Earlier this year, a Texas jury recommended that Kenneth Payne, 29, spend 16 years in jail. Payne's crime? Stealing a Snickers bar from a grocery store. When Smith county Assistant District Attorney Jodi Brown was asked by the Associated Press how she could justify a sentence of 16 years for the theft of a Snickers bar, she replied "It was a king size." A king size Snickers bar it was. Retail price: $1.
Democracy:
Corporate Crime
Corporate crime and violence inflict enormous damage on society. Hundreds of billions of dollars are stolen from Americans every year as a result of corporate and white-collar fraud, and tens of thousands of Americans are injured or killed each year by corporate violence. The Clinton/Gore administration has failed to document the extent and nature of corporate crime and violence, to calculate the damage, or to seek effective legislative and enforcement remedies. The Federal Bureau of Investigation's annual report Crime in the United States focuses exclusively on street crime. And according to a recent study by Public Employees for Environmental Responsibility, criminal prosecutions of environmental crimes, for example, fell sharply during the Clinton-Gore administration, compared to the Bush-Dole years. A crackdown on corporate crime and violence requires the following initial steps:
Document the extent and nature of the problems, and publicize them aggressively. The Federal Bureau of Investigation (FBI) should be required to issue an annual report on Corporate Crime in the United States. To the Justice Department, "crime in the United States," means "street crime in the United States." The FBI's annual report on crime discusses burglary, robbery and theft, but says nothing about price-fixing, corporate fraud, pollution, or public corruption. And the Justice Department publishes no equivalent publication called Corporate Crime in the United States.
Establish a corporate crime-fighting agenda. The Justice Department must take more aggressive actions against violations of environmental, health and safety laws, fraud, corrupt practices, and other measures designed to control corporate and white-collar crime. Many of these violations have been investigated by reporters from the mass media, but to no avail.
Expand the staffs of the major law enforcement agencies with oversight over corporate crime and violence - including the FBI's white-collar crime units and the Justice Department's Criminal Division, and increase the budget for prosecution of white-collar crime.
Bar companies with records of criminal and other wrongdoing from federal contracts.
Introduction
Every year, the FBI issues its report Crime in the United States, which documents murder, robbery, assault, burglary and other street crimes. The report ignores corporate and white-collar crimes such as life-taking pollution, procurement fraud, financial fraud, public corruption and occupational homicide.
The FBI does not issue a yearly Corporate Crime in the United States report, despite strong evidence that corporate crime and violence inflict far more damage on society than all street crime combined.
The FBI estimates that burglary and robbery costs the nation $3.8 billion a year. Compare this to the hundreds of billions of dollars stolen from Americans via systemic and episodic corporate and white-collar fraud. Health-care fraud alone costs Americans $100 billion to $400 billion a year. The savings and loan fraud - which former Attorney General Dick Thornburgh called "the biggest white collar swindle in history" - will cost us anywhere from $300 billion to $500 billion. There is also $40 billion a year in auto repair fraud, at least $15 billion a year in securities fraud, and a host of lesser frauds that cost consumers tens of billions a year.
And corporate crime is often violent crime. The FBI estimates that 19,000 Americans are murdered every year. Compare this to the 56,000 Americans who die every year on the job or from occupational diseases such as black lung and asbestosis. On-the-job deaths often result from criminal recklessness. They are sometimes prosecuted as homicides or as criminal violations of federal workplace safety laws. And environmental crimes often result in death, disease and injury. In recent examples of corporate violence twelve New Mexico campers were killed in August 2000 when a natural gas pipeline operated by El Paso Natural Gas Co. broke and exploded near Carlsbad, NM, and more than 100 Americans have died in crashes linked to Firestone tire separations that caused their Ford Explorer vehicles to crash. And Dr. Troyen Brennan, a leader of the Harvard University Medical Malpractice Study of New York State, has estimated that there are 100,000 deaths each year from hospital-based medical negligence.
Despite the failure of the federal government to systematically and regularly document corporate crime and violence, it exists, and it is sometimes prosecuted. A recent report by Corporate Crime Reporter, The Top 100 Corporate Criminals of the 1990s, focused on major American corporations that have pled guilty or no contest to crimes and been criminally fined. These corporate criminals fell into 14 categories of crime: environmental (39), antitrust (20), fraud (13), campaign finance (6), food and drug (6), financial crimes (4), false statements (3), illegal exports (3), illegal boycott (1), worker death (1), bribery (1), obstruction of justice (1) public corruption (1), and tax evasion (1). Six corporations on the list were criminal recidivists during the 1990s.
The Tip of the Iceberg
Companies that are criminally prosecuted represent only the tip of a very large iceberg of corporate wrongdoing. For every company convicted of health care fraud, hundreds get away with ripping off Medicare and Medicaid, or face only mild fines and civil penalties. According to a 1999 report from the National Institutes of Justice, criminals have found ways to easily circumvent existing controls, and fraud schemes are usually discovered by chance, if at all. For every company convicted of polluting the nation's waterways, there are many not prosecuted because their corporate defense lawyers offer up a low-level employee to go to jail or pay a fine in exchange for a promise not to prosecute the company or high-level executives. For every corporation convicted of bribery or of giving money directly to a public official in violation of federal law, thousands legally give money for expected favors to political parties through political action committees - and profit from a system that effectively legalizes bribery. For every corporation convicted of selling illegal pesticides, hundreds more are not prosecuted because their lobbyists have ensured that dangerous pesticides remain legal. For every corporation convicted of reckless homicide of a worker, hundreds of others aren't even investigated when a worker is killed on the job. Only a few district attorneys across the country (Michael McCann, the District Attorney in Milwaukee County, Wisconsin, being one) regularly investigate workplace deaths as homicides.
As some of these examples suggest, corporations define the laws under which they live. For example, the automobile industry over the past 30 years has worked its will on Congress to bury proposed legislation that would impose criminal sanctions on knowing violations of the federal auto safety laws. In 1966, when the National Traffic and Motor Vehicle Safety Act was passed, Senator Vance Hartke argued that exempting a person or corporation from criminal penalties was "indefensible in law, reason or morality." As Hartke observed, "Criminal behavior is criminal behavior, whether done on a dark road or behind a corporate organization." But auto industry muscle trumped such common sense, and now, if an auto company is caught violating the law, only a modest civil fine can be imposed. Because of their immense political power, big corporations have big resources to win in courts of law and in the court of public opinion.
Few prosecutors are willing to take the heat that a major corporation can dish out. It is testament to the will of a few dedicated federal prosecutors that Royal Caribbean Cruise Lines, for example, was recently criminally convicted of polluting the oceans. The company faced a team of two criminal prosecutors whereas its defense team included: Judson Starr and Jerry Block, former heads of the Justice Department's Environmental Crimes Section; former Attorney General Benjamin Civiletti; former federal prosecutors Kenneth C. Bass III, and Norman Moscowitz; and Donald Carr of Winthrop & Stimson. As experts on international law issues, the company hired former Attorney General Eliot Richardson, University of Virginia law professor John Norton Moore, former State Department officials Terry Leitzell and Bernard Oxman, and four retired senior admirals.
As the case proceeded to trial, Royal Caribbean engaged in a massive public relations campaign, taking out ads during the Super Bowl, putting a former Administrator of the Environmental Protection Agency (EPA) on its board of directors, and donating thousands of dollars to environmental groups. Federal prosecutors overcame this incredible effort and convicted the company. But that was an unusual prosecution by unusually determined prosecutors.
According to former New York Times reporter David Burnham, each of the past half-dozen Attorneys General have publicly committed the Justice Department to a war against white-collar crime. But, as Burnham reports in his study, Above the Law: Secret Deals, Political Fixes and Other Misadventures of the U.S. Department of Justice, the Department doesn't walk the talk. Burnham found that less than one half of one percent (250) of the criminal indictments (51,253) brought by the Department in 1994 involved environmental crimes, occupational safety and health crimes, and crimes involving product and consumer safety issues. Burnham doubts that these numbers reflect the true level of corporate crime in America.
"In August 1993, the National Law Journal did a survey of general counsels of major corporations," Burnham said. "Sixty-six percent of the counsels said they believed that their companies had violated federal or state environmental laws in the last year. You have tens of thousands of major corporations. You have a substantial number of the general counsels of these companies saying they are committing crimes. That speaks for itself." Burnham believes that corporate criminals often get away because of "unacknowledged class biases, outright political deals, poorly drafted laws and incompetent investigators" at the Justice Department.
Lenient Treatment of Corporate Crime and Violence
There is a long history of authorities ignoring or dealing leniently with corporate crime and violence. Examples include:
Earlier in this century, General Motors, Standard Oil of California, and Firestone Tire and Rubber conspired to destroy inner city rail transit systems in more than 100 cities nationwide. In 1949, GM was convicted of ripping up the tracks, and replacing the trolleys with polluting buses. For perhaps the greatest economic crime in history, GM and the other companies convicted in the conspiracy, were fined $5,000 each. One executive, also convicted, was fined $1.
For decades, the makers of leaded gasoline systematically suppressed information about the severe health hazards of their product. According to an investigative article published in the Nation magazine (March 20), the auto and oil industries, as well as the makers of lead additive, knew from the mid-1920s on that leaded gasoline was a public health menace and that safe anti-knock substitutes were cheaply available, but rejected them because they would be unprofitable. According to automotive journalist Jamie Lincoln Kitman, who wrote the article, these manufacturers wildly exaggerated the benefits of leaded gasoline while downplaying or outright denying its dangers. No criminal prosecution was ever brought against the manufacturers. Fourteen years after the federal government banned lead from gasoline sold in the U.S., one American company (Ethyl) and one English company (Associated Octel) still sell leaded gasoline throughout the developing world and Eastern Europe, despite lead's clearly established dangers, particularly to children.
"The story of how millions of tons of lead, a potent neurotoxin, were spewed into the environment and people's blood for 60 years ranks beside tobacco and the exploding gas tank of the Ford Pinto in the annals of corporate crime in America," said Kitman. "And what's truly outrageous, leaded gasoline continues to be sold around the world." (Ninety-three percent of all gasoline sold today in Africa contains lead.)
Two years ago, corporate criminal recidivist Warner-Lambert began selling a diabetes drug called Rezulin. Earlier this year, the Food and Drug Administration forced the drug off the market, but only after 61 confirmed deaths and 28 non-fatal liver failures. Total sales of the drug brought in $1.8 billion to the company's Parke-Davis unit. Earlier this year, Public Citizen's Dr. Sidney Wolfe called for a criminal investigation of Parke-Davis for failing to make timely reports of drug-induced liver toxicity in patients taking Rezulin. Wolfe said that prior to the marketing of Rezulin in March 1997, Warner-Lambert/Parke-Davis was aware of a significant number of cases in which liver toxicity developed in people given the drug. The Clinton administration did not bring any criminal charges against the company.
Weak Criminal Enforcement of Worker Deaths
Corporate violence that results in worker deaths is rarely prosecuted, either at the state or federal level. The National Safety Council estimates that since the passage of the Occupational Safety and Health Act in 1970, 250,000 workers have died on the job (this figure does not include occupational diseases). Yet, according to the Occupational Safety and Health Administration (OSHA), only a handful of individuals have done jail time for criminally violating that law.
Each year, OSHA refers only a small number of cases to the Justice Department for criminal prosecution. And Justice Department officials are reluctant to prosecute these cases, knowing that for a criminal violation that results in the death of a worker, federal workplace safety law allows for only six months in prison for a first offense. In contrast, the penalty for harassing a wild burro on federal land is one year in prison.
Labor union activists have sought to strengthen criminal and other provisions of the health and safety law over the years, but these efforts have been roundly defeated by big business interests in Congress.
Earlier this year, a massive explosion at a Phillips Petroleum plastics plant in Pasadena, Texas killed one person and injured 74. It was the third fatal accident at the sprawling petrochemical complex in the last 11 years - a 1989 blast killed 23 and an explosion in June 1999 left two dead. The explosion was also the fourth within the last year at the facility. This record of repeated disaster has produced no criminal prosecution, only minor fines from OSHA.
Three Strikes and You're Out
Corporate criminals are often caught by company whistleblowers and by federal or state officials under the nation's toughest anti-corporate wrongdoing civil law - the federal False Claims Act. In 1994, a group of the nation's largest defense contractors worked the halls of Congress in an effort to weaken this law. In response, a public interest group, the Project on Government Oversight, researched the histories of the companies seeking to weaken this popular anti-fraud law. It found that these companies had engaged in adjudicated fraudulent activities (some criminal) - many of them three or more times. The study found that General Electric engaged in fraudulent activities 16 times since 1990.
According to the study, a rule of "three strikes and you're out of federal contracts" applied to corporations engaged in fraudulent activity would have disqualified most major defense contractors from government contracts. Because of weak and ineffectual debarment policies, many corporate wrongdoers stay on as federal contractors.
A study by the General Accounting Office (GAO), the investigative arm of Congress, found that in 1993, eighty federal contractors receiving a total of more than $23 billion in government business had violated the National Labor Relations Act..
Another GAO study found that in 1994, 261 federal contractors receiving more than $38 billion from the government for goods and services were fined at least $15,000 each for violations of the Occupational Health and Safety Act (OSHA). Behind the scenes, big business works tirelessly through the Congressmen and Congresswomen it finances to cut Labor Department funding for enforcement at OSHA.
Street vs. Suite: Disparities in Sentencing
Earlier this year, a Texas jury recommended that Kenneth Payne, 29, spend 16 years in jail. Payne's crime? Stealing a Snickers bar from a grocery store. When Smith county Assistant District Attorney Jodi Brown was asked by the Associated Press how she could justify a sentence of 16 years for the theft of a Snickers bar, she replied "It was a king size." A king size Snickers bar it was. Retail price: $1.
In Texas, theft of property worth less than $500 is usually charged as a misdemeanor punishable by a fine of $500 with no jail time. The case was brought as a felony because Payne was a habitual offender - he had ten previous convictions (including one for stealing a bag of Oreo cookies) and had spent seven years in Texas prisons. When he took the king-sized Snickers bar, he was on parole for felony theft.
Compare Kenneth Payne's plight to that of a group of white-collar and corporate criminals who were also sentenced earlier this year.
Four Hoffman-LaRoche Ltd. executives pled guilty for their roles in an international conspiracy to suppress and eliminate competition in the vitamin industry - what the Justice Department said was perhaps the largest criminal antitrust conspiracy in history. The prison terms: four months, three and one-half months, three months and three months. (The four executives were also fined $75,000 to $350,000). Also earlier this year, three cruise line employees were sentenced for their role in dumping pollution into the Alaskan Inland Passage from a Holland America cruise ship. They were each sentenced to two years unsupervised probation and fined $10,000.
Criminal Sanctions are Needed to Control Corporate Wrongdoing
Those who want corporate criminals coddled argue that the civil law is sufficiently broad to control corporate wrongdoing. Richard Parker, a professor at George Mason University Law School, argues that corporate crime simply doesn't and can't exist.
"Crime exists only in the mind of an individual," Parker said two years ago at a conference on corporate crime in Washington, D.C. "Since a corporation has no mind, it can commit no crime." Parker claims "there is no legitimate function to corporate criminal liability that cannot be served equally as well, if not better, by civil enforcement."
Other legal experts in the field, like Columbia University law professor John Coffee, agree that in theory civil penalties could effectively combat corporate wrongdoing - but in practice, they don't work as well as criminal prosecution. "When it comes to allocating blame, assessing responsibility, and shaming wrongdoers, the criminal law works much better than the civil law," Coffee said at the same conference.
If corporations were sanctioned exclusively by civil penalties, their wrongdoing would seem "less blameworthy than the conduct of individuals who were still being processed through the criminal justice system. Inevitably, there is a hierarchy between the criminal law, which is seen as front page news, and civil lawsuits, which are on page 17 of the business section [of the newspaper]," Coffee said.
What Needs to Be Done
The federal government needs to get serious about corporate crime. Any serious effort must be accompanied by the compilation and publication of a Corporate Crime in the United States report, released every year by the FBI. This report would be similar to the FBI's Crime in the United States report, which documents street crime. The report would focus law enforcement, legislative and citizen attention on a growing and serious complex of harmful conditions.
The Justice Department also needs to lay out a corporate crime-fighting agenda. Rhetorical flourishes by the Attorney General about fighting white-collar crime are not enough.
Federal enforcement officials at the Justice Department need to broaden their horizons and reach out beyond traditional criminologists to corporate criminologists worldwide who have studied the issue and proposed innovative strategies to control corporate crime.
In addition to badly needed budget allocations for corporate crime prosecutors and agents in the field, a corporate crime fighting agenda might include: requiring publicly held corporations to report their histories of crime and wrongdoing to the Securities and Exchange Commission; creating a corporate crime strike force at the Department of Justice, similar to the organized crime strike force; encouraging private attorney general actions to relieve some of the burden on federal law enforcement; adding citizen bounty-hunting provisions to federal laws; strengthening federal whistleblower laws; executing corporations convicted of serious crimes; debarring recidivist corporate violators from federal contracts; mandating adverse publicity sanctions; and eliminating country club prisons.
Copyright © 2001 Citizen Works |
