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25. Convicted Corporations Receive Perks Instead of Punishment

Sources:

ASHEVILLE GLOBAL REPORT, No. 183, July 18-24, 2002
Title: “Corrupt Corporations Still at Work in Developing World”
Author: Emad Mekay

MOTHER JONES, May/June 2002
Title: “Unjust Rewards”
Author: Ken Silverstein

Faculty Evaluator: Laurie Dawson Ph.D., Diana Grant Ph.D.
Student Researcher: Lindsey Brage, Terri Freedman

American energy giant, Enron, and telecommunications company, WorldCom, committed massive corporate fraud and illegal acts. Declaring bankruptcy in December 2001, they left thousands of American workers jobless and without pensions. The Institute for Policy Studies in Washington D.C. and Corpwatch, a multinational watchdog group, has uncovered evidence of bribery scandals, environmental degradation and violations of international and labor laws. Yet Enron still has 25% interest in a Bolivian oil company called Transredes. Working with Shell Oil, the company is building a pipeline through Bolivia’s Chaco Forest region, an area internationally known for its biodiversity, endangered species and the ancestral homeland of the indigenous Guarani and Guianeck peoples. In December 2002, Transredes was granted $220 million in loans from the International Development Bank, to be backed by U.S. taxpayer dollars.

Enron was also responsible for cutting down the last intact, dry tropical forest in the world, Bolivia’s 15-million acre Chiquitano Forest, for another gas pipeline. The Chiquitano Forest was home to the endangered marsh deer, maned wolf, jaguar, ocelot and the hyacinth macaw. The World Wildlife Fund ranked the area one of the world’s 200 most endangered eco-regions. The Overseas Private Investment Corporation (OPIC), during the Clinton administration in 1999, approved loans for Enron’s pipeline, which could have skirted the forest at an additional expense to the company. Officially, OPIC is mandated to protect ecologically sensitive areas.

WorldCom still profits from its extensive telephone and internet networks throughout Latin American, Asia, Europe and Africa. Enron has additional business interests throughout Central and South America. In northwest India a power plant, which they co-own with Bechtel and General Electric, is so controversial that Enron officials face threats of being arrested on the spot if they enter the country. According to Nadia Martinez of the Institute for Policy Studies, “Enron and WorldCom are just symptoms of the way companies are able to do business without accountability.”

In 2000, Clinton issued an order that provide clear guidelines regarding the awarding of federal contracts. The new “contractor responsibility rule” specified that federal officers should weigh “evidence of repeated, pervasive or significant violations of the law,” for example cheating on prior contracts, violating environmental and safety laws, labor rights, consumer protection laws, and antitrust activities. President Bush quietly killed the rule requiring officials to ban federal contractors with a record of violations of workplace safety and other laws.

The Congressional Research Service issued an opinion concluding that the secret suspension of the rule (no issuing of public notice or soliciting of comments) was probably illegal, but the move went virtually unreported in the media. The government does not maintain a central database to store information on contractors’ records of compliance with the law. The EPA and OSHA maintain their own lists of corporate violations, but parent companies are not always linked to their subsidiaries. “There’s no process built into the review system,” says Gary Bass, executive director of OMB watch, a Washington-based advocate of government accountability.

A six-month investigation by Mother Jones of the nation’s 200 largest contractors found that the government continues to award lucrative contracts to dozens of companies that it has repeatedly cited for serious workplace and environmental violations. Among the findings: forty-six of the biggest contractors were prosecuted by the Justice Department and ordered to pay cleanup costs after they refused to take responsibility for dumping hazardous waste and various other environmental violations. General Electric-which received nearly $9.8 billion from the government, making it the nation’s 10th largest contractor-topped the list with 27 cases of pollution for which it was held solely or jointly liable. Subsequently GE was fined total of only $369,363 for its combined EPA (27) and OSHA (48) violations.

UPDATE BY EMAD MEKAY: The story was an attempt to direct public attention to the corporate mismanagement, executive greed and malpractice of multi-national corporations, particularly the same ones that stirred public controversy last year in the U.S. over their fraudulent dealings, in the developing countries.

Unless they are very well regulated and very well supervised, the economies of the poor nations tend to be a subject for all kinds of abuse by fly-by-night operators. But because of pressure from public international financial institutions, like the World Bank and the International Monetary Fund (IMF) to deregulate their economies and dismantle public monitoring agencies, the risk of multinational engaging in corrupt activities overseas is far higher.

According to recent documents obtained from the U.S. Treasury department, U.S. energy company Enron, one of the companies referred to in the story, managed to secure government assistance to its problematic overseas investments through hefty contributions to different U.S. administrations and access to government officials.

Enron has regularly sought aid from staff from the Treasury and the State Department to favorably resolve its problems and disputes with foreign governments over its subsidiaries; activities particularly in countries like Argentina, India, Nigeria, the Dominican Republic and Turkey.

According to Public Citizen, which is using Freedom of Information Act to obtain documents from the U.S. Treasury, the shamed company also played a major role in the exporting California-style deregulation to poor countries. This has often proved catastrophic for the citizens of those countries. Brazil, for example, now says it will investigate allegations that U.S. energy giant AES Corp. and Enron Corp. conspired to rig the 1998 bidding process for Latin America’s largest electric utility, Eletropaulo. Enron decided not to bid for the project in return for other potentially lucrative energy deals with AES.

Brazil now wants to know whether the utility could have fetched a higher price and to what extent the under-the-counter deal between the two multinationals hurt the Latin American country’s interests.

The U.S. government also continued to back another company caught in financial scandals and mentioned in the story, WorldCom, despite its now established record of fraud. In May, MCI, the telephone division of bankrupt giant WorldCom, said it had received a contract from the U.S. Defense Department to install wireless phone service in Iraq. The company declined to discuss details of the contract, citing “an agreement with our client.”

Despite of laudable attention the mainstream media gave to the Enron scandal in the United States very little has been published about the role of the same company, among many controversial ones, in the defenseless poor nations.

Some corporate monitors like Corpwatch, Public Citizen and the Institute of Policy Studies have all devoted time and effort to follow the Enron case and other cases where international business giants are abusing their mandates in the poor nations. Their websites respectively are: http://www.corpwatch.orghttp://www.ips-dc.org andhttp://www.citizen.org/. Inter Press Service is also a news agency that seeks to cover development news and the unethical practices of some major companies. It can be found at http://www.ipsnews.net.