America's Corporations Are Much Like Russia's:

The Corporate Crime Wave in America

BY MARC OLIVER
The following is a summary of the feature article by Robert Sherrill in the March 20, 1997 issue of The Nation, which liberally excerpts from the Wall Street Journal.

The Wall Street Journal uniquely reports big-business malfeasance. So much so Ralph Nader recently said: "The Wall Street Journal is the main reporter in our country of corporate crime. The Wall Street Journal has so much information on corporate crime it should be named The Crime Street Journal."
Why other news outlets trivialize and under-report corporate crime is not a mystery; they do not want to appear unfriendly to big advertisers and potential investors, or else the news outlet may already be owned by big business.
Since many of us never see this type of crime reporting in any detail, here is a teaser summary of corruption, sleaze, and unhinged greed by some major corporations.

Corporate Crime In '96

Archer Daniels Midland
The world's largest grain producer pleaded guilty to fixing prices of two of its products, lysine and citric acid (used in soft drinks and detergents) in exchange for immunity of price-fixing charges for its corn syrup. Analysts figure A.D.M. cheated customers out of $170 million. These customers pass their extra costs on to us in the form of higher prices at the grocery store. Since A.D.M was fined $100 million, it thus made $70 million from cheating, and their stock rose when investors heard of their deal. A.D.M. has a history of price fixing and other corrupt practices, including dubious campaign gifts like slipping a thousand $100 bills into the Nixon White House in 1972.
Insurance Companies
The biggest insurance companies are seemingly in a competition for "crookedest." In 1993 Metropolitan was fined $202 million for cheating its customers. Last year Prudential was similarly fined $35 million and has to pay $1 billion in restitution to its cheated policy-holders.
Prudential had been found guilty of the practice of "churning," which is a racket where about 10 million customers were sweet-talked into using the cash value of older policies to pay premiums on new expensive policies. Prudential admitted guilt and fired several people.
Numerous other insurance companies have been found guilty of the same practice. Mutual of New York, for example, paid $12.5 million back to a mob of angry customers.
Piggish Banks
Citibank managed $100 million for Raul Salinas, a former Mexican government official and brother to Carlos, the former President of Mexico. But Raul never earned more then $190,000 per year, so why did Citibank resist the notion these millions were being laundered by the bank? (Raul Salinas is now in jail in Mexico on charges of "inexplicable enrichment.")
Citibank fought against the Justice Department to delay withdrawal of the funds, saying there were no improprieties. Now rumors are that Citibank will be indicted for money laundering.
Money laundering is a highly profitable crime routinely committed by banks. It is a practice currently hard to prove, and thus is rarely prosecuted.
Drug&Health Care Fraud
According to the General Accounting Office, crooked health care companies defraud the government out of $100 billion (not million) every year.
SmithKline Beecham performed unneeded blood tests to bilk undisclosed millions from Medicare. An agreement for Beecham to pay the government $300 million as settlement is "close."
Similarly, Corning Insurance paid $125.8 million to settle allegations its subsidiaries performed unneeded blood tests and fraudulent billing. This company paid similar fines in past years so these practices must be profitable.
National Health Laboratories paid a settlement of $110 million for similar Medicare fraud.
Americans spend $500 million per year on a drug named Synthroid, made by a British drug maker named Boots. The F.D.A. approved Synthroid without a trial in 1958, so without trial data competitors have since been disadvantaged. A recent trial, paid for by Boots, showed lower-cost generic manufactures produced as good a drug as Synthroid, and could sell it at 60% of Boots' price.
But Boots has disallowed publication of the study, as it would ruin its market share and attractiveness to BASF, which just bought Boots.
$356 million could be saved by Americans annually if generic of Synthroid were available.
Attorneys General in 22 states have sued the biggest contact lens companies-Bausch & Lomb, Johnson & Johnson and Ciba Vision-for price [fixing] conspiracy, contending that as many as 25 million consumers were overcharged $600 million between 1989 and 1994.
(There are many more crook stories in this category; see the March 20 issue of The Nation.)
Arms Merchants Cheat Too
Sorry, not enough space to do this topic justice here.
Screwing the Workers
It took seven years to sentence three Pyro Mining executives, finding they lied about hazardous gas conditions resulting in the deaths of ten men. Despite the killings, the executives drew sentences ranging from only five to eighteen months and fines from $375 to $3,000 (a maximum of 1.8 months and $300 per dead miner).
Princeton labor economist Alan Krueger was quoted by the Wall Street Journal as estimating as many as 3 million workers are paid less than the minimum wage and adds, "Violating the minimum wage law has a certain economic logic to it because an employer, if caught, usually has to pay only the back wages that were due. Penalties are generally levied only on repeat or extreme violators."
A survey found 43% of garment makers were paying illegally low wages, and trucking companies and eateries and construction firms are criminals in this too.
The Employer Policy Foundation, an employer-supported think tank, estimates that workers would get an additional $19 billion a year if the rules were observed. In a review of 74,000 cases processed by the Labor Department over a four-year period, E.P.F. reported that one out of every fifty workers had been illegally denied overtime pay.
Conclusions
Many corporate crimes have trivial penalties in mostly out-of-court settlements, and white-collar villains rarely go to prison. Why? Some excuses are that corporations out-gun prosecutors with an army of their own lawyers, and that communities accept corrupt practices out of fear a business will leave town and jobs would disappear. Minor penalties mean more profits, often then sparking buying of the criminal company's stock because the fine was `less then expected.'
Penalties less than amounts stolen reward corruption and greed. Corporations under the current government enforcement climate are actually rewarded for engaging in price fixing, abusing fair labor practices, money laundering, and lying.
Good corporations thereby become comparatively less profitable, so to compete they may find they have to become bad too.
We, the public, through our elected and employed officials, must do something to stop corrupt corporate practices. If we fail to do this, with increasing de-regulation of all kinds, these lawless and immoral practices will increase. Furthering that probability is the fact that the IRS and other government regulatory agencies are soon to be greatly down-sized.
We have to make penalties punitive. Let's impose a fine of a minimum of 150% of monies stolen.
To do nothing invites complete and justifiable public cynicism, and this can create criminals of the un-corporate kind.
If corporate corruption continues to increase, I recommend that all other criminals, of all types, incorporate in order to enjoy an equal application of justice.


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This story was published on April 2, 1997.