IN THESE TIMES · APRIL 1. 1996

C O R P O R A T I O N S

Underworld, U.S.A.

Recent talk of "corporate responsibility" has overlooked America's corporate Crime epidemic.

By Russell Mokhiber

Spurred by Patrick Buchanan's presidential campaign, American reporters and political leaders are suddenly abuzz with the formerly taboo subject of corporate power and its abuse. Newsweek ("Corporate Killers"), the New York Times ("Corporations Under Fire"), Business Week ("The Coming Backlash Against Business"), even Bob Dole, have all weighed in on the tragedy of escalating layoffs.

Yet all the talk of "corporate responsibility," unprecedented as it is, remains numbingly vague. No major political figure or publication has mustered the courage to address the country's current wave of corporate crime and violence. (Newsweek's headline writers didn't mean killing people; they meant the elimination of jobs.) But corporate crime and violence inflict far more damage on society than all street crime combined.

Nevertheless, inside-the-Beltway corporate liberals and conservatives alike insist that crime in America is committed primarily by the poor and blacks.

Richard Cohen, a Washington Post columnist and a corporate liberal, believes that "young black males commit most of the crimes in Washington, D.C." Charles Krauthammer, a Post columnist and a corporate conservative, has written that "crime is generally an occupation of the poor." And James Glassman, a straight-out corporatist and Post contributor, writes that the rich "don't commit the violent crimes that require billions to be spent on law enforcement."

These statements can be considered plausible only if we ignore—as Cohen, Krauthammer, Glassman and their colleagues in the mainstream media regularly ignore—the crimes and violence committed by powerful large American corporations and their primarily wealthy non-young-black-male executives.

How much damage these corporations inflict is known only by the criminals, their high-powered lobbyists and their attorneys. (Robert Bennett, one of the nation's premier white-collar crime defense lawyers, has said that "90 percent of what I work on never sees the public light of day—and that should be true of any good white-collar crime defense attorney.")

Every year, the FBI issues its Crime in the United States report, which documents murder, robbery, assault, burglary and other street crimes. The report ignores corporate and white-collar crimes such as pollution, procurement fraud, financial fraud, public corruption and occupational homicide.

But some evidence indicates the magnitude of the problem. The FBI reports burglary and robbery combined cost the nation about $4 billion in 1995. In contrast, white-collar fraud, generally committed by intelligent people of means— such as doctors, lawyers, accountants and businessmen— alone costs an estimated 50 times as much—$200 billion a year, according to W. Steve Albrecht, a professor of accountancy at Brigham Young University.

The FBI puts the street homicide rate at about 24,000 a year. But the Labor Department reports that more than twice that number—56,000 Americans—die every year on the job or from occupational diseases such as black lung, brown lung, asbestosis and various occupationally induced cancers.

Even these figures, which scarcely meet with any serious public attention or debate, don't get at the full scale of the problem. Most corporate wrongdoing and violence goes unreported for one compelling reason—unlike all other criminal groups in the United States, major corporations have enough power to define the law under which they live.

The auto industry is a case in point. Today, the federal auto safety law carries no criminal sanctions, thanks to the auto industry lobby. For years, auto safety advocates have sought to add criminal sanctions to the law, and for years, the auto lobby has blocked their passage.

This might seem to many mainstream observers a harmless legislative perk. But consider that for more than 20 years, the auto industry also defeated efforts to enact federal law that would require air bags as standard equipment on all U.S. cars.

It wasn't that the industry didn't know how to save lives. General Motors produced more than 11,000 Chevrolets, Buicks, Oldsmobiles and Cadillacs with full front air bags in the early 1970s. Numerous studies predicted what the auto companies and safety experts are now seeing on the road— air bags are saving lives and preventing serious injury.

However, the industry didn't want to live under a lifesaving rule of law. So every time safety advocates brought the air bag law up in Congress, the crime lobby defeated it. It wasn't until 1991, after government-procured cars demonstrated the life-saving potential of air bags, that the industry gave in to growing public pressure.

Auto safety expert Byron Bloch, who owns an original production 1973 Chevy Impala with full front air bags, estimates that as many as 140,000 Americans—"almost three Vietnam walls worth of Americans"—have died in auto crashes since the early 1970s because the auto companies' legislative privilege effectively thwarted all efforts to develop and legally mandate the device in American cars.

Yet even if a genuine populist movement were to enact tough laws criminalizing the reckless conduct of corporations, there would still remain the problem of prosecution. And here, too, lurks a central, if unsurprising, obstacle to reining in corporate crime: Unlike most other criminal groups, corporations have enough power to influence prosecutors not to bring criminal charges.

According to former New York Times reporter David Burnham, each of the past half-dozen U.S. attorneys general have publicly committed the Justice Department to a war against white-collar crime. But as Burnham reports in his recent book, 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—who now co-directs the Transactional Records Access Clearinghouse, which collects data on the performance of the U.S. government—finds that less than one half of 1 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 whether this record reflects 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 told Corporate Crime Reporter. "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. When it comes to prosecuting white-collar crime cases, Burnham argues, "the Justice Department itself could be convicted of fraud."

On-the-job homicides are some of the most heinous crimes corporations could be charged with. Yet corporate violence that results in worker deaths rarely provokes criminal prosecutions, either at the state or federal level. The National Safety Council estimates that since the passage of the Occupational Safety and Health Act (OSCAct) in 1970, 250,000 workers have died on the job.

Many of these deaths stemmed directly from recklessness on the part of corporate employers, but according to the Occupational Safety and Health Administration (OSHA), only four people have done time for OSHAct violations.

Each year, OSHA refers only a handful of cases to the Justice Department for criminal prosecution. And Justice Department officials are reluctant to prosecute these cases, knowing that the federal workplace safety law allows for only six months in prison for a first offense.

This is a law enforcement obscenity. Harassing an animal gets you more time than criminal violations of the federal worker safety law. The maximum criminal penalty for harassing a wild burro on federal land is one year in jail, and seven people have been jailed for this crime.

Labor union activists have sought to strengthen the criminal provisions of the health and safety law over the years, but these efforts have been roundly defeated by big business interests in Congress. And the business-driven anti-law enforcement climate in Washington often leaves OSHA pulling its punches in cases of the most egregious corporate conduct.

Take the case of Patrick Hayes. In October 1993, Hayes was smothered to death under 60 tons of corn at a Showell Farms, Inc. chicken-processing facility in De Funiak Springs, Fla. It took rescue workers five and a half hours to recover his body.

OSHA investigator Linda Campbell found six willful violations of the federal worker safety law and recommended a $530,000 fine against the company. Campbell also told Hayes' parents that she recommended a criminal prosecution of those responsible for Patrick's death.

But Campbell's superiors at OSHA overruled her original determination, reducing the fines to $30,000 and downgrading the citations from "willful violations" to "serious." Because federal law requires a "willful violation" to prosecute a workplace death, this reversal blocked any possible federal criminal prosecution.

In cases like these, state officials should step into the breach and investigate the workplace death for a possible reckless homicide or manslaughter prosecution. When Ira Reiner was the Los Angeles County district attorney in the 1980s, he investigated every workplace death for a possible criminal prosecution—and took many of the cases to court.

Currently, one such prosecution is pending in Wisconsin. Last year, the district in Jefferson County hit Ladish Malting Co., a wholly owned subsidiary of Cargill, Inc., with reckless homicide charges in connection with the death of Vernon Langholff, an employee who had fallen 100 feet from a fire escape landing that broke apart from a grain elevator. State officials alleged that the unsafe condition of the fire escape had been reported to the company's safety committee three years earlier.

But in most such cases, district attorneys are under heavy pressure from big business interests not to bring such prosecutions. In the Hayes case, Patrick's father, Ron Hayes, approached the Florida state's attorney to look at the possibility of criminally prosecuting the company.

"[The state's attorney] told me and my wife and my attorney that he was scared by the company's attorney," Hayes says. "The company's attorney told the state's attorney that they would make this a political issue if the state tried to prosecute. The state's attorney said that he just did not want to get into a political battle. He was not going to try to help us politically with this case."

Even though corporate offenders regularly tilt the legal system to their advantage, some blatant acts of criminality do slip through the cracks and are prosecuted. Forty-six executives were convicted in the "Operation-Ill-Wind" defense procurement fraud enforcement action in the early 1990s. Thirteen major defense corporations—including Boeing, General Electric, United Technologies and Hughes—were convicted in that operation. In When the Pentagon Was for Sale (Scribner, 1995), Andy Pasztor, a Wall Street Journal correspondent who covered the Pentagon, tells the inside story of the country's biggest defense scandal. Multibillion-dollar Contracts were secretly divvied up according to a "shopping list" devoid of any competition, one of the main conspirators recalled to Pasztor. The conspirators assembled their Contracts "just the way you would make one out if you went to the supermarket. When you're in control, you can do anything you want, absolutely anything.... And we did."

Meanwhile, Exxon, International Paper, United Technologies, Weyerhaeuser, Pillsbury, Ashland Oil, Texaco, Nabisco and Ralston-Purina have all been convicted of environmental crimes in recent years. Currently, federal grand juries in Manhattan, New Orleans, Washington, D.C., Brooklyn and Alexandria, Va., are investigating the tobacco industry for a whole range of wrongdoing, from lying to Congress to deceiving shareholders about the known addictive hazards of smoking. The first indictments are expected soon.

Recidivist corporations steal billions of dollars every year. They 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. The qui tam provisions of the False Claims Act permit a private citizen to file suit on behalf of the federal government and collect a portion of the money if the government's action is successful. In 1994, a group of the nation's largest defense contractors worked the halls of Congress in an effort to weaken this law. (The bill later died in a Senate committee.)

In response, a public-interest group, the Project on Government Oversight, began to research the records of the companies seeking to weaken this popular anti-fraud law. The project studied the criminogenic histories of these companies and found that the companies had been engaged in adjudicated fraudulent activities (some criminal)—many of them three or more times.

The study found that General Electric has engaged in fraudulent activities 16 times since 1990. According to the study, a modified "three strikes and you're out" rule would have disqualified an impressive roster of fraud-tainted losers from receiving government Contracts including Boeing (4), Grumman (5), Honeywell (3), Hughes Aircraft (9), Martin Marietta (5), McDonnell Douglas (4), Northrop (4), Raytheon (4), Rockwell (4), Teledyne (5), Texas Instruments (3) and United Technologies (3).

Meanwhile, corporatist politicians, not beholden to any notion of corporate justice, are shameless in their defense of corporate crime. Last year, a reporter asked Speaker of the House Newt Gingrich about his association with Southwire Co., a major Georgia company convicted of environmental crimes. The reporter pressed Gingrich to explain why he hadn't severed his ties to the family that controls the company and that had dumped more than $100,000 into Gingrich's various campaigns and projects.

"You are talking about the largest employer in Carroll County [Gingrich's home base], which has over 3,000 people who work for it," Gingrich said. "I hardly think that having been convicted of a violation turns one into a criminal company." No politician could get away with an answer like this after taking contributions from convicted inner-city drug dealers who put to work thousands of their fellow citizens.

Gingrich was also asked last year about House Republican efforts to limit the criminal liability of doctors and ocher health care providers who rip off the health care system for an estimated $100 billion a year. "For the moment, I'd rather lock up the murderers, the rapists and the drug dealers," he replied. "Once we start getting some vacant jail space, I'd be glad to look at it." Clearly, Gingrich and the rest of the corporatist Washington crowd fail to grasp a fundamental lesson of effective deterrence: enforce the law against the most powerful members of society first.

Ignore or downplay the crimes of the powerful, and like a fish, respect for legal authority rots—from the head down. Why should street criminals respect legal authority when corporatists like Gingrich give the flashing green light to doctors and hospital executives to plunder the health care system?

Gingrich has said we must "re-establish shame as means of enforcing proper behavior." Who wouldn't agree? But let's start at the top, where the rot takes hold.

Russell Mokhiber is the editor of Corporate Crime Reporter, a legal weekly based in Washington. D.C.