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The Results of Ten Years of Prosecution of Corporate Crimes
by Rick Keefer
August 15, 2004

The most abhorrent thing found during my research has been the discrepancy between the effects of prosecution of those who have stolen from the federal and state governments versus those who have stolen from individuals or other corporations. The most disconcerting fact is that many of the corporations that have been convicted of anti-trust violations, fraud, environmental crimes, as well as campaign financing fraud are still in business. Many of the corporations are thriving, because they were able to claim their fines and criminal penalties as "net loss" and avoid tax liability. Others, the ones I call most devious, used a calculated bankruptcy claim to avoid payment of the penalties imposed. And, other devious corporate executives simply changed the name of their corporation and avoided the public forum as well as the civil and criminal obligations directed by the courts.

To address the discrepancy, I would like to differentiate between the types of settlements involved. In most of the cases brought against corporations for defrauding state or federal government agencies (including military), there were monetary reimbursements for the amount that the corporation had gained in addition to the fines imposed. There were also specific remedies for the situations created by the attempted fraud. In the cases of antitrust, environmental crimes, and financial fraud the corporation was fined, but only in the case of the banking industries were there specific reimbursement orders given. Basically, this meant the replacement of funds into the proper accounts from which it was taken.

The fines and reimbursement requirements of the judicial system is extra-ordinarily skewed when it comes to the repayment and enforcement of the courts findings. Corporations that are outside the US mainland have a distinct advantage. They are able to roll up their operations, take their funds/assets back to their country of origin, and there is little that can be done to enforce the rulings against them. Many simply change their "Corporate Designation" within a larger corporate structure and return to commit other crimes within the US border. Companies that are based in the US have many ways to recover from their mis-deeds. They use our bankruptcy procedures to eliminate other debts, use tax loop-holes to pass the fines and penalties back to the federal government, or dissolve the corporations common assets (selling to corporate partners) and re-forming under a different "Corporate Body". The process that has allowed a corporation status as an entity has also allowed the loop-holes preventing prosecution of executives defrauding the court system in this way.

As an example of a foreign corporate body convicted of an environmental crime, the company responsible for releasing Cyanide into a sixteen mile area of the Alamosa River in 1996 is an owned subsidiary of a holding company. Yet, the subsidiary responsible was able to forfeit its "claim-bond" and left the taxpayers of the Colorado and the US to pay what is now in excess of $100 million for the clean-up which is still not complete. Worse yet, the holding company is still allowed to do business within the US without any accountability for the previous incident.

As an example of an US based corporation convicted of an environmental crime, in 1998, another corporation in Colorado violated the limits of its pollution limits allowed within the Clean Air Act. The case was for such violations over the course of four years. The corporation entered into a plea agreement and admitted that it committed numerous criminal acts and was fined $37 million. This corporation subtracted the fines and civil penalties from its net profit for the year, and gained a significant tax break. Using the fines and penalties in this way, netted much more tax gain than any charitable donation could have. Because of the profit to penalty discrepancy, this corporation continues the violations and cuts a check to the EPA for the violations. The profits made by continuing the violation far out-way the penalties. And, the penalties are far short of the cost requirements annually to meet the EPA regulations. There are many other corporations that use this form of "Compliance" because it is more profitable. The records of corporations too numerous to include are available from the EPA.

Exxon, the corporation responsible for the Valdez incident, has made great strides to gain public favor. Yet, there are miles of beach that remain "oiled". The total investment in the last fifteen years has been $2.1 billion. The reported profit of Exxon for April to June of 2004 was and estimated $5.8 billion. The actual fine ordered paid by Exxon was $125 million. The cost to Exxon was nothing and the positive publicity generated by their "Management Council" has served to increase their profits. The penalties and expenditures did nothing to change the global practices of the corporation.

The number of antitrust suits filed against corporations for price-fixing on the global markets are also to numerous to list individually. There were billions of dollars in fines levied against the corporations brought before the department of justice. There was no consideration of the amount of profits made by these corporation during their criminal activity. There was also no consideration of restitution to corporations they conspired to defraud. There was no consideration of the individual citizens around the world that they conspired to defraud. There was no restitution to the corporations or individuals who suffered hardship or lost their jobs/businesses because of the manipulation of prices world wide. The subject of price-fixing varied; from dietary supplements that are added to cereals and general foodstuffs; to erythobates and sorbates that are used as food preservatives; to Graphite Electrodes used to heat recycled metal to a molten state; Lysine used as a weight-gaining additive for livestock world-wide; and, Citric Acid which is an additive in everything from soda to your morning cereals.

These corporations were convicted of defrauding corporations and individuals in the global market by fixing a pre-agreed upon price, an arrangement that lasted as much as 30 years in some cases. These corporations falsely inflated prices on the milk our children (back to the days I was in school) were served in school as well as many other products. This in turn caused everyday items such as cereals, metals for packaging, feeds for livestock, livestock prices, etc, etc to increase as a direct result of their corporate manipulations of their product pricing.

Shockingly, many of these same corporations now have federal and state contracts. They have, since being found guilty of antitrust violations, in some cases been brought to court for other violations. Many have been sold within their corporate holding companies and now operate under a different name, but are working withing the US. Even worse, many of the corporations brought to justice during the 1990's were allowed to take their fines and penalties off their corporate net profit. The taxpayers, both in the US and Europe, paid the fines with our loss of tax revenue. Many simply filed insolvency papers and sold their holdings to another corporation owned by their conglomerate. They avoided paying the courts or those they have defrauded, and lost nothing.

The hard numbers with respect to the cost of prosecuting these cases is a near impossibility to bring into account. Thousands of hours by prosecutors and their aids, hundreds of hours within the court rooms and use of court clerks, and an indeterminable amount of natural resources, transportation expenses, and reimbursements to those brought to court to testify. The US Department of Justice spends millions to prosecute these cases. The taxpayer is often left to pay the bills after the corporations use the loop-holes they have lobbied to have legislated. In short, even when the largest and wealthiest corporations have been brought to justice for humane, environmental, or financial wrong doings.....an estimated 75% actually loose nothing of their profits in the interim following a loss in court. A shameful 25% actually profit through tax loop-holes, net profit-losses claimed by payment of penalties and fines, through the use of "bankruptcy" laws to avoid payment of other debts, or a combination of these things.

Submitted by Rick Keefer with the assistance of the DOJ, FTC, FCC, SEC, and those working at the Corporate Crimes Reporter

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