Thursday, September 27, 2007

2008 Greenwash Awards

Posted by Pratap Chatterjee on September 27th, 2007

Which are the world's worst multinationals? Which are the best? These are questions CorpWatch gets asked practically everyday. Just to clarify, we do not rank good corporations or endorse any of them, for several reasons: today's idols sometimes turn out to have feet of clay. And we see our job as investigators of malfeasance. For those who want to do the opposite, there are plenty of groups out there who promote "socially responsible" businesses, and we encourage you to look them up. (We don't have a list of these groups for the aforementioned reasons, but we do have a guide to the principles that we believe good businesses should follow -- and we leave it to you, our gentle readers, to apply this criteria to evaluate corporations.)

But we strongly believe that it is very important not to take corporate claims at face value, because sometimes these companies are not telling the whole truth. This is known as "greenwash" and to see a history of this phenomenon, we urge you to check out our short history of the subject, in this handy guide written by Josh Karliner, the founder of CorpWatch.

Today, there is an opportunity for you to get your favorite (or maybe, least favorite) multinational nominated for a "Greenwash" award -- Friends of the Earth Switzerland is holding its fourth annual award ceremony in January 2008, to coincide with the annual gathering of Fortune 500 chieftains in Davos. You can take part in this contest by clicking here

(Previous winners from 2005, 2006 and 2007 are available online.)

If you have questions, contact Oliver Classen who is coordinating the awards ceremony.

In case you are wondering, how do you find out which companies are claiming to be sustainable? Well, here's a tip -- there's a group in the Netherlands that collects these reports: the Global Reporting Intitiative. You can even search their database to look up your favorite/least favorite company. GRI is about to launch a tool on October 1st, 2007 that will allow you to rank these reports -- if you are so inclined.

Read the reports, search our website and that of Multinational Monitor, and then contact groups on the ground to see if these companies are telling the truth or not.

Remember the deadline to nominate a company for the Public Eye on Davos award is September 30th, 2007!

Contractor Rock Bands Jam with Military

Posted by Pratap Chatterjee on September 27th, 2007

You've heard of golf junkets for politicians and pay-offs for disc jockeys who help get artists into the Top 40. But government bureaucrats invited to play Grateful Dead-style music and rock music covers from the Clash with military contractors looking for work? Welcome to GitRockin, a fund-raiser to be held in Washington DC on October 18th.

Ken Sandler of the Defense Information Systems Agency (DISA), a division of U.S. Central Command, will play the drums with Jim Ittenbach, a Verizon engineer under contract with DISA. The pair belong to a band called Troubled Spirit. They play songs like Rolling Stones' Sympathy For The Devil and REM's End Of The World As We Know It.

For the October 18th event, Troubled Spirit has renamed itself the DISA-Peering Act, after the agency that they both work at. Our question is will they play one of their classic covers: the Rolling Stones Can't Always Get What You Want or will it be the Beatles Come Together?

Then there is an all contractor band composed of a vocalist from Perot Systems and a guitarist from AT&T. Songs on their previous play lists include The Clash's I Fought the Law and English Beat's Save it for Later.

CorpWatch asked a former senior government official how ethical this was. (Sorry, we can't tell you who, but he goes way to the top) His response: "There is an Office of Government Ethics regulations at 5 CFR 2635 that talks about "impartiality" in performing a Federal employee's duties, but that was about the closest thing I could find. I suppose that one could argue that a Federal employee participating in this sort of thing loses his/her "impartiality", but that's about it."

The event, which is being held at the State Theater in Falls Church, Virginia, is a benefit for the United Service Organizations (USO) that provides charity to the United States Armed Forces personnel and their families. Iraqis waiting for handouts may just have to suffer in silence while Tacocat belts out REM's Fables of the Reconstruction.

Friday, September 21, 2007

Who's Really Paying the High Prices for Your Pharmaceuticals

Posted by Stan Cox

Hazardous imports have been the top story on the evening news for weeks now. But the poor quality of some foreign-made products is only half the story. Before we ever see those products, manufacturing plants in the countries of origin can pose an even greater danger to human and ecological health.

Take India, which is now our biggest foreign source of pharmaceuticals. A just-published study by Sweden's Goteborg University shows that, whatever the quality of the drugs being shipped out of India, they are leaving behind a toxic mess. Even after days in a water-treatment plant, effluents discharged into streams and rivers in one Indian region show concentrations of antibiotics and other drugs at 100 to 30,000 times the levels considered safe.

In a 2005 visit to villages in that area near Patancheru, in the state of Andhra Pradesh, I spoke with people who’d broken out in rashes from bathing in water from their own wells; farmers who’d left rice paddies unsown because their irrigation water was ruined; and herders whose water buffalo had dropped dead while grazing -- damage they attributed to pollution from the 90 or more bulk-drug factories in the vicinity. Health surveys have shown higher rates of cancer and other illnesses in villages around Patancheru’s "special economic zone" than in more distant villages.

State law says that the factories must haul their toxic wastes to an effluent treatment plant run by Patancheru Enviro Tech, Ltd. (PETL) on a tributary of the Nakkavagu rivulet. The treatment plant’s outflow into the Nakkavagu (which waters a valley dotted with 14 villages) has often been found to carry industrial pollutants at many times the statutory limits.

Now the Swedish study, recently published online by the Journal of Hazardous Materials (abstract here free) has found record-breaking concentrations of eleven drugs – antibiotics and treatments for high blood pressure, ulcers and allergies – in wastes flowing from the PETL plant.

Noting that "to the best of our knowledge, the concentrations of these 11 drugs were all above the previously highest values [ever] reported in any sewage effluent", the authors singled out the antibiotic Ciprofloxacin (Cipro), which flows out of the plant at the rate of 100 pounds of active ingredient per day. That, say the authors, "is equivalent to the total amount consumed in Sweden (population nine million) over an average 5-day period"! Concentrations of five other antibiotics were found at levels that are toxic to plants, blue-green algae, and a range of bacteria. And before it leaves the facility, the stew of drugs is mixed with human sewage, creating perfect conditions for breeding dangerous, antibiotic-resistant bacteria.

In June, a front-page story by Washington Post reporter Marc Kaufman revealed that there are virtually no controls on the quality of drugs being imported from India. He wrote that India and China together supply as much as 20 percent of the US market for generic and over-the-counter drugs and 40 percent of all bulk drugs used here and that the two nations' share may rise to 80 percent by 2022. India’s share of the US market in 2006 was $800 million, exceeding China’s.

According to Kaufmann, the FDA conducted 1222 quality-assurance inspections of domestic drug-manufacturing plants in 2006. That same year, the agency carried out only 32 inspections of Indian drug plants, mostly to check on new import applications, not for quality control by existing suppliers. And "on-the-ground inspections of Indian and Chinese plants remain rare and relatively brief and are always scheduled in advance, unlike the surprise visits that FDA inspectors pay to domestic manufacturers." There is no indication that FDA inspectors pay any attention to environmental impacts of the plants.

The Swedish researchers calculated that if the quantities of pharmaceuticals they detected being released from the Patancheru treatment facility in a single 24-hour period could be collected and sold in Sweden, they would fetch an amount approaching $200,000, even in generic form. But, they wrote, because the production costs are so much lower than the eventual retail price, it is cheaper for companies to waste the drugs than to invest in pollution control.

When I returned to India earlier this year and checked on the current state of pollution in Patancheru, I was told that burgeoning export-drug production is putting more pressure than ever on the system. Meteorologist Dr. S. Jeevananda Reddy -- a former chief technical advisor to the United Nations and now a campaigner for tougher policies on pollution in the Patancheru area -- told me that the sheer quantity of drugs that plants are producing means that they pump out far more waste water than the treatment plant can handle.

The state permits each company to dispose of only a certain amount of water per day, and if its chemical concentration is too high, the company is fined. But, said Dr. Reddy, "The fines are peanuts to them." And, of course, the effluent is not even tested for presence of pharmaceuticals. The bulk-drug plants are often producing at two, three, sometimes ten times the permitted capacity. Reddy has watched as tanker trucks full of effluent from drug factories are turned away by the water treatment plant because their company's daily quota has been exceeded. He says that rather than returning to the factory, the trucks will often head out into the countryside to dump their load. Those wastes would contain, if anything, higher concentrations of pharmaceuticals than seen in the Swedish study.

So when the alarm is raised over hazardous toys, food, and drugs imported from China, India, or other countries, it may be that people living and working downstream or downwind from the foreign factories who could well be paying the highest price of all for our insatiable demand.

Friday, September 14, 2007

Accounting for Errant Auditors

Posted by Pratap Chatterjee on September 14th, 2007

The U.S. Securities and Exchange Commission (SEC) brought charges against 69 accountants for failing to register with the Public Company Accounting Board (PCAB) earlier this week. This somewhat obscure action is the latest ripple in the wave of crackdowns that followed the Enron accounting scandals in 2001 -- to break up the all too cozy relationship between auditors and the multinationals that they are supposed to be policing.

Governments allow companies to close their financial books at the end of the fiscal year, if a qualified accountant has signed off on it. The problem is that both the companies and the auditors are private entities whose ultimate motive is to make a profit, so there is potential for one or both of the two not to report any cooking of the books, unless they know that a regulator might catch them and discipline them. And in the last two decades, as favored accountants have been rewarded with multi-million dollar non auditing consulting gigs (such as tax planning or management consulting), the worry was that they were looking the other way in order to win more business.

Following the Enron scandal, which showed that Arthur Andersen, the company's auditor, had failed in its public duty, the U.S. Congress passed the Sarbanes-Oxley law in 2002 that replaced the accounting industry's own regulators with the Public Company Accounting Board with subpoena and disciplinary powers. Auditors are supposed to register with the board, but clearly not everyone took this seriously.

The SEC's enforcement director, Linda Chatman Thomsen, said that Thursday's action showed that the agency "is committed to ensuring compliance with the regulatory framework Congress established for auditors of public companies." A total of 50 of the errant accountants settled the charges with the federal agency the very same day.

This action is an important warning shot across the bows to let the auditors know that the SEC is checking up on them. But the jury is still out as to whether the SEC will go one step further and prosecute auditors who fail to report companies that are cooking their books.

In related news, a new study from the University of Nebraska suggests the whistle-blowers who report violations of the Sarbanes-Oxley Act to agencies like the PCAB are not properly protected. The study looked at 700 cases where employees experienced retaliation from companies for whistle-blowing and found that a mere 3.6 per cent of cases were won by employees.

Richard Moberly, the study's author, argues the findings "challenge the hope of scholars and whistle-blower advocates that Sarbanes-Oxley's legal boundaries and burden of proof would often result in favourable outcomes for whistle-blowers."

The Financial Times reports that Louis Clark, president of the Government Accountability Project, a non-profit organization that lobbies for whistle-blowers, calls the law "a disaster." Jason Zuckerman, a lawyer at the Employment Law Group, a law firm that represents Sarbanes-Oxley whistle-blowers, says: "Part of the problem is that investigators misunderstand the relevant legal standards and believe that a complainant must have a smoking gun -- that is, unequivocal evidence proving retaliation."

The debate is still on over whether Sarbanes-Oxley is effective five years after the law was passed, although all appear to agree it was a step in the right direction. The proof of the pudding, they say, will be in the eating, so we eagerly await the day that SEC puts errant accountants behind bars.