identify Corporate Psychopaths. Perhaps it is time to use them.”

Time has come for testing

Boddy’s last statement contains a kernel of hope. If our world has become chaotic due to institutionalized psychopathy, imagine how much better it could be if such dangerously impaired individuals were excluded from positions of power and influence.

Precedence exists for dealing with such situations. Randomized workplace drug testing became the norm in the 1980s. At the time, civil libertarians strongly objected on the basis that it violated personal privacy protections. However, the U.S. Supreme Court decided in 1989 that such testing was constitutional and now about 25 per cent of Fortune 500 companies routinely require their employees to submit to such tests.

Perhaps investors at major financial institutions should require that senior level managers submit to established tests to ensure they are not psychopathic. This is not an issue of civil liberties since the precedent has already been well established regarding drug impairment in the workplace. Likewise, it is not a regulatory issue since private shareholders have every right to demand that executives demonstrate they are not biochemically impaired and therefore unable to carry out their fiduciary duties on behalf of investors. If corporate boards are hiring psychopaths as executive management, they are not carrying out their due diligence and could be held legally liable for their oversight.

Companies should also consider providing employees with specific whistleblower provisions to expose potential psychopaths in the workplace. A 2010 study by Boddy showed that corporate psychopaths caused more than one quarter of all workplace bullying, though they accounted for only one per cent of the workforce.

Besides being traumatic and humiliating to other workers, this bullying is also very expensive. Boddy calculated that bullying by corporate psychopaths cost companies in the U.K. more than £3.5 billion per year in lost productivity and attrition. Extrapolating these results to the United States, these deviant individuals are responsible for more than $35 billion in direct annual losses to U.S. businesses.

Politicians, too?

And what about elected officials? There is no higher standard of trust in our society than standing for public office. Campaigning politicians are expected to submit to almost absurd levels of scrutiny about their private lives, character and personal relationships. Should not candidates begin providing voters proof that they are medically capable of acting in the interests of the public that may elect them?

The Occupy Wall Street protesters demanding an end to the reign of the “1%” may have unwittingly stumbled on the crux of the issue. Science tells us that 99% of humans have normal emotional function. One per cent are psychopaths. We ignore that truth at our peril.

Five Candidates for the Corporate Death Penalty

Thursday, October 20, 2011 by Single Payer Action

by Russell Mokhiber

 

One of the most famous signs to come out of Occupy Wall Street stated simply: “I will believe corporations are people when Texas executes one.”

That was sort of a joke.

But in fact, for the benefit of real live human beings, some corporations ought to be executed.

When it comes to the serious crimes that big corporations engage in – pollution, corruption, fraud, threatening the lives of real Americans – the death penalty is off the table. 

My guess is that most of the occupiers at Wall Street would be in favor of the corporate death penalty.

Some – like Richard Grossman – would criminalize the corporate form.

But if you want to take the incremental approach, here’s my list of five candidates for the corporate death penalty.

Health insurance corporations. Most western industrialized countries – with the exception of the USA – already have this death penalty in place. In those countries, corporations are not allowed to sell primary private health insurance. Instead, there is a public single payer – everybody in, nobody out. Under this death penalty proposal corporations like Aetna, CIGNA, UnitedHealth, and Wellpoint would be put out of business. And with a public single payer to replace them, we’d save billions of dollars and the lives of more than 45,000 Americans who die every year from lack of health insurance.

Nuclear power corporations. Do we really need a Fukushima here in the United States? We do not. Without government loan guarantees and federal limits on nuclear liability, the industry would be put out of business. So, we could simply cut the federal subsidy and that would be the end of it. And we should. A wide range of safer, cleaner energy options is available to replace the energy currently being generated by unsafe nuclear power.

Giant Banks. Wells Fargo. Citibank. Bank of America. JP Morgan Chase. Morgan Stanley. Goldman Sachs. They should be executed – broken up and replaced by smaller banks.

Break up the big banks. And impose a hard cap on their size. No bank should have assets of more than four percent of GDP. There is support across the political spectrum for this proposal. During the debate over financial reform, the measure garnered 33 votes in the Senate – it was called the Brown-Kaufman amendment.

Fracking corporations. Hydraulic fracturing – fracking – is wrecking havoc in the northeastern part of the United States. Any corporation engaged in fracking behavior that threatens drinking water supplies ought to be put out of business. Anti-fracking activists in New York have already drafted legislation that would criminalize fracking corporations.

Corporate criminal recidivists. Legislatures should adopt provisions to strip corporations of their charters for serious corporate violations or for recidivist behavior. Some states already have such provisions, although they are rarely invoked.

Some corporations have been put to death for wrongful behavior, but they have been mostly smaller companies.

In 1983, the Attorney General of Virginia asked the state’s corporation commission to dissolve a book company convicted of possessing obscene films.

But when it comes to the serious crimes that big corporations engage in – pollution, corruption, fraud, threatening the lives of real Americans – the death penalty is off the table.
If we are serious about corporate crime, the death penalty is a deterrent that will work.