Saturday May 18, 2013
Portrait of a Corporate Criminalby Daniel Johnson, Deputy Executive Editor
Under California’s Three Strikes Law, an individual criminal faces life in prison. BP is long past its three strikes.
(CALGARY, Alberta) - Criminality is rampant in the world of business--for all corporate sizes. But it is rare for miscreants to be brought to any effective justice. Wall Street is the most obvious example where a handful of firms virtually brought the world economy to its knees, causing untold pain and hardship to hundreds of millions around the globe, and no one has actually been held accountable.
“Corporations are people,” Mitt Romney declared in the run-up to his nomination in the last election. This can be interpreted in two ways. One, where under the Fourteenth Amendment, corporations are considered to be legal persons; and second, in the way that Romney seemed to argue where corporations are made up of people.
BP is the third-largest energy company and fourth-largest company in the world measured by 2011 revenues and is one of the six oil and gas “supermajors”. BP's operations in the United States comprise nearly one third of its worldwide business interests. Its 2011 revenue was $386 billion with total assets of $290 billion.
The British oil company has agreed to pay $4.5 billion in fines and penalties and to plead guilty to 14 criminal charges related to the 2010 Deepwater Horizon rig explosion that killed 11 people and caused a giant oil spill in the Gulf of Mexico. That amount includes $1.256 billion in criminal fines, $2.394 billion to the National Fish and Wildlife Foundation for remediation efforts and $350 million to the National Academy of Sciences.
In addition, the company could owe as much as $21 billion in pollution fines under the Clean Water Act in a case still to go to court. BP also agreed to pay $525 million to settle civil charges by the Securities and Exchange Commission for misleading investors about the flow rate of oil from the well.
The top BP officers aboard the drilling rig, Robert Kaluza and Donald Vidrine, were charged with manslaughter for each man who died, the government saying that the officials were negligent in supervising tests to seal the well. Also charged was David Rainey, BP’s former vice president for exploration in the Gulf of Mexico, with obstruction of Congress and making false statements for understating the rate at which oil was spilling from the well. (The strange thing about this kind of lie is: Did they think no one else would figure out the real numbers?)
Brandon L. Garrett, a law professor at the University of Virginia who studies corporate prosecutions, said the government could still invoke “debarment,” or disqualification from getting federal contracts. Although debarment is rare, he said, “that could be a very large blow both to reputation and to business BP does with the federal government.”
Under California’s Three Strikes Law, an individual criminal would face life in prison. The equivalent, in the corporate world, would put a company out of business. I’ll pick up this idea a little further on.
BP, as a company, is long past its three strikes. In newspaper parlance, when individual suspects are arrested or identified, it is said, “they were known to police”. BP, as a corporation, is “known to the Department of Justice”.
In March 2005, BP's Texas City refinery, one of its largest, exploded and killed 15 workers, injured another 180 and forced thousands of nearby residents to remain sheltered in their homes. A 20-foot column filled with hydrocarbon overflowed to form a vapour cloud, which ignited. The incident came at the end of a series of less serious accidents at the refinery, and engineering problems not addressed by the management. Maintenance and safety at the plant had been cut as a cost-saving measure, the responsibility ultimately resting with executives in London.
There have been several investigations of the disaster, the most recent being from the US Chemical Safety and Hazard Investigation Board which "offered a scathing assessment of the company." OSHA found "organizational and safety deficiencies at all levels of the BP Corporation" and said management failures could be traced from Texas to London.
The company pleaded guilty to a felony violation of the Clean Air Act, was fined $50 million, the largest ever assessed under the Clean Air Act, and sentenced to three years probation.
On 30 October 2009, the US Occupational Safety and Health Administration (OSHA) fined BP an additional $87 million, the largest fine in OSHA history, for failing to correct safety hazards revealed in the 2005 explosion. Inspectors found 270 safety violations that had been previously cited but not fixed and 439 new violations.
In 2010, BP agreed to pay a settlement of $50.6 million for the safety violations that were not fixed after the explosion. In July 2012, the company agreed to pay $13 million to settle the new violations. At that time OSHA found "no imminent dangers" at the Texas plant, which is up for sale. Thirty violations remain unresolved.
In September 1999, one of BP’s US subsidiaries, BP Exploration Alaska, agreed to resolve charges related to the illegal dumping of hazardous wastes on the Alaska North Slope, for $22 million. The settlement included the maximum $500,000 criminal fine, $6.5 million in civil penalties, and BP’s establishment of a $15 million environmental management system at all of BP facilities in the US and Gulf of Mexico that are engaged in oil exploration, drilling or production.
The charges stemmed from the 1993 to 1995 dumping of hazardous wastes on Endicott Island, Alaska, by BP’s contractor Doyon Drilling. The firm illegally discharged waste oil, paint thinner and other toxic and hazardous substances by injecting them down the outer rim, or annuli, of the oil wells. The company failed to report the illegal injections when it learned of the conduct, in violation of the Comprehensive Environmental Response, Compensation and Liability Act.
In August 2006, BP shut down oil operations in Prudhoe Bay, Alaska, due to leaking wells. The wells were leaking an insulating agent called Arctic pack, consisting of crude oil and diesel fuel, which is placed between the wells and ice to prevent freezing. BP had also spilled over one million litres of oil in Alaska's North Slope due to corrosion in the feeding pipeline to the Alaska Pipeline. This corrosion is caused by sediment collecting in the bottom of the pipe, protecting corrosive bacteria from chemicals sent through the pipeline to fight these bacteria. There are estimates that about 5,000 barrels (790 m3) of oil were released from the pipeline. To date 1,513 barrels (240.5 m3) of liquids, about 5,200 cubic yards (4,000 m3) of soiled snow and 328 cubic yards (251 m3) of soiled gravel have been recovered.
The next year Alaska Department of Environmental Conservation officials reported a toxic spill of methanol (methyl alcohol) at the Prudhoe Bay oil field managed by BP. Nearly 2,000 gallons of mostly methanol, mixed with some crude oil and water, spilled onto a frozen tundra pond as well as a gravel pad from a pipeline. Methanol, which is poisonous to plants and animals, is used to clear ice from the insides of the Arctic-based pipelines.
BP was named by Multinational Monitor as one of the ten worst corporations in both 2001 and 2005 based on its environmental and human rights records. In 1991 BP was cited as the most polluting company in the US based on EPA toxic release data.
In 1988, a Libyan bomb planted on board an airliner exploded over Lockerbie, Scotland, killing 270 people. BP admitted that it had lobbied the British government to conclude a prisoner-transfer agreement which the Libyan government had wanted to secure the release of Abdelbaset al-Megrahi, the only person convicted for the bombing. BP said that it pressed for the conclusion of prisoner transfer agreement (PTA) amid fears that delays would damage its "commercial interests" and disrupt its £900 million offshore drilling operations in the region, but it denied claims that it had been involved in negotiations concerning the release of Megrahi. Profits always come before people.
In 2009 BP spent nearly $16 million lobbying the US Congress. in 2011, BP spent a total of $8,430,000 on lobbying and hired 47 lobbyists.
Conducting business in modern society is a public trust and is subject to regulation in order to ensure that the public is not harmed. An obvious example is a restaurant where the public health department conducts regular inspections to ensure that food is handled safely. As a patron of a restaurant, you have to feel confident that when you enter, buy and consume a meal, it will not poison or kill you.
It’s even more incumbent on larger companies, like BP, to do everything possible to ensure the safety of its workers, the public and the environment that belongs to everyone.
In a manner similar to that of a restaurant, a corporation is licensed (I.e., granted a charter) to conduct its business. Just as a restaurant can lose its license to operate, I believe that egregiously criminal companies like BP should lose their charter. They should be out of business.
Now, considering that the world’s largest corporations make up the warp and woof of our societies, such a disentanglement would not be particularly easy, but it is possible.
I would handle it this way. A large company that loses its charter would not just “disappear”. I suggest that it would be forfeited to its employees—all those who were not involved or complicit in the criminality. They are not the people you want to be hurt.
The senior managers (CEOs, VPs etc) would lose their jobs, their pensions, their golden parachutes and whatever part of their personal fortune that was comprised of company stock because, of course, the stock would be rendered worthless—go to $0. All the shareholders, too, would lose their investments.
Such draconian results would give everyone a serious incentive to act honestly and above board.
Would such a thing be possible? Only if the electorate would wake up and realize that corporate malfeasance only occurs because they, through their elected representatives, allow it to happen.
Daniel Johnson was born and raised in Calgary, Alberta. He is currently working on a book The Occupy Wall Street User Manual which is scheduled for publication in spring 2013 by Polymath Press In 1990 he published his first (and so far, only) book: Practical History: A guide to Will and Ariel Durant’s “The Story of Civilization” (Polymath Press, Calgary)
Newly appointed as the Deputy Executive Editor in August 2011, he has been writing exclusively for Salem-News.com since March 2009 and, as of summer 2012, has published more than 210 stories. View articles written by Daniel Johnson
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