It is never easy choosing the 10 worst corporations of the year there are always more deserving nominees than we can possibly recognize. One of the greatest challenges facing the judges is the directive not to select repeat recipients from last year's list.
The no-repeat rule forbids otherwise-deserving companies like Bayer, Boeing, Clear Channel and Halliburton from returning in 2004. Of the remaining pool of price-gougers, polluters, union-busters, dictator-coddlers, fraudsters, poisoners, deceivers and general miscreants, we chose the following presented in alphabetical order as the 10 worst corporations of 2004:
ABBOTT LABORATORIES: DRUG-PRICING CHUTZPAH
Chutzpah. Webster's defines the Yiddish term now incorporated into English slang as: 1) unmitigated effrontery or impudence; gall; 2) audacity; nerve. In the next edition, they may want to add: 3) See Abbott.
In December 2003, the company raised the U.S. price of its anti-AIDS drug Norvir (generic name ritanovir) by 400 percent. That is, unless the product is used in conjunction with other Abbott products in which case the price increase is zero.
Norvir has become an increasingly important treatment in recent years. Scientists have discovered that while Norvir is generally too toxic for safe use as a protease inhibitor (one category of anti-AIDS drugs), in lower doses it works well as a booster to increase the efficacy of other protease inhibitors. As a result, Norvir is frequently prescribed along with other protease inhibitors.
The Norvir price increase does not apply when the product is used as a booster with another Abbott protease inhibitor (in the combined product Kaletra). Thus the impact of the Norvir price increase is to make Kaletra far cheaper than rival combinations of Norvir and non-Abbott protease inhibitors.
Lynda Dee, co-chair of the AIDS Treatment Activists Coalition's Drug Development Committee, called the price increase "pharma-terrorism perpetrated against the patients who need new drugs the most."
Abbott said the price spike was justified by its need to raise money for research and development. "New medicines cost hundreds of millions of dollars to develop," Jeffrey Leiden, president and chief operating officer of Abbott's Pharmaceutical Products Group, told a National Institutes of Health meeting in May.
Moreover, Leiden said, the price increase would not deny any patients access to the drug. The price increase does not apply to federal AIDS drug programs, which cover 54 percent of people with HIV/AIDS. Price increases only apply to private insurers and to uninsured individuals, who Abbott says can get the product for free under a special program it operates.
Making the Abbott price jump especially pernicious in the eyes of consumer advocates was that the drug was invented on a grant from the U.S. federal government.
Because of the U.S. government's financing role, Essential Inventions, Inc., a nonprofit corporation created to distribute affordable public health and other inventions, in January petitioned the government to exercise its "march-in" rights under the federal Bayh-Dole Act and issue an open license to generic firms to produce their own version of Norvir.
"Essential Inventions is asking the Bush administration to adopt a simple rule U.S. consumers should not pay more for drugs invented on government grants," said Essential Inventions president James Love. Norvir is 5 to 10 times more expensive in the United States than in other high-income countries.
But NIH rejected the Essential Inventions proposal, arguing that companies that obtained licenses to government-funded inventions have a duty only to commercialize the inventions.
AIG: DEFERRED PROSECUTIONS ON THE RISE
When the world's largest insurer, American International Group Inc. (AIG), was charged by federal prosecutors with crimes in November, it quickly cut a deal with the U.S. Justice Department that ended a criminal probe into its finances with a deferred prosecution agreement.
In a deferred prosecution, the corporation accepts responsibility, agrees not to contest the charges, agrees to cooperate, usually pays a fine and implements changes in corporate structure and governance to prevent future wrongdoing. If the company abides by the agreement for a period of time, then the prosecutors will drop the criminal charges.
"This comprehensive settlement brings finality to the claims raised by the SEC and the Department of Justice," said AIG Chair Maurice Greenberg. "The role of the independent consultant complements our own transaction review processes. We welcome this enhancement to our overall risk management and control mechanisms."
Under the deal with AIG, an AIG subsidiary was charged with a crime, but the charge will be dismissed with prejudice if AIG abides by the deferred prosecution agreement for the next 12 months. As part of the agreement, AIG and two subsidiaries will pay an $80 million penalty, and $46 million into a disgorgement fund maintained by the SEC.
Federal officials in October filed a criminal complaint charging AIG-FP PAGIC Equity Holding Corp., a subsidiary of AIG, with violating the federal securities laws, by aiding and abetting PNC Financial Services Group, Inc. (PNC) in connection with a fraudulent transaction to transfer $750 million in mostly troubled loans and venture capital investments from subsidiaries off its books.
These transactions were previously the subject of a deferred criminal disposition involving PNC.
Earlier this year, the Department dismissed the criminal complaint against a PNC subsidiary, after the company fulfilled its deferred prosecution agreement obligations. Companies are getting off the criminal hook with these agreements, which were originally intended for minor street crimes. Now they are being used in very serious corporate crime cases.
COCA-COLA: KILLERCOKE.ORG VS. COKEKILLS.ORG
On KillerCoke.org, you'll find a raft of information on Coke and its bottlers' operations in Colombia. There is extensive documentation of rampant violence committed against Coke's unionized work force by paramilitary forces, and powerful claims of the company's complicity in the violence.
An April 2004 report from a fact-finding delegation headed by New York City Council member Hiram Monserrate contends: "To date, there have been a total of 179 major human rights violations of Coca-Cola's workers, including nine murders. Family members of union activists have been abducted and tortured. Union members have been fired for attending union meetings.
"Most troubling to the delegation were the persistent allegations that paramilitary violence against workers was done with the knowledge of and likely under the direction of company managers."
Allegations such as these formed the basis of a lawsuit filed in 2001 by the International Labor Rights Fund and the United Steelworkers of America in U.S. courts against Coke on behalf of a Colombian trade union and union leader, victims of violence at Coke bottling facilities in Colombia.
In 2003, a federal court dismissed the claims against Coke, arguing that its relationship with the owners of the Coke bottling plant in Colombia was too attenuated to hold the soft drink multinational responsible for human rights abuses at the plant. The plaintiffs have since refiled their complaint they argue the original decision was mistaken, but that Coke's subsequent purchase of the Colombia bottlers means the company is now clearly responsible for the bottlers' actions.
Here's what Coke has to say: "The pervasive violence in Colombia, and the targeting of union members by its perpetrators, has, unfortunately, touched The Coca-Cola Company in a very personal way. Employees of our Company and bottling partners in Colombia have been threatened, kidnapped, and some have even been murdered ... In a lawsuit in Colombia, the court concluded that the bottler not only took proper steps to initiate investigation by the authorities, but went further to enhance its workers' safety by heightening security at the plant."
Instructive in raising questions about Coke's good-faith concern for its workers is its unwillingness to support an independent investigation into the Colombia allegations even after the company's former general counsel, and the former assistant U.S. attorney general, Deval Patrick, had committed to one. Coke's refusal to authorize an investigation reportedly contributed to Patrick's decision to resign from the corporation.
DOW CHEMICAL: FORGIVE US OUR TRESPASSES
At midnight on Dec. 2, 1984, 27 tons of lethal gases leaked from Union Carbide's pesticide factory in Bhopal, India, immediately killing an estimated 8,000 people and poisoning thousands of others.
Today in Bhopal, at least 150,000 people, including children born to parents who survived the disaster, are suffering from exposure-related health effects such as cancer, neurological damage, chaotic menstrual cycles and mental illness. Over 20,000 people are forced to drink water with unsafe levels of mercury, carbon tetrachloride and other persistent organic pollutants and heavy metals.
Activists from around the world including human rights, legal, environmental health and other experts mobilized this year to demand that Dow Chemical, the current owner of Union Carbide, be held accountable.
Here is part of Dow's statement on Bhopal: "While Dow has no responsibility for Bhopal, we have never forgotten the tragic event and have helped to drive global industry performance improvements. This is why Responsible Care was created and why these standards are essential for the protection of our employees and the communities where we live and work. Our pledge and our commitment is the full implementation of Responsible Care everywhere we do business around the world."
In commemoration of the 20th anniversary of Bhopal, here are a few things to remember about Dow Chemical, the company that now owns Union Carbide:
Rocky Flats: The top secret Colorado site managed by Dow Chemical from 1952 to 1975 remains an environmental nightmare.
Mercury: In Canada, Dow had been producing chlorine using the mercury cell method since 1947. Much of the mercury was recycled, but significant quantities were discharged into the environment. In March 1970, the governments of Ontario and Michigan detected high levels of mercury in fish in major waterways. Dow was sued by state and local officials for mercury pollution.
Busting unions: In 1967, unions represented almost all of Dow's production workers. But since then, according to the Metal Trades Department of the AFL-CIO, Dow undertook an "unapologetic campaign to rid itself of unions."
Dursban: Trade name for chlorpyrifos, a toxic pesticide, proved to have nerve-agent effects. It was tested on prisoners in New York in 1971. It replaced DDT when DDT was banned in 1972. A huge seller, in June 2000, the EPA limited its use and forced it off the market at the end of 2004.
Holmesburg experiments: In January 1981, a Philadelphia Inquirer story revealed that Dow Chemical paid a University of Pennsylvania dermatologist to test dioxin on prisoners at Holmesburg Prison in Philadelphia in 1964.
Brain tumors: In 1980, investigators found 25 workers with brain tumors at the company's Freeport, Texas, facility 24 of which were fatal.
GLAXOSMITHKLINE: DEADLY DEPRESSING
GlaxoSmithKline, Paxil and selective serotonin reuptake inhibitors (SSRIs): It was the story that foreshadowed and strikingly paralleled the controversy surrounding Merck, Vioxx and Cox-2 inhibitors.
With the antidepressant Paxil (generic name paroxetine), the story was driven primarily from the United Kingdom, by the BBC program Panorama and a public interest group called Social Audit. They called attention to the severe side effects from the drugs notably, that they are addictive and lead to increased suicide rates in youth.
In 2003, the evidence of dangerous side effects had piled too high for British regulators to continue to ignore them. In June, the U.K. health experts advised that children should not be prescribed Paxil.
In February 2004, Panorama reported on internal documents from GlaxoSmithKline (GSK) showing the company knew that Paxil could not be proved to work in children.
In March 2004, days after the Medicines and Healthcare Products Regulatory Agency (the United Kingdom's drug regulatory agency) advised that Paxil dosages should be kept to low levels, an expert participating in the Paxil review resigned, claiming the agency had possessed evidence for more than a decade suggesting that Paxil dosages should be kept low, but failed to act on it.
By this time, the story had started to heat up in the United States. Dr. Andrew Mosholder, of the FDA Office of Drug Safety, had conducted an analysis of clinical trials related to antidepressant use in children, and found a heightened risk of suicide. But his superiors refused to let him present his findings to an advisory panel convened to look at the issue in the wake of the British action.
According to an investigation by Sen. Charles Grassley, R-Iowa, the FDA actually tried to get Mosholder to present data that deceptively underrepresented the risk.
Although Paxil is not approved by the FDA for prescription to children, doctors routinely write "off-label" prescriptions for the product for children, a practice permitted under FDA rules. More than two million prescriptions for Paxil were written for children and adolescents in the United States in 2002.
In April 2004, The Lancet, the prestigious British medical journal, published a paper showing that clinical test data did show problems with prescribing Paxil and other SSRIs to children.
In June, New York State Attorney General Eliot Spitzer filed suit against Glaxo, charging the giant drug maker with suppressing evidence of Paxil's harm to children and misleading physicians. Spitzer's complaint cited a 1998 GSK memo which states that the company must "manage the dissemination of these data in order to minimi[z]e any potential negative commercial impact."
GSK responded in a statement that it "acted responsibly in conducting clinical studies in pediatric patients and disseminating data from those studies. All pediatric studies have been made available to the FDA and regulatory agencies worldwide." Responding to Spitzer's suit, GSK claimed that, "As for the 1998 memo, it is inconsistent with the facts and does not reflect the company position."
In August, the company settled with Spitzer for $2.5 million, plus a commitment to maintain the policy of posting clinical trial results, for all drugs marketed by the company.
In October, the FDA ordered Glaxo and other SSRI makers to include a "black box" warning with their pills. The warning says SSRIs double the risk of suicide in children, though some medical researchers say the number should be higher. Glaxo continues to insist that it disclosed information to appropriate authorities as soon as it discerned important results from its clinical studies.
HARDEE'S: HEART ATTACK ON A BUN
When Hardee's introduced the Thickburger this year, Jay Leno joked that it was being served in little cardboard boxes shaped like coffins. With other major fast-food outlets moving to green salads, Hardee's revels in big beef. From Hardee's press release of Nov. 15, 2004: "Now Hardee's is introducing the mother of all burgers the Monster Thickburger™. Weighing in at two-thirds of a pound, this 100 percent Angus beef burger is a monument to decadence, yet is still a throwback, as it features lots of meat, cheese and bacon on a bun."
Eating one Thickburger is like eating two Big Macs or five McDonald's hamburgers. Add 600 calories worth of Hardee's fries and you get more than the 2,000 calories that many people should eat in a whole day, according to Michael Jacobson of the Center for Science in the Public Interest.
Hardee's makes no pretensions that the Thickburger is good for you, and has no qualms about the impact of the monster on the public's health. The fast-food pusher's new advertising campaign is straight up: "Be afraid. Be very afraid."
MERCK: 55,000 DEAD
It's not as if people in power didn't know about the impending disaster what David Graham, a Food and Drug Administration drug safety official, calls "maybe the single greatest drug-safety catastrophe in the history of this country.''
Testifying before a Senate committee in November, Dr. Graham put the number in the United States who had suffered heart attacks or stroke as a result of taking the arthritis drug Vioxx in the range of 88,000 to 139,000. As many as 40 percent of these people, or about 35,000-55,000, died as a result, Graham said.
The unacceptable cardiovascular risks of Vioxx were evident as early as 2000 a full four years before the drug was finally withdrawn from the market by its manufacturer, Merck, according to a study released by The Lancet, the British medical journal.
Authors of the Lancet study pooled data from 25,273 patients who participated in 18 clinical trials conducted before 2001. They found that patients given Vioxx had 2.3 times the risk of heart attacks as those given placebos or other pain medications.
Merck withdrew Vioxx on Sept. 30 of this year after a company-sponsored trial found a doubling of the risks for heart attack or stroke among those who took the medicine for 18 months or more. Merck says it disclosed all relevant evidence on Vioxx safety as soon as it acquired it, and pulled the drug as soon as it saw conclusive evidence of the drug's dangers. But there is evidence that strongly suggests a different version of the story. The Lancet findings came in the wake of new disclosures that suggest Merck was fully aware of Vioxx's potential risks by 2000. The Wall Street Journal revealed e-mails that confirm Merck executives' knowledge of their drug's adverse cardiovascular profile the risk was "clearly there," according to one senior researcher.
"Given this disturbing contradiction Merck's own understanding of Vioxx's true risk profile and its attempt to gloss over these risks in their public statements at the time it is hard to see how Merck's chief executive officer, Raymond Gilmartin, can retain the confidence of the public, his company's most important constituency," the Lancet editors wrote.
Dr. Graham, the federal drug-safety reviewer, continues to seek to publish his study demonstrating the dangers of Vioxx, but he has been delayed and demeaned by top officials at the Food and Drug Administration.
MCWANE: DEATH ON THE JOB
The New York Times ran a three-part series by David Barstow and Lowell Bergman that exposed the egregious safety record of McWane Inc., a large, privately held Alabama-based sewer and water pipe manufacturer.
Nine McWane employees have lost their lives in workplace accidents since 1995. More than 4,600 injuries were recorded among the company's 5,000 employees. According to the series, one man died when an industrial oven exploded after he was directed to use it to incinerate highly combustible paint. Another was crushed by a conveyor belt that lacked a required protective guard.
Three of McWane's nine deaths were the result of deliberate violations of safety standards. In five others, safety lapses were a contributing factor.
According to the Times, McWane pulled the wool over the eyes of investigators by stalling them at the factory gates, and then hiding defective equipment. Accident sites were altered before investigators could inspect them, in violation of federal rules.
When government enforcement officials did find serious violations, "the punishment meted out by the federal government was so minimal that McWane could treat it as simply a cost of doing business."
According to the Times, in one McWane oven explosion that killed an employee, Frank Wagner, McWane "hired a well-connected lobbyist to lean on Dennis Vacco, then New York State's attorney general, and ended up with a settlement in which it did not admit responsibility for the death."
The experts who looked at the case determined that the explosion that killed him was the result of reckless criminal actions by McWane, which was operating a cast-iron foundry in Elmira, N.Y., where Wagner worked.
"The evidence compels us to act," the prosecution team wrote in a confidential memorandum to Vacco in 1996. The team urged him to ask a grand jury to indict McWane and its managers on manslaughter and other charges. A grand jury inquiry, senior investigators believed, could have taken them up the corporate ladder, the Times reported.
But Vacco never sought an indictment against McWane for any crime. Only after an unusual intervention by the United States attorney in Buffalo, who threatened federal charges, did McWane agree to plead guilty to a state felony and pay $500,000.
As the Times series showed, in plant after plant, year after year, "McWane workers have been maimed, burned, sickened and killed by the same safety and health failures."
McWane says it is changing and it's certainly paying more attention to PR after the series.
"Over the last several years, our Company has embarked on significant changes that are focused on setting the industry standard in employee safety, health and environmental programs," asserts a May 2004 report from the company on health and safety.
That doesn't exactly jibe with what company managers call "the McWane way" what federal and state regulators characterized to the Times as a "lawless" and "rogue" operation that ruthlessly sought profits with disregard for worker safety and well-being.
RIGGS BANK: THE PINOCHET CONNECTION
An explosive report from the U.S. Senate Permanent Subcommittee on Investigations of the Committee on Governmental Affairs, issued in July, revealed that Riggs Bank in Washington, D.C., illegally operated bank accounts for former Chilean dictator Augusto Pinochet, and routinely ignored evidence of corrupt practices in managing more than 60 accounts for the government of Equatorial Guinea.
An ongoing internal investigation by Riggs has revealed that the bank's dealing with Pinochet dates back to 1985, while the Chilean despot remained in power, according to a November Washington Post report.
Riggs hasn't been cited for violations in connection with the Pinochet money-laundering scheme. In May, the bank paid $25 million in fines in connection with money-laundering violations related to the Equatorial Guinea and Saudi Arabian governments.
The Permanent Subcommittee on Investigations report found that from 1994 until 2002, Riggs opened at least six accounts and issued several certificates of deposit (CDs) for Pinochet while he was under house arrest in the United Kingdom and his assets were the subject of court proceedings. The aggregate deposits in the Pinochet accounts at Riggs ranged from $4 million to $8 million at a time.
Pinochet is not the only dictator for whom Riggs undertook money laundering. Equatorial Guinea is a small, oil-rich West African country dominated by a dictator, President Teodoro Obiang Nguema Mbasogo. Obiang, his family and cronies live a life of luxury, while the rest of the country remains desperately poor.
The Permanent Subcommittee on Investigations report found that from 1995 until 2004, Riggs Bank administered more than 60 accounts and CDs for the government of Equatorial Guinea, Equatorial Guinea government officials or their family members. Combined, these accounts represented the largest relationship at Riggs Bank, with aggregate deposits ranging from $400 to $700 million at a time.
Riggs does not deny these activities took place, and its internal investigation is continuing. A number of Riggs employees involved in the scandals have been fired or demoted. In July, Riggs announced that it was going to be acquired by PNC Financial Services Group (see profile of AIG above) for more than $700 million. Ongoing legal problems at Riggs could derail the deal, which is supposed to be consummated early in 2005, but for now both parties say it remains on.
WAL-MART: THE WORKFARE COMPANY
A February 2004 report issued by Rep. George Miller, D-Calif., encapsulated the ways that Wal-Mart squeezes and cheats its employees, among them: blocking union organizing efforts, paying employees an average $8.23 an hour (as compared to more than $10 for an average supermarket worker), allegedly extracting off-the-clock work, and providing inadequate and unaffordable healthcare packages for employees.
Miller's report's innovation was in documenting how Wal-Mart's low wages and inadequate benefits not only hurt workers directly, but impose costs on taxpayers. The report estimated that one 200-person Wal-Mart store may result in a cost to federal taxpayers of $420,750 per year about $2,103 per employee. These public costs include: $36,000 a year for free and reduced lunches for just 50 qualifying Wal-Mart families; $42,000 a year for Section 8 housing assistance, assuming 3 percent of the store employees qualify for such assistance; $125,000 a year for federal tax credits and deductions for low-income families, assuming 50 employees are heads of household with a child and 50 are married with two children; $100,000 a year for the additional Title I (educational) expenses, assuming 50 Wal-Mart families qualify with an average of two children; $108,000 a year for the additional federal healthcare costs of moving into state children's health insurance programs (SCHIP), assuming 30 employees with an average of two children qualify.
Wal-Mart's abuses are giving rise to countervailing efforts, but it is an open question whether the company has amassed such power that it will be able to defeat such initiatives.
In California, in November, the company was able to stave off by a 51-to-49 percent margin a proposition that would have required every large and medium employer in the state to provide decent healthcare coverage for their workers, with the employer contribution set at a minimum of 80 percent of costs. Wal-Mart dumped a half million dollars into the anti-Proposition 72 campaign just a week before the vote.
The biggest immediate challenge facing Wal-Mart is a class action lawsuit filed by its women workers. The women allege that Wal-Mart pays female workers less than men, promotes men faster than women and men above more competent women, and fosters a hostile work environment.
While Wal-Mart is willing to bend to consumer demand on marginal issues like covering over the headlines on Cosmopolitan magazine, it is not so flexible on respect for worker rights. Nor is there any sign of a consumer rebellion on anything like the scale necessary to make the company revisit its employment policies.