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The Corruption of Capitalism

I've spent half a century writing for radio and print (mostly print). I hope to still be tapping the keys as I take my last breath.

Corporate Malfeasance

On an almost daily basis, news breaks of another corporation being unmasked for bad behaviour, always in an attempt to pad profits:

  • In 2021, four U.S. pharmaceutical companies, including giant Johnson & Johnson, agreed to pay $26 billion following accusations they fuelled the opioid crisis that has killed more than half a million Americans.
  • Goldman Sacks sold very risky funds labelled as safe to investors it called “muppets.”
  • Volkswagen fudged emissions tests on 11 million of its vehicles in order to cheat on pollution regulations.
  • Rodelis Therapeutics bought the rights to the tuberculosis drug cycloserine and immediately increased its price from $500 to $10,800 for a month’s supply.
  • It just goes on and on.

Herewith, a few examples of the egregious actions of corporations.

Is profit a dirty word?

Is profit a dirty word?

The Fentanyl Pusher

In recent years, there has been an explosion in the number of people dying from overdoses of the synthetic opioid fentanyl. The Centers for Disease Control and Prevention reports that in the United States:

“Fentanyl and other synthetic opioids are the most common drugs involved in overdose deaths. Even in small doses, it can be deadly. Over 150 people die every day from overdoses related to synthetic opioids like fentanyl.”

Insys Therapeutics and John Kapoor

With the death toll as context, let’s meet John Kapoor, founder of the pharmaceutical company Insys Therapeutics. In May 2019, a jury convicted Kapoor of racketeering conspiracy. He was given a 5.5-year prison sentence to be served at a minimum-security facility.

The company was fined $225 million. Shortly thereafter, Insys filed for bankruptcy.

Testimony during his trial told of huge bribes paid to doctors to encourage them to prescribe his company’s fentanyl product—Subsys. Some of the inducements involved lap dances performed by strippers.

Several other Insys employees and some doctors have also been convicted in the kickback scheme.

Wells Fargo Fake Accounts

One of America’s largest banks with a storied past ran a scheme for creating false accounts for customers without their permission.

Under relentless pressure from managers to meet high sales targets, “Between 2011 and 2015, company employees opened more than 1.5 million bank accounts and applied for over 565,000 credit cards in customers’ names that may not have been authorized” (McCombs School of Business).

Wells Fargo has a storied history.

Wells Fargo has a storied history.

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Signatures were forged and fake PIN numbers set up. Customers were then charged fees for accounts they neither wanted nor authorized. Many people had their credit scores adversely affected for failing to pay maintenance charges on accounts they didn’t know existed.

The Week notes that “The bank proudly touted its account growth to investors, which helped the bank’s stock double in value between 2011 and 2015.” Executives holding stock did very well, thank you.

Wells Fargo was fined $185 million for its misbehavior, which amounts to chump change for a company that had gross profit of $78 billion in 2021. A few senior executives were allowed to resign, but nobody went to prison.

Sears Employee Mistreatment

Every year, the Sears catalogue arrived with a hefty thud on the doorsteps of American homes. The previous year’s publication could then be retired to complete its life cycle in the outhouse.

Of course, the thunder hut is where the company ended up in late 2018 and left its employees with little or nothing to show for their service. What had once been the world’s largest retailer filed for bankruptcy protection.

The management of Sears failed to keep up with a changing retail climate and it started to decline. In 2013, Edward Lampert and his hedge fund ESL Investments took over the company and the downward plunge accelerated. There were staff cuts and store closings, which served to destroy customer service so that the rot spread faster and further.

As the company was plunging into the financial glue, Lampert was selling off its few viable assets to himself. In addition, in 2013, Sears declared a dividend $509 million payable to its shareholders, the major one being ESL Investments. This was while Sears showed an operating loss of $187 million, and the pension fund was short $133 million.

Over the next few years, the company shuttered most of its stores and sold off many of its brands. The company that once had more than 500 stores has just 20 left operating under bankruptcy protection.

Lampert has mansions in Florida, Connecticut, and Colorado, as well as a luxury yacht called Fountainhead. The name of the 288-foot boat honors Ayn Rand the libertarian. She wrote a book with that title and was a champion of free-market capitalism.

the-corruption-of-capitalism

Greasing the Wheels

Unaoil is a company that says it “provides industrial solutions to the energy sector in the Middle East, Central Asia, and Africa.” It’s headquartered in Monaco and has been at the centre of investigations into its role as a broker between large corporations and government procurements. Money changes hands—large amounts of it—and contracts are awarded.

Rolls-Royce, the maker of prestigious cars and high-quality engineering products, was a client of Unaoil. In 2017, the company confessed to paying bribes through Unaoil to governments in Kazakhstan, Angola, and elsewhere, and agreed to pay a fine of $800 million.

According to the Huffington Post, other blue-chip companies such as HSBC, Samsung, and CitiGroup are under investigation for their ties to Unaoil.

Britain's Serious Fraud Office laid numerous charges against senior Unaoil executives. In July 2019, Basil Al Jarah, Unaoil partner, entered a guilty plea over bribes and received a prison sentence of three years and four months. Several other company leaders have been found guilty of making corrupt payments.

Bonus Factoids

  • Global Exchange is a human rights organization. In 2017, it named the Donald Trump business empire as the number one corporate criminal of that year.
  • Conrad Black is a former Canadian media mogul who served 42 months in a Florida prison following his conviction for fraud and obstruction of justice. Black wrote a glowing biography and several newspaper columns praising Donald Trump. In May 2019, the U.S. president granted Black a full pardon for his crimes. Both men say Black’s effusive admiration for Trump had nothing to do with the pardon.
  • The World Bank has a list of more than 600 companies that are barred from doing business with it. Canada has the most banned corporations with 117, almost all of them connected to the engineering giant SNC-Lavalin, which has been caught in a bribery scandal in Libya and elsewhere. The United States holds second place with 46 companies, followed by Indonesia (43), and Britain (40).
  • Kickback: Exposing the Global Corporate Bribery Network is the title of David Montero’s 2018 book. He quotes an American energy consultant as saying “[Bribes] are like steroids–everyone’s doing it. And if you don’t do it, you fall behind.” He says the annual total of bribes paid is around $400 billion, at the low end. The World Bank estimates the yearly figure is more like $1 trillion.

Sources

This content reflects the personal opinions of the author. It is accurate and true to the best of the author’s knowledge and should not be substituted for impartial fact or advice in legal, political, or personal matters.

© 2019 Rupert Taylor

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