excerpts from the book

Pigs at the Trough

How corporate greed and political corruption are undermining America

by Arianna Huffington

Three Rivers Press, 2003


In Without Conscience, renowned criminologist Dr. Robert Hare identified the key emotional traits of psychopaths. Included in what he called "The Psychopathy Checklist" were: the inability to feel remorse, a grossly inflated view of oneself, a pronounced indifference to the suffering of others, and a pattern of deceitful behavior.

"Businessmen," said Ayn Rand in 1961, "are the symbol of a free society-the symbol of America. If and when they perish, civilization will perish." Obviously the high priestess of free enterprise never met the men of Enron, Adelphia, and WorldCom

In books such as The Virtue of Selfishness and Atlas Shrugged, the bibles of free marketeers like Alan Greenspan, Rand championed the idea that by doing what is best for yourself, you end up doing what is best for society. That equation has now been turned on its ear. The gross excesses of today's crony capitalists are no longer aligned with the interests of their shareholders or workers, or even with the long-term interests of the companies they run-not to mention society as a whole.

The top 1% of stock owners hold 47.7% of all stocks by value. The bottom 80 % of stock owners own just 4.1% of total stock holdings.

Between 1990 and 2000, average CEO pay rose 571 %. Between 1990 and 2000, average worker pay rose 37%.

How can there be talk of a shared destiny in a nation where just over one percent of the population (170 billionaires, 25,000 deca-millionaires and 4.8 million millionaires) control approximately 50% of the entire country's personal wealth? Where the richest 20% earn 48.5% of the income and the poorest 20% merely 5.2%? Where, since 1980, real income for the bottom fifth of families fell by $800, while for the top fifth, it rose by $56,800?

Our MBA President and His CEO Sidekick

Of course, one of the main reasons the Bush administration has been so reluctant to rein in corporate America is because it is so much a part of it, with a vice president who was a CEO, three former CEOs who hold cabinet-level positions, two-dozen ambassadors who are former CEOs or company chairmen, a president who is the first commander-in-chief with an MBA, and a domestic agenda no deeper than tax breaks for friends.

Fittingly, then, both the president and the vice president were caught in the rising tide of corporate scandals that washed over the White House lawn in the summer of 2002.

The Bush crisis control team had an off day that July 31 when, in the space of 12 hours, it was revealed that both Harken Energy, while President Bush was on its board, and Halliburton, while Vice President Cheney was its CEO, had created subsidiary shell companies in offshore tax havens. The administration's attempt at what was supposed to be damage control did more harm than good.

First, Bush and Cheney's reps tried to argue that even though setting up shop in the Caymans is a favorite ploy of companies looking to avoid paying their fair share of taxes-remember Enron had 881 subsidiaries there-that wasn't the reason Harken or Halliburton had done it. Well, pray tell, what was? A desire to rack up frequent flier miles checking on the company headquarters/PO box? Exploiting all the oil under the Cayman Islands? Cheaper umbrella drinks for company meetings?

As if this half-hearted evasion wasn't lame enough, White House spokesman Dan Bartlett fell back on the classic Plan B: trying to make friends and win arguments by splitting hairs. Harken's offshore entity wasn't designed to evade taxes, explained Bartlett at the time, it was meant to enhance "tax competitiveness." And to his credit, Bartlett didn't even break out laughing after this claim. Probably waited until he got back to his office. Oh yeah, and, also, oral sex isn't-well, you know the drill.

White House press secretary Ari Fleischer even tried the ol' No Harm, No Foul defense, arguing that the reason Bush's company went Caribbean was a "moot question" because Harken never made any money on the Cayman venture. Memo to Fleischer: arguing that the crime didn't pay isn't a defense.

And by the way, thank you, Ari, for further evidence that our MBA president was an exceedingly poor businessman.

These wobbly spin doctors' task was, admittedly, made much harder by the fact that on the same day these tax dodge disclosures came to light, President Bush had spoken out with his usual Dudley Do-Right forthrightness against the very same practice. "We ought to look at people who are trying to avoid U.S. taxes as a problem," he said. Indeed we ought. So why don't we?

Let's start by looking at the problem of the vice president and Halliburton. During the Number Two's time as the company's Number One, there was a dramatic increase in the number of Halliburton subsidiaries registered in tax havens: from nine in 1995 to 44 in 1999. And it was accompanied by a no less spectacular drop in Halliburton's federal taxes: from $302 million in 1998 to less than zero-to wit, an $85 million rebate- in 1999.

At the same time they were hard at work stiffing U.S. taxpayers, Cheney and Halliburton were happily nursing at the public teat-the company received $2.3 billion in government contracts and another $1.5 billion in government financing and loan guarantees.

During the vice-presidential debate, Cheney scored points responding to a Joe Lieberman zinger about the millions Cheney had made during the Clinton-Gore years by boasting that "the government had absolutely nothing to do" with his burgeoning bank account. Only someone fully immersed in the corporate culture of our day could view $3.8 billion as "absolutely nothing."

It would have been nice to hear what Mr. Cheney has to say about all of this, but he began making himself very scarce- especially when it came to the media-right around the time in May 2002 when reports first surfaced that the Securities and Exchange Commission was looking into Halliburton's Cheney-era accounting practices.

His vanishing act was so effective that many started to wonder if Cheney has returned to his "secure, undisclosed location." If he had, it was only because the mountain hideaway was filled with fat-cat donors. It turned out that the vice president had been talking after all-but only to those ready to write a hefty check to the GOP.

Cheney headlined more than 70 fundraising events leading up to Election Day 2002. At one such event, donors who ponied up $25,000-per-couple were allowed to take part in a 45-minute roundtable discussion with Cheney. So it seems that if the White House Press Corps wants to get any serious face time with the vice president, it's gonna cost them. $277.50 per minute. I wonder if Connie Chung and Chris Matthews or Mike Wallace and Morley Safer can team up and get the couples' rate?

Of course, Cheney's reluctance to talk to reporters is understandable, given what has come to light about his heretofore highly touted tenure at Halliburton, including the questionable accounting, the offshore subsidiaries, and the revelation that the company did business with Iran, Libya, and-despite Cheney's denials-Iraq. It's his very own "Axis of Profits."

But, to be fair, under Cheney, Halliburton did end up giving a little something back to America-in the form of $2 million worth of fines for consistently overbilling the Pentagon. In one case they charged $750,000 for work that actually cost them only $125,000. Despite all this, the company has continued to be awarded massive government contracts, including a 10-year deal with the Army that, unlike any comparable arrangement, comes with no lid on potential costs. I guess it really does help to have friends-and ex-CEOs-in very high places.

During a fund-raising appearance last summer, Cheney lauded the White House's commitment to "more accountability for corporate officials.'' I'd love to know if richly rewarding corporations that have defrauded taxpayers is the kind of "accountability" he was referring to.

Theodore Roosevelt, August 31, 1910

"There can be no effective control of corporations while their political activity remains. To put an end to it will be neither a short nor an easy task."


The Corporate Takeover of Our Democracy

The financial scandals of our time were made possible by an unprecedented collusion between corporate interests and politicians that, despite all the breast-beating about reform, is still going strong. Together, these two powerful groups tore down hard-won regulations that restrained the worst capitalist excesses, leaving in their place a shaky edifice of feckless self-policing and cowed regulators, powerless to prevent the corporate Chernobyls.

Because corporations are such generous campaign donors and such demanding patrons, they have been coddled and cuddled and humored by lawmakers until little remained of a regulatory regime dating back to the last great era of capitalism run amok, the 1920s...

Corporations get their way in Washington by traveling a long-established highway of corruption-with well-stocked gift shops at every exit. Lobbying in America has become a $1.55 billion business. There are 38 lobbyists for each and every member of Congress. Lobbyists from just one industry alone, the hyperactive pharmaceutical business, outnumber actual members of Congress by 623 to 535. Get those guys a dose of Ritalin.

This is the nexus of corporate corruption; the source of all the swill. The unseemly link between money and political influence is the dark side of capitalism. It was this link that prompted a full-court-press by key members of Congress against crucial reforms proposed by ex-SEC chairman Arthur Levitt in the nineties, reforms that might have prevented some of the bloodletting of the last year.

It was also this link that gave Enron and Kenneth Lay their aura of power, and made Lay a principal shaper of the administration's energy policy and an intimate FOG (Friend Of George). This aura didn't come cheap. Enron and its executives doled out $2.4 million to federal candidates in the 2000 election and were among George W's biggest donors. Lay and his wife alone have donated $793,110 to the GOP since W's dad was in office. Enron has also spent big bucks lobbying Congress and the White House: $4 million in 1999 and 2000 alone. The money had bought the company a bipartisan who's who of Washington insiders-including James Baker, Mack McLarty and Gore 2000 fundraising director Johnny Hayes-to help push its corporate agenda.

In exchange for his unwavering support, "Kenny Boy" was given unprecedented input into the makeup of the Federal Energy Regulatory Commission (FERC), the agency charged with regulating Enron's core business. Lay bragged to one potential nominee about his "friends at the White House." He also personally put the screws to FERC chair Curtis Hebert in an effort to change his views on electricity deregulation. Hebert didn't oblige, and was soon the former chairman of FERC, replaced by Enron ally Pat Wood. Wood actually insisted that the collapse of Enron "doesn't seem to be tied too much to deregulated energy markets." You know that something is rotten in Washington when the top energy industry regulator is so unabashedly anti-regulation.

We also now know why the White House was willing to go to court to fend off congressional efforts to find out who Vice President Cheney met with for input on his Energy Task Force. Turns out the VP and his staff had at least six meetings with representatives from Enron-including two with Chairman Lay himself-the last of which occurred just six days before the company revealed that it had vastly overstated its earnings, signaling the beginning of the end for the energy giant.

The Nexus and the Pharmaceutical Industry: Money Is the Drug

... Each year, tens of thousands of people are killed by the giant drug companies, whose wanton disregard for human life is only matched by the tobacco companies and firearms manufacturers.

With more than 100 deaths linked to its best-selling cholesterol drug, Baycol, Bayer was finally forced to pull it off the market. Though not until Baycol earned Bayer profits $720 million in 2001 alone. Bayer was earning $7.2 million for every death its product caused by leaving it on the shelves. Or, depending on the way you look at it, a few more deaths were just the price of doing business.

But what about the F.D.A., the agency whose mission it is to protect us against just this very thing? Not to worry. Thanks to mega-millions spent on campaign contributions and lobbying, the pharmaceutical industry-Washington's longtime 800 pound gorilla on steroids-has been able to skirt government oversight of its patent-extending and price-gouging schemes by muscling politicians into doing its bidding. For every disease the drug-companies cure by developing a new drug, they develop a new way to contaminate our political system.

But nothing they've done in the U.S. compares to their handiwork in Africa. There the U.S. drug companies deliberately allowed the deadly AIDS epidemic to spread while they waged a legal battle to keep low-cost versions of life-saving anti-AIDS drugs from the millions dying of the disease. In 2001 the public outcry about these dirty deeds finally reached critical mass, shaming the drug companies' Washington lickspittles into looking at their shoes when their longtime patrons came calling for more favors. The industry was forced to relent, dropping its lawsuit and begrudgingly lowering the price of AIDS drugs to poor countries. At least they were able to make millions of dollars in profits first. Too bad about the hundreds of thousands of people who had to die. But maybe that's the Gloomy Gus way to see it, and the pharmaceutical executives are glass-half-full kind of people.

They'd have to be, considering their latest scheme. At a cost to consumers of billions of dollars, the drug companies are using American courts to stall the sale of generic versions of some of their most popular and sorely needed products. Here's how it works: When a drug's patent is about to expire, the patent-holding company wards off the oncoming competition by filing numerous costly frivolous lawsuits against anyone who even thinks of making a low-cost, and perfectly legal, version of the pill. The drug company doesn't really expect to win, but the suit can delay the generic version from hitting the market for years-allowing the patent holder to rake in billions in additional, competition-free sales. Of course, to the more than 41 million people uninsured, the lack of an available generic version of a drug means the lack of the drug altogether. And the beautiful part (at least to the glass-half-full crowd) is that the public gets to pay twice: we pay for unnecessarily high-priced drugs, and we pay for the court system the drug companies are exploiting to keep us paying the high price.

A bill to put a stop to this outrageous abuse of our legal process was introduced by senators John McCain and Charles Schumer and passed the Senate with 78 votes. Originally considered a long shot, the legislation gained momentum, helped, ironically, by the support of a number of other corporations that have recognized that this kind of patent thievery is actually costing them hundreds of millions of dollars in over-inflated health care costs. And in a rocky economy, little things like hundreds of millions of dollars get noticed. Executives at General Motors, for instance, figured out that the drug manufacturers maneuvering to maintain market exclusivity on five top-selling drugs- including Paxil, Prilosec, and Wellbutrin-after the patents had expired had cost GM over $200 million.

For the first time, it's not just voiceless millions in Africa or poor people on Medicaid who are feeling the sting of the drug I companies' shameful ability to bilk the system. It's powerful corporations that pay top dollar for receptive ears in Washington.

"The love of money as a possession-as distinguished from the love of money as a means to the enjoyments and realities of life-will be recognized for what it is, a somewhat disgusting morbidity, one of those semi-criminal, semi-pathological propensities which one hands over with a shudder to the specialists in mental diseases."

I Welcome to the Big House: How Many CEOs Will Learn the Real Meaning of "Hostile Takeover" in Prison?

In the summer of scandal, the new consensus along that other Axis of Evil, the one connecting Washington and Wall Street, was that the very public hauling of a few corporate crooks to jail would be a very good thing for the market, for the economy-and for our political leaders' reelection prospects.

As soon as corporate crime finally started to register on pollsters' seismographs, all of official Washington was suddenly drunk on the idea of tossing CEO scofflaws in the slammer. A day after President Bush took Wall Street to the woodshed and proposed doubling the maximum prison term for mail fraud and wire fraud, the Senate did him one better, voting 97-0 to adopt stiff new criminal penalties for securities fraud, document shredding, and the filing of false financial reports. "Somebody needs to go to jail," Senator Tom Daschle intoned ominously. "We're going to shackle them and take them to jail," growled Representative Tom DeLay, sounding like he couldn't wait to slap on the handcuffs himself.

You can count me in with the law-and-order crowd. But the question is, How many of corporate America's new breed of robber barons will ever actually see the inside of a jail cell? Truth be told, despite the well-deserved roasting they're currently getting over the media spit, many of the most notorious boardroom bad guys are continuing to live the high life to which they became accustomed while plundering their companies' coffers.

In July 2002, while visiting friends in Aspen, I had a close encounter of the disgraced CEO kind: I spotted Kenny Lay, garbed in a spiffy jogging suit, getting in a little morning cardio not far from one of the two multi-million-dollar vacation homes he keeps there. I realize that life isn't fair. But wouldn't it be nice if it were a little more just? If Lay, instead of jogging around the streets of Aspen in sweats, were jogging around a jail-yard track in stripes?

But if the past is indeed prologue, very, very few of America's new robber barons will end up in jail. In the last 10 years, the Securities and Exchange Commission-which, despite being the government's top corporate watchdog, doesn't have the authority to toss even the worst Wall Street cheaters in prison-turned 609 of its most offensive offenders over to the Justice Department for potential criminal prosecution. Of those, only 187 ended up facing criminal charges. And of those, only 87 went to jail. Eighty-seven. In 10 years. And far too many white-collar criminals land in one of those ritzy country club prisons, where inmates perfect their backhand and make collect calls to their brokers.

To make the current climate even more temperate for corporate crime, most prosecutors are reluctant to take on these kinds of cases, passing up more than half of the ones the SEC sends their way. For one thing, proving fraudulent intent is a tricky business-and in criminal cases, it has to be proven beyond a reasonable doubt. For another, with rare exceptions, most prosecutors have neither the passion for making corporate criminals pay nor the zeal to pursue complex and challenging fraud cases. Too busy busting prostitutes in New Orleans, I guess.

Even Eliot Spitzer, one of the few who has shown the determination to take on Wall Street's elite, allowed Merrill Lynch to walk away with a fine but without having to admit guilt for brazenly misleading investors.

Another impediment to a vigorous legal campaign is that prosecutors like to win. When they go after a corporate player, they know they'll be locking horns with the best legal talent that billions can buy-not running roughshod over some overworked public defender. It's a high-stakes game that many aren't willing to play.

So despite the PR value of pumping up maximum sentences for corporate crimes, it's not going to make much of a dent in boardroom thievery because so few of the perpetrators will ever face criminal prosecution. For a corrupt corporate chieftain crunching the numbers, the odds will still justify the crime. Doubling the penalties for those convicted of breaking laws that are so rarely enforced is hardly serious reform.

Compare this tiptoeing on eggshells to the ardor with which our criminal justice system pursues even the lowest-level drug offenders. In 2000 alone, 646,042 people were arrested in America for simple possession of marijuana. And while the Drug Enforcement Administration has a budget of $1.8 billion, even with the extra funds Bush wants to toss its way, the SEC will have to make do with less than a third of that.

The sentencing side of the criminal justice ledger exhibits the same inequity: the average sentence for even the biggest white-collar crooks is less than 36 months; nonviolent, first-time federal drug offenders are sent away for over 64 months on average. So much for letting the punishment fit the crime.

The bitter truth is that, unlike the majority of nonviolent drug cases, corporate malfeasance is not a victimless crime. Not with tens of thousands of laid-off workers, $630 billion lost from corporate pension plans, and more than $9 trillion in shareholder assets wiped out in the scandal-fueled stock market swoon.

Here's the bottom line: despite their tough talk, our political leaders are not serious about declaring war on corporate crime...

Since, at its heart, the corporate scandal is a political scandal- corporate money corrupts politicians who by passing or neglecting to pass laws make corporate crime possible and profitable-it's hard to see how we will ever get rid of this corporate hangover until we cure our politicians' unslakable thirst for campaign cash and their corporate masters' "infectious greed," to use Alan Greenspan's oft-quoted phrase. Teddy Roosevelt was the driving force behind a tough ban on corporate donations that was enacted in 1907, but Roosevelt's reforms were eventually circumvented by the soft money loophole, now supposedly closed by the campaign finance reform bill. As we've seen, the Federal Election Commission has already been trying to undercut the reform. So it's essential that we purge the Commission of commissioners who don't believe in its mission, and that we fortify it with some real enforcement bite.

But even before the commissioners and the lobbyists and the lawyers started sniffing out the new loopholes like pigs snorting for truffles, the ban on soft money was hardly the end of the overwhelming influence of money on our campaigns. The fact is soft-money donations made up less than 20% of the nearly $3 billion spent in the 2000 elections, while hard-money donations totaled roughly $1.75 billion. But it's a start.

There can be no clearer indication of how undemocratic the way we finance campaigns is than the fact that only one-quarter of 1% donate $200 or more, and only one-tenth of 1% gives $1,000 or more.

Our elected leaders cite the absurd cost of political ads- the single greatest expense of almost all modern campaigns- as the main reason they need to fund-raise so aggressively. But consider this. It was they who, in 1997, in an example of everything that's wrong with Washington, gave away the digital spectrum to broadcasters-a little gift now worth hundreds of billions of dollars. Demanding that the broadcasters, who are now making massive profits using the public airwaves, offer political candidates free TV time is a small price to pay in return.

But ultimately the only way to dramatically deminish the corrupting influence of special-interest money is by adopting the Clean Money, Clean Election model, which replaces the nonstop money-grab with full public financing of elections. No hard money, no soft money, no endless dialing for dollars, no quid pro dough deals. Just candidates and elected officials beholden to no one but the voters.

And this is no pie-in-the-sky fantasy. Clean Money laws in states like Maine and Arizona have proven remarkably effective: reducing campaign spending, shrinking the influence of outside money, and encouraging more-and better-people to run.

It's time for our business and political leaders to help redefine morality beyond sex, drugs, and rock and roll to include lying, hypocrisy, and callous indifference to those in need.

Corporate Welfare

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