Corporations Kill

A recent headline tells it all: “General Motors will pay $900 million to settle criminal charges related to its flawed ignition switch that has been tied to at least 124 deaths.” The problem was that the ignition switch could shut off the car while it was being driven, therefore causing the disabling of the airbag, power steering and power brakes, obviously putting both drivers and passengers at risk. GM knew about this almost a decade ago but did not begin to recall the cars until 2014. At least 124 people died because of this defect.  Part of the legal problem is that technically “it isn't illegal to sell a car that has a defect that can kill people,” says U.S. Attorney Preet Bharara. The way the law is written “makes it difficult to prosecute individuals or to impose greater penalties on a company.” GM has set up a compensation plan totaling over $600 million to victims and their families. GM was fined $35 million to settle civil charges with federal safety regulators. For GM, this is a familiar story.

          This was similar to the famous Ford Pinto case in the 1960s concerning a defective fuel system design, when Ford did a “cost-benefit” analysis and found that to correct the problem would have cost them $11 per car, even though a new design would result in 180 fewer deaths. Specifically, Ford found that it would have cost them $137 million compared to a $49.5 million price tag put on the deaths, injuries, and car damages. Thus they stood to gain $87.50 million not to fix the problem.

          This is merely the latest in a long line of cases of corporate crime. In 2014 Toyota agreed paid $1.2 million because of its failure to recall cars despite reports of unintended acceleration. In 2013 JPMorgan Chase agreed to pay record $13 billion fine to settle criminal charges related to the sale of mortgage backed securities ahead of the 2008 financial crisis.

          There are a variety of behaviors that are illegal in the United States, ranging from the inconsequential to grievously damaging to society. Not all behaviors that threaten the well-being of U.S. citizens are treated as criminal. Even some that are illegal are not widely investigated, nor are they counted by the measures of crime reviewed earlier. There is a great deal more to crime than what is described by the UCR and NCVS. An alternative view of crime and the extent of crime presents a radically different picture than that provided by the media and official statistics.

Who are the “dangerous” people in society? Who threatens us with death and serious bodily injury? Who puts our money or property at risk? There is no question that we would be frightened if a robber confronted us on the street or if we came home and discovered that a stranger had broken into our house. We do not want to downplay the significance of traditional crimes of violence. These are, however, only part of the total crime picture.

Statistically speaking, the gravest threats to us are not from robbers, burglars, rapists, or others threatening one-on-one harm. The FBI compiles “crime clock” statistics from the data it collects annually. In 2013, the crime clock listed violent crimes as occurring every 27 seconds and a murder every 37 minutes. However, it has been estimated that in 2013 4,585 workers were killed on the job or about 88 per week and 12 each day from an occupational injury or from diseases they contracted through their employment. Another source reports 3.1 million nonfatal workplace injuries and illnesses per year. Occupational diseases, death, and injuries cost us around $155 billion each year, dwarfing the crimes shown on television. Importantly, about half of these workplace harms are preventable. They could be avoided if employers complied with various state, federal, and local laws and regulations.

The list of corporate crimes includes bribery of government officials, defense contract fraud, health care provider fraud, corporate tax evasion, price-fixing, false advertising, product misrepresentation, cheating workers out of overtime pay, violations of minimum wage laws, unfair labor practices, surveillance of employees, theft of trade secrets, monopolistic practices, and defrauding investors. While the list of crimes increases, the corporate share of the tax burden has been declining. Individuals now pay 5 times the more taxes than corporations, down from around 25% in the 1950s to less than 10% today.

In the year 2011 alone, there were 100 separate stories of corporate crime.  The total estimated amount of money involved in insider-trading cases from 2000–2010 amounted to just over $400 million.  The economic collapse of 2008 was caused by corporate negligence and fraud. Pending corporate fraud cases went from 423 in 2005 to 726 in 2011. During that year, the FBI secured $2.4 billion in restitution orders and $16.1 million in fines from corporate criminals involved in health care fraud, mortgage fraud, financial institution fraud, insurance fraud, mass marketing fraud, and asset forfeiture/money laundering.

There is little doubt, however, that the corporate system is highly criminogenic. It is directly related to the very nature of capitalism. Unless the regulations that were set up back in the 1930s can be reinstituted, GM and others will continue their criminal behavior.  They are the classic recidivists. And since they essentially control the country and shape the legal system in their favor, the public will continue to suffer.

For more on this subject, see my latest research article on this web site.