Scandal follows Scandal but Who Needs Regulation?

Oh my goodness! Volkswagen, which distanced itself from its Adolf Hitler aided beginnings and the taint of using slave labor to become the largest automobile manufacturer in the world has exploded in the biggest manufacturing scandal of the year – maybe in several years but who can keep track?

From Upton Sinclair’s exposure of corporate meat packing fraud and filth to today, the rolls are filled with dishonorable corporate activity. I know, I know, not all of theM, but how many bad apples in a barrel before you don’t want anything to do with the whole lot?  Here are a couple of lists just to jar loose the memories. The Biggest 25 Ever (probably not, but all recent.)  And here’s a Wiki list.  It’s pretty short on Gilded Age scandals but still, many.

So, the problem is not, nor has ever been, one bad apple.  The problem is the set up of corporations to spin the “virtuous circle” of profits and greed while resisting any kind of regulation or oversight for the common good.  Today’s James B Stewart article in the NY Times makes the point about VW with plenty of detail:  it was not just the CEO Winterkorn, nor a rogue engineer somewhere.  It starts at the top, with the Board.

Volkswagen’s recent history — a decades-long feud within the controlling Porsche family, a convoluted takeover battle and a boardroom coup — has dominated the German financial pages and tabloids alike. This week, the German newspaper Süddeutsche Zeitung compared Volkswagen’s governance to that of North Korea, adding that its “autocratic leadership style has long been out of date.” It said “a functioning corporate governance is missing.”

Image result for volkswagen pollution

… I spoke this week to a longtime former senior Volkswagen executive, who agreed that a scandal, especially one involving emissions, was all but inevitable at Volkswagen. He cited the company’s isolation, its clannish board and a deep-rooted hostility to environmental regulations among its engineers. …  engineers felt that the politicians were guilty of rank hypocrisy, especially in the United States, also grumbling that electric cars make no sense as long as power plants are burning fossil fuels.

“There’s an attitude of moral superiority there,” he said. “The engineers think they know best.”

And, of course, it’s not new. Cheating, cheating, everywhere.  Because, who does the testing? Why those who have products to be tested! Wahoo!  Let the students test themselves…

Paul Krugman weighs in with a quick summary of very recent corporate scandals and hammers the drum for a return to reasonable regulation.

There are, it turns out, people in the corporate world who will do whatever it takes, including fraud that kills people, in order to make a buck. And we need effective regulation to police that kind of bad behavior, not least so that ethical business people aren’t at a disadvantage when competing with less scrupulous types. But we knew that, right?

Well, we used to know it, thanks to the muckrakers and reformers of the Progressive Era. But Ronald Reagan insisted that government is always the problem, never the solution, and this has become dogma on the right.

As a result, an important part of America’s political class has declared war on even the most obviously necessary regulations.

And ALL PRAISE! to the folks who found out:

Peter Mock, European managing director of a International Council on Clean Transportation and his American counterpart, John German, were sure that tests would show VW diesel to be clean!  They hired West Virginia University’s  Center for Alternative Fuels, Engines and Emissions where Dan Carder was director and research assistant professor Arvind Thiruvengadam and his colleagues hoped to be able to publish a few scholarly articles from the test results.  No one had an idea that anything was wrong.  When the results started coming in they re-did and re-did the tests, doubting themselves.

The initial test results were ready a year ago to little noise except for the EPA which began testing of its own followed by European authorities.  Bam! The VW castle is barely standing. In fact, the whole diesel line of fossil fuels may die.  The silver lining? Perhaps, to reclaim the trust of the public, VW will lead the way in to renewable fuels. Perhaps.

And, by the way, were the code that was jiggered to falsely give superb emission reading “open code” instead of proprietary, some young nerds might have discovered the problem several years ago.

Climate Change Deniers: Follow the Money

Books Merchants_of_DOUBTIn 2010, after 5 years of research, science historians Naomi Oreskes and Erik Conway, published Merchants of Doubt: How a Handful of Scientists Obscured the Truth on Issues from Tobacco Smoke to Global Warming.  In it they located a small group of cold-warrior physicists who, once the Soviet Union fell, looked for other threats to free market capitalism.  They found it in government regulation and began working with the major tobacco companies to provide “scientific” argument that tobacco could not be shown to be damaging to health and should not be regulated.  That fight lost, they moved on to do similar work for the fossil fuel corporations.  The book was well documented and widely praised except, of course, by those who came under its scrutinity.

In 2014  Emmy Award-winning filmmaker Robert Kenner released a 96 minute documentary film, also called Merchants of Doubt, based on the book. [Available NetFlix DVD and Amazon streaming]

Books climate-deception-dossiersYou’d think that would be enough to open a few, necessary eyes — those which have believed the denials of the past decade or so.  Maybe a few, but not enough.  Now comes another broadside.  The Union of Concerned Scientists along with the Climate Investigations Center has published a 340 page report based of Freedom of Information Act obtained documents presenting the efforts to sow doubt and confusion.  The report is called The Climate Deception Dossiers.  It gathers letters, e-mail showing,

“…that the world’s largest fossil fuel companies—BP, Chevron, ConocoPhillips, ExxonMobil, coal giant Peabody Energy, and Shellwere fully aware of the reality of climate change but continued to spend tens of millions of dollars to sow doubt and promote contrarian arguments they knew to be wrong. Taken together, the documents show that these six companies, in conjunction with the American Petroleum Institute (API)—the oil and gas industry’s premier trade association—and a host of front groups, have colluded to intentionally deceive the public; their corporate officials have known for at least two decades that their products are harmful; and their disinformation campaign continues today—despite the fact that most of the companies now publicly acknowledge the reality of anthropogenic, or human-caused, climate change. [UCS article ]

Among the organizations fighting tooth and nail to disabuse the public of the facts was the infamous ALEC which as long ago as 1998 had workshops at its annual meeting about the dangers of climate science. As recently as 2014 this was in the program.

See page 17 on

See page 17 on

In the section “Holding fossil fuel companies accountable” UCS has suggestions for what should be required of the companies which have helped delay urgent action.

The full report is a PDF here.

When Jon Stewart Took on Wall Street

Joe Nocera in the NY Times has a nice memory of how Stewart took apart the Wall Street media.

“Stewart had no special Wall Street knowledge, as he was the first to admit. What he had was a nose for a scam, and an uncanny ability to articulate what the rest of us were feeling.

“He mocked the way Wall Street firms paid ungodly sums to settle government charges without ever admitting guilt (a subject later championed, less humorously, by Federal Judge Jed Rakoff). He lampooned the way dubious deals — particularly the notorious Goldman Sachs Abacus deal — were legal, even as they oozed with sleaze. After J.P. Morgan’s big London Whale losses, he showed a Senate hearing where senators cravenly solicited regulatory advicefrom the company’s chief executive, Jamie Dimon — and then noted that J.P. Morgan was often their biggest campaign contributor. And so on.

Punishment for Felonious Banks

Robert Reich, economist, author, blogger, public servant, is always worth turning to in order to understand the world, and some striking alternatives to the status quo.  Here is a June article from his web site, recommending some innovative punishments for felonious banks.

When real people plead guilty to felonies, they go to jail. But big banks aren’t people despite what the five Republican appointees to the Supreme Court say.

The executives who run these banks aren’t going to jail, either. Apologists say it’s not fair to jail bank executives because they don’t know what their rogue traders are up to.

Yet ex-convicts often suffer consequences beyond jail terms.

In many states they lose their right to vote. They can’t run for office or otherwise participate in the political process.

So why not take away the right of these convicted banks to participate in the political process, at least for some years? That would stop JPMorgan’s Dimon from lobbying Congress to roll back the Dodd-Frank act, as he’s been doing almost non-stop.

Why not also take away their right to pour money into politics? Wall Street banks have been among the biggest contributors to political campaigns. If they’re convicted of a felony, they should be barred from making any political contributions for at least ten years.

Read All

Corporate Welfare

Editorial in the NY Times today

… as labor standards have eroded, allowing profitable corporations to pay chronically low wages, taxpayers are not only supporting the working poor, as intended, but also providing a huge subsidy for employers by picking up the difference between what workers earn and what they need to meet basic living costs. The low-wage business model has essentially turned public aid into a form of corporate welfare.

I’m sure all sorts of investigations are going to pop-up to find out why this is happening….

Short of cracking down on such welfare frauds, California has an idea worth pursuing…

In 2016, California will start publishing the names of employers that have more than 100 employees on Medicaid and how much these companies cost the state in public aid.


More Bunko-Steerers in the Health Care Fight

“The television ad sponsored by the advocacy arm of the National Federation of Independent Business featured a small-business owner in Arkansas, frustrated at what he said are the higher bills he has seen since the Obama administration’s health care plan went into effect — and pointing blame at Senator Mark Pryor, a Democrat considered one of the most vulnerable incumbents facing re-election this fall.

“But the largest chunk of the money donated to the nonprofit group’s advocacy came not from small-business owners, but rather from health insurance companies trying to repeal a health care tax, the most recently available federal tax records show.

“The largely hidden role of the for-profit health insurers highlights the increasingly confusing world of campaign finance, as nonprofit groups like theNational Federation of Independent Business and its Voice of Free Enterprise program can keep their donor lists secret, and then present their carefully crafted message, financed in large part by big business, as if it is coming from, perhaps, a more sympathetic voice.

NY Times

PG&E Cut Back Inspections Against Own Engineers Advice

Oh let’s hear it for more self-regulation!

PG&E dramatically slashed spending on gas transmission pipeline safety in the three years before the San Bruno explosion — so much so that the company’s own engineers warned that it was tempting fate, newly released documents show.


SF Gate/ 

Going After the Market Mobsters

Jesse Eisinger from ProPublica, via the NY Times, reminds us again how culpable big brokerage firms, and their employees, were for the late, unlamented, financial catastrophe.

On March 16, 2007, Morgan Stanley employees working on one of the toxic assets that helped blow up the world economy discussed what to name it. Among the team members’ suggestions: “Subprime Meltdown,” “Hitman,” “Nuclear Holocaust” and “Mike Tyson’s Punchout,” as well a simple yet direct reference to a bag of excrement.

Ha ha. Those hilarious investment bankers.

Then they gave it its real name and sold it to a Chinese bank.

… documents suggest a pattern of behavior larger than this one deal: people across the bank understood that the American housing market was in trouble. They took advantage of that knowledge to create and then bet against securities and then also to unload garbage investments on unsuspecting buyers.

NY Times

Let’s hope that the new Chair of the SEC, Mary Jo White –as proposed by President Obama– will go after these corporate mobsters as hard as she did John Gotti when she was United States Attorney in New York.

NY Times

UBS About to Settle

Every time the venerable Swiss banking hulk appears in the news my mind swings instantly to one of the first of the new breed of GOP nasty-guys who monopolized my anger button: Texas Senator and John McCain adviser Phil Graham. 

Former Texas Sen. Phil Gramm has emerged as the key behind-the-scenes economics/Wall Street guy for John McCain and is being touted as the treasury secretary in waiting. Since 2002, Gramm has been an executive with the U.S. operations of UBS, the giant Swiss Bank. Anunintentionally hilarious interview with Gramm on theWall Street Journal editorial page last week asserted that Gramm has “been a key instigator of some of the biggest money-making UBS deals of recent years.” The interview was noteworthy not just for first-class butt-kissing, but for deliberately gliding over the avalanche of disasters in the past year that has turned UBS from a respected Swiss titan of discretion and risk management into a laughing stock. As this one-year chart shows, UBS’s stock lost nearly 70 percent of its value and now stands at levels not seen since 2002, when Gramm signed up. [Slate]

Named one of the top 25 responsible for the financial melt-down by Time magazine and the man who opined that his fellow citizens (who he hoped would vote for his man McCainn) were “a nation of whiners” he makes hackles rise every time he opens his mouth.

Sweet merciful crap, will this guy ever just shut the hell up already? Economics-wise, he’s History’s Greatest Monster. He and his wife Wendy were prime shakers behind energy deregulation—leading directly to the Enron scandal and collapse (Wendy both helped deregulate Enron and then went to work for them at a tidy salary, ka-ching, because that is how the Phil Gramm household operates.) His deregulation penchant also brought us all the unregulated glory of credit default swaps, leading Time magazine to call him out as one of the 25 People to Blame for the Financial Crisis. Oh, and then he fled from the senate to a sweetheart lobbyist position at UBS, just in time for UBS to wreck itself mightily in the subprime mortgage business, get called out for intentionally cheating customers, and be probed for assisting client money laundering. If there’s one guy who knows how to cause epic, nation-shattering economic fiascos, it’s Phil Gramm. If you told me he was one of the four horsemen of the economic apocalypse, my only reply would be to wonder if maybe he wasn’t actually two or three of them.

Hunter at Daily Kos

Anyhoo, UBS was in the news today:

UBS, the Swiss banking giant, is close to reaching settlements with American and British authorities over the manipulation of interest rates, the latest case in a multiyear investigation that has rattled the financial industry and spurred a public outcry for broad reform.

UBS is expected to pay more than $450 million to settle claims that some employees reported false rates to increase the bank’s profit, according to officials briefed on the matter who spoke on the condition of anonymity because the talks were private.

If the bank agrees to the deals with various authorities, the collective penalties would yield the largest total fines to date related to the rate-rigging inquiry and would increase the likelihood that other financial institutions would face stiff penalties.

You  think Graham is going to stand up and say a word of contrition? Nah.  He’s saving his mouth for some nasty words for the poor, about whom he once said that food stamps should be cut because “all our poor people are fat.” 

An Enemy of the People — Where Was He in the Drug Compounding Scandal?

I watched Henrik Ibsen’s 1888 blockbuster play, Enemy of the People, last night in the 1971 BBC version, having been reminded of it in a book about whistle blowers and the risks they run. There is of course the 1966 Arthur Miller version available, the 1978 version with Steve McQueen in the role of the Enemy, and a new “jagged fist of a revival” playing on Broadway, but strangely — in a country so much embroiled in like issues for the last 30 years — the 124 year old “contemporary” play would not surface as a touchstone for most.

The chemist of a small town in Norway, always somewhat of a gadfly, comes upon the earth shaking discovery that the water being bottled in the town and shipped all over the country, and attracting visitors to the spa, is contaminated.  His seeing a pattern in illnesses of locals made him suspicious.  A finding by a test lab has confirmed.  He suspects the problem is effluent from the local tannery — owned by his father-in-law– seeping into the groundwater.

Beginning as an ebullient town crier —  “gee, aren’t you glad I found this out before more people get really sick”–  in the space of the short play he discovers he has not an ally in the world but his daughter, and to a lesser extent his wife.  The once promising muck-raking editor bows out because of financial compromises.  The head of the local trades-unions understands the potential loss of jobs if the news get out. His own brother, head of the plant, is his worst enemy, exploding personal, political and economic land mines every step of the way.

In the end, no one wants to hear his news.  He is declared an enemy of the people, his warnings ignored, and all but run out of business. The bottling plant goes on…doom, we are sure, is right around the corner.

Gee, how little times have changed!

 A federal inspection of a company whose tainted pain medicine has caused one of the worst public health drug disasters since the 1930s found greenish-yellow residue on sterilization equipment, surfaces coated with levels of mold and bacteria that exceeded the company’s own environmental limits, and an air-conditioner that was shut off nightly despite the importance of controlling temperature and humidity.

The findings, made public on Friday by the Food and Drug Administration, followed a report from Massachusetts regulators on Tuesday and offered disturbing new details in an emerging portrait of what went wrong inside the New England Compounding Center, the pharmacy at the heart of a national meningitisoutbreak in which 25 people have died, 313 more have fallen ill and as many as 14,000 people are believed to have been exposed.   NY Times

The corruption, which Dr.Thomas Stockman memorably describes as spreading like black-spot rose fungus over the whole population is still spreading.  The industries and their abettors in Congress and regulatory agencies always believe profits trump all other arguments.  Heck it’s a free market — you can chose to take that spinal injection, or not!

In this case, as is too familiar, no whistle blower stood. It took deaths and illness to blow loud enough to be heard.   There have been some brave men and women who have stood up over the decades but they are in short supply, intimidated by corporate bullies, the fear of ostracization — being declared An Enemy of the People– and afraid of losing their livelihood.

It’s hard to know how to counter the natural fear.  Perhaps a National Hall of Fame for Whistle Blowers, and of course life-long pensions from the companies whose practices they halted.

Back to the play.  The startling part, to me, was the abrupt John Galtian turn Stockman takes.  Ayn Rand hadn’t written her infamous book yet, but the notion of “supermen” who knew more than the lowly common herd did not begin with her.  Instead of organizing  education and opposition to the idiocy of the bottling plant owners –and a large part of the population– Stockman goes off on megalomaniac tear, condemning the townspeople to their faces –without explaining the issues and looking for allies– and proclaiming that rule by the uncommon and extraordinary man was the only way to peace and tranquility — Plato’s philosopher’s king.  There is a clear whiff of despotism in his attitude — however good his intentions.  It is little wonder that Hitler found Ibsen’s plays to be particularly instructive.


I am far from believing that all decisions made by the demos are sanctified by truth and as often, are arrived at flown in on a carpet of lies.  Nevertheless, Stockman’s hasty rejection of all decision making by other than the superior man tells us about the temperament of his creator and his lack of faith in facts, reason and persuasion.  Hell yes!  Do it my way!