SHORT TAKES #16: MORE CORPORATE BAD BEHAVIOR

Here are summaries of three important stories that have gotten little attention in the mainstream media. These stories include corporations engaging in fraud and bribery, blocking competition to rip off businesses and consumers, and running unsafe prisons.

I share these stories of corporate bad behavior – and there are many more than I have time and space to share – for multiple reasons, including:

·         To puncture the prevalent myth that the private sector does no wrong and that it is efficient and effective in meeting needs and solving problems.

·         To demonstrate that the profit motive, coupled with the greed of corporate executives and investors, is so powerful that for many individuals it will corrupt their behavior in ways both small and large (e.g., de la Torre of Steward Health, Kenneth Lay and Jeffrey Skilling of Enron, and many others).

·         To make it clear that the private sector needs regulation to protect consumers, workers, and the public.

·         To show that the public shouldn’t trust what corporations say because they have a huge financial interest in hiding harms they may be causing (e.g., tobacco, global warming, toxicity of pesticides and other chemicals, etc.).

·         To document that the current punishments and penalties are too little to change corporate executives’ behavior. Often, the punishments and penalties are simply considered a cost of doing business.

·         To demonstrate that privatization of public functions and public goods (e.g., health care, drinking water systems, etc.) is not a wise idea.

·         To document that corporations are relentless over time and across multiple strategies (campaign spending, lobbying, the revolving door of personnel in and out of government regulatory positions, etc.) in their efforts to bend policy (taxes, regulation, punishments, etc.) and enforcement to their benefit. They are immortal, after all, and can and do outwait and out persevere most individuals and government agencies who try to rein in their power and misbehavior.

If you want to get a sense of the overall scale of corporate bad behavior visit this Violation Tracker database compiled by Good Jobs First.

STORY #1: RTX Corporation, formerly Raytheon, has agreed to pay $950 million in penalties for defrauding the government and paying foreign bribes. RTX entered into three-year deferred prosecution agreements (DPAs) with federal authorities in MA and NY. These mean the corporation won’t be prosecuted if it exhibits good conduct (i.e., complies with anticorruption and antifraud laws) for the next three years. [1] It also means the corporation doesn’t have to plead guilty and that its records and executives are not the subject of depositions and court testimony, which keeps the detailed information on the violations and investigations from being made public.

RTX inflated its revenue from government contracts by at least $111 million by lying about labor and materials costs, as well as double-billing. RTX paid bribes to a high-ranking Qatari military official to get lucrative contracts with the Qatari military. This violated the Foreign Corrupt Practices Act and the Arms Export Control Act.

RTX and its subsidiaries are repeat violators. Most recently, in August the corporation agreed to a $200 million penalty for more than two dozen violations of the Arms Export Control Act and International Traffic in Arms Regulations. The violations included the corporation providing classified military aircraft data to China and employees taking classified information on company laptops into Russia, Iran, and Lebanon.

Here’s Good Jobs First’s documentation of the violations of RTX and its subsidiaries since 2000. Prior to this latest $950 million settlement, there were 133 violations that resulted in penalties totaling $550 million.

STORY #2: The U.S. Justice Department has filed an antitrust lawsuit against Visa for stifling competition in the debit card business. The suit alleges that Visa penalizes banks and businesses that don’t use Visa’s payment processing system to process debit transactions. Visa’s processing system handles 60% of debit transactions in the U.S. and charges over $7 billion in fees. The suit alleges that Visa uses its dominance to stifle competition and extract billions of dollars in excessive fees from businesses and consumers. [2]

The Justice Department’s complaint relies heavily on Visa’s own statements of corporate strategy. For example, Visa’s stated strategy is to “partner with emerging players before they become disruptors.” As a result, it offers big incentives (up to hundreds of millions of dollars annually) to financial system innovators like Apple Pay and PayPal for NOT competing and NOT disrupting Visa’s dominance. [3]

Visa and its allies have spent over $80 million lobbying against the Credit Card Competition Act, which would save consumers and businesses an estimated $15 billion annually.

STORY #3: The U.S. Justice Department has announced an investigation into reports of recurring and sometimes deadly violence at the privately run Trousdale Prison in Tennessee; reports which have been endemic since it was opened in 2016 by CoreCivic. CoreCivic is the largest private prison corporation in the U.S. with a value of over $1.4 billion. It has four prisons and two jails in TN and, since 2016, has spent more than $4.4 million on nearly 80 settlements over 22 deaths of inmates and dozens of other mistreatment complaints. TN has fined CoreCivic $38 million since 2016 for contract violations and the state comptroller has released scathing audit reports three times. But CoreCivic is active with its political spending and state leaders downplay the problems and renew the state’s contracts with it. [4]

There have been over 300 deaths at the four CoreCivic prisons in TN since 2016; some due to natural causes, but some due to violence and some appear to be due to medical neglect. Inmate complaints allege murders, brutal beatings, physical and sexual assaults, medical neglect, and cruelty. In its settlements, CoreCivic does not admit guilt and typically requires the other parties to a settlement to agree to refrain from talking about their complaint or the settlement.

Severe staffing shortages and unchecked flows of contraband contribute to the problems at the CoreCivic facilities. Even the prison guards report that they feel unsafe because of the understaffing.

[1]      Offenhartz, J., & Sisak, M. R., 10/17/24, “RTX to pay $950m to resolve fraud allegations,” The Boston Globe from the Associated Press

[2]      Associated Press, 9/25/24, “Business Talking Points – Financial,” The Boston Globe

[3]      Kuttner, R., 9/25/24, “The Justice Department challenges Visa’s predatory power,” The American Prospect (https://prospect.org/blogs-and-newsletters/tap/2024-09-25-justice-department-challenges-visas-predatory-power/)

[4]      Mattise, J., Loller, T., & Hall, K. M., 10/14/24, “Tenn. prison operator under US scrutiny,” The Boston Globe from the Associated Press