BP, Crime, and the Corporate Charter
The constitution of Delaware, the state in which most of the largest corporations get their corporate charter, requires that corporate charters be subject to revocation if they have been misused or abused. Criminal acts are considered misuse and abuse under the law.5 Virtually every state has corporate charter revocation laws because those who came before us recognized the danger of misuse of the advantages of incorporation and took seriously the public obligation to oversee the conduct of corporations. In our amoral age of corporate law and the careless transformation of corporations into metaphorical people or speakers, the charter revocation laws are widely ignored. This lack of responsibility and accountability helped create the environment in which the Powell-Chamber of Commerce campaign to transform corporations into holders of constitutional rights could succeed, and makes that success all the more dangerous.
The global oil giant BP illustrates like no other the lack of public accountability and control over the giant transnational corporations that now dominate so much of our lives. BP is a web of corporations. The corporation was founded in the United Kingdom as British Petroleum in 1909. The parent corporation is now called BP plc and maintains its headquarters in London. BP operates in the United States through numerous subsidiary corporations that have been granted corporate charters under Delaware law. These include BP America, BP America Production Company, BP Products North America, BP Corporation North America, BP Exploration (Alaska) Inc., BP West Coast Products, Standard Oil, BP Amoco Chemical Company, and more.
On April 20, 2010, BP’s Deepwater Horizon oil rig in the Gulf of Mexico exploded and sank, killing eleven people. The resulting massive oil inundation into the Gulf waters created an environmental and economic catastrophe for people living and working in and along the Gulf. BP has concealed, evaded, or misrepresented the facts about the amount of oil that has poured into the Gulf. Even when scientists implored BP to allow them to monitor the flow of oil that created massive underwater plumes, BP stonewalled: “The answer is no to that. We’re not going to take any extra efforts now to calculate flow there at this point.”
A criminal investigation is under way relating to a whistle-blower disclosure that BP violated the law by not retaining key safety documents about the Deepwater Horizon oil rig. As BP tried to shift the blame and evade accountability, BP’s CEO Tony Hayward whined, “I want my life back.”
BP’s reckless and illegal activity in American waters in the Gulf was only the latest of its crimes. On one day alone in October 2007, BP admitted to a virtual crime spree. First, BP Products North America Inc. pleaded “guilty to a felony” for causing a 2005 refinery explosion in Texas that killed fifteen people. BP admitted, “If our approach to process safety and risk management had been more disciplined and comprehensive, this tragedy could have been prevented.” The criminal plea agreement required BP to pay a fine of $50 million and serve three years of probation.
Second, on the same day, BP admitted that it engaged in criminal conduct that caused “the largest oil spill ever to occur at Prudhoe Bay” in Alaska. As a result, BP Exploration Alaska Inc. pleaded guilty to a misdemeanor violation of the Federal Water Pollution Control Act. BP’s plea agreement required BP to serve three years’ probation and pay a fine of $12 million. BP admitted that its approach to “risk” was “not robust or systematic enough.”
Third, BP also admitted that it engaged in criminal conspiracy, mail fraud, and wire fraud after BP America and several other BP subsidiary corporations “manipulated the price of February 2004 TET physical propane and attempted to manipulate the price of TET propane in April 2003.” As a result of BP’s criminal price manipulation, BP was required to pay $303.5 million in fines, penalties, and restitution. BP admitted that its “view of the legality of these trades changed as our knowledge of the facts surrounding them became more complete.” BP admitted its “failure to adequately oversee our trading operations.”
And these crimes by BP were not the first and not the last. BP’s other recent admissions or convictions of crimes and misdemeanors include the following:
A guilty plea in Alaska related to the illegal disposal of hazardous waste, including paint thinner and toxic solvents containing lead, benzene, toluene, and methylene chloride, on Alaska’s North Slope
$25 million in penalties in California due to “significant and numerous violations” at a BP refinery
$900,000 in penalties after producing and distributing gasoline that threatened public health
$87, 430,000 in proposed penalties to BP Products North America Inc. “for the company’s failure to correct potential hazards faced by employees.” OSHA found that despite the death of 15 people and the injury of 170 in its Texas oil refinery explosion and despite its promises to change its ways, BP continued to commit “hundreds of new violations”
$3 million in additional fines to BP North America when OSHA “found that BP often ignored or severely delayed fixing known hazards in its refineries”
Thirteen “serious safety violations” at a BP refinery near Blaine, Washington. A Washington official stated in 2010 that “we are disturbed that more than ten years after the explosion that killed six workers at the Equilon refinery, our inspectors are still finding significant safety violations every time we inspect one of the refineries in the State of Washington.”
BP’s oil refinery operations account for 97 percent of all “egregiously willful” and “willful” violations found by government safety inspectors over the past three years. Despite (or perhaps because) of this record of crime and misdeeds, in the first quarter of 2010 alone, BP made $5.6 billion in profit. And what happened to Tony Hayward, the CEO who wanted his life back after BP ruined the Gulf of Mexico and killed workers on the Deepwater Horizon? BP gave him a salary and bonus of $6 million in 2010 and awarded him $18 million when he left the company.
In June 2010, an organization called Green Change filed a petition requesting that the attorney general of Delaware initiate an action to revoke the Delaware charters of BP, a serial criminal. More than five thousand people joined the call.6 A year later, the attorney general has not responded to or commented on the detailed petition describing BP’s crimes, let alone taken action.7 We have had plenty of corporate “fraud, immorality, and violations of law” warranting charter revocation proceedings. We have not had nearly enough action by attorneys general and other state officials to enforce this law.
Too Big to Tell the Truth
Large corporations defy even mild controls of health, environmental, and consumer protection laws and then seek shelter from the Supreme Court’s corporate rights regime. Not long before Citizens United, the corporate “speech” campaign reached the point of claiming the right of corporations to lie, or at least to have the constitutional right of “breathing space” to protect them from charges of lying.
A California law allowed people to bring consumer fraud charges alleging that Nike fraudulently launched a campaign of lies about why no shoes were made in America anymore and whether Nike’s shoes were made by badly exploited poor people in brutal overseas sweatshops. Nike went all the way to the Supreme Court arguing that the transnational corporation had a “free speech right” to block the law. Again, the global corporations and corporatist “legal foundations” rallied to the cry that corporations are people, and the Constitution prevents any restriction on corporate “speech.”
Covington & Burling (remember them from the cigarette child-targeting and Monsanto drug-created milk cases on pages 44-46?) filed briefs for ExxonMobil, Microsoft, Morgan Stanley, and Glax-oSmithKline to support “corporate speakers’” First Amendment rights to block laws holding corporations accountable for massive deceptive disinformation campaigns. Covington & Burling wrote, “If a corporate speaker must limit its factual statements on matters of public concern to statements that no one could possibly challenge, or that the speaker could be certain it could prove as ‘true’ in a court of law or before a reg
ulatory body, the result will be a deterrence of speech which the Constitution makes free.”8 The Washington Legal Foundation brief went straight to the heart of the matter: the Court should not allow anything that might cause the corporate share price to fall. Washington Legal Foundation, one of the largest of the Powell-Chamber-inspired corporatist legal groups, argued that a corporation must be able to block a law like California’s or otherwise it would risk a “shareholder suit alleging negligence for the drop in stock values resulting from its failure to defend itself in the court of public opinion.”
The theme of all of these corporate arguments is only partly that corporations should have the same First Amendment “breathing space” as people do to debate public issues with passion, hyperbole, and even scurrilous attacks and arguable falsehoods. An additional theme is that global corporations are just too big, too powerful, and in too many countries to be subjected to judgments of state law when they launch false feel-good public relations campaigns in response to criticism or when they spew lies about cigarettes, global warming, sweatshops, the rainforest, or anything else.
In the Supreme Court brief, the global corporations argued that Nike could not possibly guarantee “truth” (the brief itself uses quotation marks around the word truth) when Nike has “736 facilities located in the 51 countries in which 500,000 workers are used by its subcontractors to manufacture its products.”9 In other words, Nike is too big, too global, and in too many countries exploiting cheap labor to possibly operate without potentially getting sued by someone for fraudulent statements. And we can’t have that, can we?
Why can’t we have that? If that really is a problem, it is an economic problem for Nike and its shareholders, not a constitutional problem for Americans. The slippery slope argument that the Court and the Constitution must step in to make sure that Nike does not find itself in court having to defend its false statements implies that Nike not only has a “right” to its corporate charter and privileges but also has a corporate “right” to operate in fifty-one countries and outsource jobs to impoverished areas of the world and the “right” to wage PR campaigns if people question the human impact of Nike’s decisions. Each of those, however, is a corporate policy preference, not a right.
Nike’s arguments state a business problem, not a constitutional problem. Nike could solve its business problem in a number of ways without fabricating constitutional rights to block the law. It could make its shoes in the United States. It could be smaller. It could price into its shoes the cost of defending itself from global human rights campaigns about its overseas sweatshops. It could ask the legislature to create an exception in the law for global corporations operating overseas sweatshops. Whether these options are unattractive or might raise the price of Nike sneakers or, God forbid, lower the share price has nothing to do with the Constitution. There is no constitutional right to cheap overseas labor and false marketing campaigns to make Americans feel better about lost jobs, human rights abuses, and immoral conduct. In the end, the Supreme Court declined to hear the Nike case, but we know how this story ends in Citizens United.
The Consequences of Corporate Amorality and Crime
Corporate crime and allowing corporate power to slip out of control of the people have consequences. WellCare Health stole millions of dollars from a children’s health program in Florida. One of BP’s many crimes killed fifteen people in a Texas refinery. Massey Energy (now owned by Alpha Natural Resources) committed thousands of violations and killed twenty-nine people in a mine explosion in 2010. Volvo supported Saddam Hussein’s regime in Iraq by committing crimes to get heavy trucks and equipment around a United Nations sanction, and Credit Suisse criminally moved money around to evade American economic sanctions against dangerous regimes in the world.
Unchecked corporate power poisons food, water, and air, and people get sick and die. Workplaces are more dangerous, and people die. Markets are corrupted, and people lose their savings and jobs are wiped out. Taxes for most people are higher because corporations and the rich do not pay their share and hide money “offshore,” abetted by criminal international bank corporations.
The Court’s Citizens United decision failed to consider whether the problem of serial corporate crime and the reality of global corporate power exposed the fallacy of excess metaphorical thinking when it comes to corporations. Had the Court considered why Congress might have distinguished between corporations and people in the Bipartisan Campaign Reform Act and the 1907 law banning corporate money in politics (see page 11), the Court would have inquired into how corporations might be different from people.
In doing so, the Court might have connected “speech” to “virtue” as essentially human characteristics and recognized the relationship of both to a self-governing republic of free people. This virtue, as Jefferson and the other Founders knew, is not only “love of the laws and of our country” but also a love that “requires a constant preference of public to private interest.”10
Corporations are incapable of virtue, not because they are bad but because they are mere tools. A hammer has no virtue either. And we would not call a hammer a “speaker.” We could design a better tool, but for most of the large public corporations, the risk of crime and fraud runs high because we do not sufficiently conceive of the corporation as a tool to aid the progress of the many rather than as an enrichment machine for a few in control of the corporation.11
Sadly, the failure to control corporate power corrodes and destroys virtue itself in too many American people. Think of those CEOs who reaped millions to destroy jobs or the public servants who sell out the country for corporate dollars or position. Think of the self-effacing, kind Lewis Powell described by Sandra Day O’Connor and all those decent, patriotic, kind, hardworking people who went off to work each day on behalf of the long cigarette conspiracy to addict children and kill people. I do not intend sarcasm here. Decent, kind, patriotic, hardworking people do go off to work every day in corporations that create terrible consequences for the world, when allowed to do so. When we fail to keep corporations in their proper economic place and to protect our political space, we corrupt virtue in all of us.
The crimes of corporations, from trading with the enemy to stealing from children, as well as the political corruption caused by corporate power, happen because people make decisions on behalf of the corporation. Yet it is not because those people are evil. It is because government, crippled by corporate “rights” and corporate power, has abandoned its duty to control the powerful tool in which those people find themselves working. When we, the people, cannot control corporations because of fabricated constitutional rights and dangerous imbalances in lobbying and election spending, people making corporate decisions are rewarded for not exercising virtue and punished for exercising it. Corporate decisions then overwhelmingly favor the private, not the public, interest, and the corporate, not the American, interest.
As Thomas Jefferson wrote in his commonplace book more than two centuries ago, “everything … depends on establishing this love in a republic.” The real people of America must overturn Citizens United and corporate rights and must assert the will of the people over the unchecked power of corporations. As in the past, we have the means and, I believe, the virtue to do exactly that.
Not long after the BP disaster in the Gulf of Mexico exposed how deeply and corruptly the oil corporations had insinuated themselves into our government, Senator Sheldon Whitehouse, former attorney general of Rhode Island and a former United States attorney, took to the Senate floor. He issued a warning and plea to the American people:
Have we now learned what price must be paid when the stealthy tentacles of corporate influence are allowed to reach into and capture our agencies of government?
I pray, let us have learned this; let us have learned that lesson. I sincerely pray we have learned our lesson, and that this will never happen again. But let’s not just pray.
In this troubled world God works through our human hands; grows a more p
erfect union through our human hearts; creates his beloved community through our human thoughts and ideas. So it is not enough to pray. We must act.
We must act in defense of the integrity of this great government of ours, which has brought such light to the world, such freedom and equality to our country. We cannot allow this government—that is a model around the world, that inspires people to risk their lives and fortunes to come to our shores—we cannot allow any element of this government to become the tool of corporate power, the avenue of corporate influence, the puppet of corporate tentacles.12
We are people. We love. We pray. We act. We are all on the same side. So let’s get to work.
Chapter Seven
Restoring Democracy and Republican Government
This is a moment of high danger for democracy so we must act quickly to spell out in the Constitution what the people have always understood: that corporations do not enjoy the political and free speech rights that belong to the people of the United States.
—Maryland Senator Jamie Raskin1
Great corporations exist only because they are created and safeguarded by our institutions; and it is therefore our right and duty to see that they work in harmony with these institutions.
—President Theodore Roosevelt2
Corporations Are Not People Page 15