Corporate crime wave - Corporate Crime/Keynote

New Internationalist, July, 2003 by Richard Swift

The recent wave of US business corruption is just the tip of a very slippery iceberg. Richard Swift plays private detective to find out how the corporate crooks get away with it and what we can do to stop them.

'I CAN'T believe they got away with it again.' Mertinsky slumped in my one extra office chair. His expensive suit looked uncharacteristically rumpled his usually well-groomed features surrendered to months of high-pressured days and sleepless nights.

Mertinsky was a class-action lawyer fresh from court. He was trying to win back retirement finds for workers forced to invest them in the self-destructing stock portfolios of corporate America. As so often in his star career he had won another battle but was losing the war. He had got the judgment but not the money in anything like the amounts that had been lost. He shook his head despondently: 'Where did all that pension money go anyway?

I'd known Mertinsky since we were university students together in the heady days of the New Left We'd fought the good fight together. He was the idealist. I was the cymic. But idealism paid better than cynicism. I ended up as a hand-to-mouth private eye, a kind of urban hunter-gatherer, working out of a crumbling old office building on New York's Lower East Side -- mostly looking for teenage runaways and proof of adultery. Mertinsky battled Big Tobacco to a standstill. Made chemical companies pay millions for using poor people's neighbourhoods as toxic dumps. Took on Big Pharma when they rushed barely tested drugs on to the market, destroying livers and immune systems. He had it all -- a blonde trophy wife, a house in the Hollywood Hills, an Olympic-size pool and a credit-rating that made me drool. But Mertinsky was no self-satisfied egomaniac. He still believed -- devoted his time and money to the campaigns and organizations trying to bring corporate power to brook for wrongdoing. It was a thankless task.

As for me, I had the reduced expectations of a cynic, which led more easily to a life of little satisfactions -- a good salami-on-rye, the smile of a beautiful woman or a ninth-inning comeback by the Mets. Still Mertinsky and a couple of other class-action lawyers from the old days occasionally threw me a little research 'bone' to help pay the office rent and keep me out of the smoky bars. This is what he was offering now, more out of frustration than hope -- a research dossier that looked at corporate crime and why it kept happening. Mertinsky and his pals were at their wits' end. They kept running up against the limits of litigation. Juries awarded huge settlements only to have them rolled back on appeal. The companies easily wrote off these final settlements as part of the price of doing business. Then there was a legion of 'good ole boy' politicians down in DC pushing something called 'tort reform' to eliminate such 'vexatious lawsuits' entirely. The corporate honchos were most grateful.

'We need to think differently, to anticipate,' Mertinsky muttered. 'These guys are getting away with murder -- one step ahead of us all the time! Why does it keep happening? We need to know stuff -- the next big corporate boondoggle, their next defence strategy in court. These guys are real lowlifes and that's your department. We want you to check into it.'

Thanks, I thought. But pride was the one deadly sin I couldn't afford, I pretended I could be helpful. I hoped he didn't notice me scratching my head.

I guessed the best places to start were the library and the internet. It just took a couple of days to come to the conclusion that this was big. Real big. Corporate crime was everywhere.

As a matter of course, corporations tried to evade laws and regulations if they stood in the way of profits. They dumped toxic waste illegally. Evaded taxes. Exposed their workers to dangerous substances and deadly working conditions. Gave bribes. Spewed poisons into the air and water. Sold a gullible public everything from dangerous baby toys to cars that flipped over and drugs whose side-effects were worse than the diseases they were supposed to cure. They hyped their stocks by hiding losses and cooking the books. Whoa, if I did a quarter of this stuff I'd be waking up in the crowbar hotel!

I started at the beginning of the big corporate meltdown that so exercised Mertinsky and company -- the Enron case. The basic facts were pretty well known by now. Enron, Worldcom, Tyco and a number of other wunderkinder of the tech revolution had hidden their precarious economics with the help of the accounting industry and the big investment banks. In the meantime the top execs walked away with billions in over-inflated salaries, fat bonuses, soft insider loans and lucrative stock options -- a cool $3.3 billion from the 25 biggest companies to go bust in 2002. And that's just the stocks they sold. And when the bubble finally burst the exec cash was safely stowed in fancy real estate, solid securities and bank accounts -- some of them offshore.

But this wasn't just a US story. Open up any business page -- it was all over the world. HIH, a big Aussie insurance company, took both policyholders and investors to the cleaners while people like their execs Ray Williams and Rodney Adler hid losses, cashed bonus cheques and issued rosy financial predictions. Then there was the rogue trader Nick Leeson who hid so much in losses in the derivatives market that he bankrupted Britain's prestigious Barings Bank. The interesting thing about Enron was how the guys down in Houston, Jeffery Skillings and Ken Lay (known to his buddy George Bush as 'Kenny Boy') were able to convince people Enron, in debt up to its ears, was 'the best company in the world.' When I dug a little deeper I found out that what Enron was into was something called 'market making.' They were trading in a lot of stuff that nobody quite understood -- gas pipeline capacity, broadband width, banks of electrical power, water supply. They even dabbled in trying to buy and sell Japanese and European weather futures.