News and Features
It's been more than three months since twelve Florida State University
students were arrested for setting up a "tent city" in front of the
school's administration building.
With the Bush Administration too often feeling the pain of its corporate
sponsors, and with the Enron scandal (so far) producing little political
fallout or legislative change on Capitol Hill, advocates of corporate
accountability have cause for frustration. (Martha Stewart is not much
consolation.) But in one area corporate critics can feel encouraged. For
several years, a small group of lawyers and labor advocates has been
trying to hold transnational companies responsible for their actions by
suing them in the United States for abetting and/or benefiting from
human rights abuses overseas. Finally, these corporation-chasers are
beginning to see signs of possible success.
In about a dozen cases, attorneys in the United States, on behalf of
villagers, indigenous people and labor leaders overseas, have filed
legal action against large corporations under the Alien Tort Claims Act
(ATCA), a law passed in 1789 that allowed foreigners to sue one another
in US courts. The law was not much used until 1979, when the family of a
17-year-old boy tortured and killed by a Paraguayan policeman
successfully employed it to sue the officer. Afterward, human rights
lawyers turned to the act as a way to address human rights violations
conducted or enabled by multinational firms.
In 1996, for instance, the Washington-based International Labor Rights
Fund (ILRF) filed an ATCA suit against Unocal, an oil and gas firm,
charging that it knowingly used slave labor to build a pipeline in
Burma. The plaintiffs included villagers who said they were forced at
gunpoint to work on the project. A federal judge dismissed the ATCA
lawsuit, arguing that Unocal did not have direct control over the
Burmese military regime, a partner in the pipeline project. That
decision is under appeal, but, in a legal first, in June a California
state judge ordered Unocal to stand trial. In that trial, in September,
the plaintiffs will argue under state law that partners in a joint
venture can be held responsible for each other's actions. That would be
a blow to Unocal. Evidence in the federal case showed it was well aware
that human rights abuses were committed by the military regime in
relation to the pipeline.
ATCA-wielding lawyers and activists have been going after corporate
malfeasance around the globe. Earlier this year, a case filed against
Shell by EarthRights International and the Center for Constitutional
Rights got a major boost. This lawsuit claims the oil company is liable
for human rights abuses committed by the Nigerian military against the
Ogoni people, who opposed a Shell pipeline. Shell repeatedly filed
motions to dismiss the case, but in February a federal judge denied
these motions and permitted the case to move into the discovery phase.
Now the plaintiffs can take depositions of Shell officials and review
Texaco was sued in New York by indigenous people of Ecuador, who charged
it with destroying their local environment by dumping a million gallons
of toxic waste into the ecosystem for two decades. The company's
actions, they claim, devastated rainforest areas, caused an increase in
cancer and other diseases and brought several tribes to the brink of
extinction. In March the two sides argued about whether the case should
be dismissed on jurisdictional grounds. The court has not yet ruled. Two
years ago, residents of Bougainville Island in Papua New Guinea filed a
lawsuit in San Francisco against the London-based Rio Tinto mining firm.
The plaintiffs maintained that the corporation, which took over a
company that developed a mine on the island, was in cahoots with a
government that engaged in human rights abuses and destroyed entire
villages in wiping out local resistance to the project. In March a
federal judge dismissed the lawsuit after the State Department argued
that the case could interfere with an ongoing peace process in Papua New
Guinea. But the judge said the Papua New Guinea government would have to
agree to permit the plaintiffs to file a case there.
In addition to the Unocal case, the ILRF is handling ATCA lawsuits
against Coca-Cola (for allegedly using paramilitary forces to
suppress--violently--union activity in Colombia), Del Monte (for
allegedly employing thugs who tortured union leaders in Guatemala),
DynCorp (for allegedly spraying Ecuadorean farmers and villagers with
toxic chemicals that were supposed to be dumped on coca plants in
Colombia) and the Drummond Company, a mining firm (for allegedly hiring
gunmen to torture, kidnap and murder labor leaders in Colombia). In a
case against ExxonMobil, ILRF contends that Mobil, which formed a
joint-venture natural gas project with the Indonesian government, paid
the Indonesian military for security and that these troops committed
human rights atrocities--including murder and torture--against villagers
in the Aceh province.
As these ATCA lawsuits creep forward, corporations here and abroad have
to take notice. A plaintiff's win would compel transnationals to
consider bringing their activities overseas into sync with international
human rights standards. As the Wall Street Journal noted, a
ruling against Unocal--if upheld--"could subject a long list of US
companies to lawsuits in American courts as human rights groups seek to
expand the reach of American tort law to foreign soil." Already the
Street is paying attention. "I've started getting calls from mutual fund
managers," says Terry Collingsworth, ILRF's executive director. "They
tell me that they cannot base stock recommendations on moral
considerations. But if there is a chance a company could be damaged by a
big award in a trial, its business practices overseas become quite
relevant." That is, "the markets" are watching and waiting--to see if
Third World locals screwed by transnationals can find justice in courts
far from their villages.
The capital unscrupulously pumped from poor neighborhoods by way of
predatory loans whizzes along a high-speed financial pipeline to Wall
Street to be used for investment. "It's about creating debt that can be
turned into bonds that can be sold to customers on Wall Street,"
explains Irv Ackelsberg, an attorney with Community Legal Services in
Philadelphia who has been defending clients against foreclosure and
working to restructure onerous loans for twenty-five years.
Household-name companies like Lehman Brothers, Prudential and First
Union are involved in managing the process of bundling loans--including
subprime and predatory--into mortgage-backed securities. They often
provide the initial cash to make the loans, find banks to act as
trustees, pull together the layers of financial and insurance
institutions, and create the "special vehicles"--shades of Enron--that
shield investors from risk.
Four securities-rating agencies--Moody's, Standard & Poor's, Duff
& Phelps and Fitch--provide bond ratings for all of Wall Street;
before assigning the acceptable rating that will draw investors, they
assess the risk firewalls constructed by the securitizing company. It
becomes a complex matrix of financial operations designed to generate
capital and minimize risk for Wall Street with the unwitting help of
borrowers. "This whole business is about providing triple-A bonds to
funds that you or I would invest in," says Ackelsberg. "The poor are
being used to produce this debt--what you have is a glorified
Ackelsberg and his colleagues frequently find themselves struggling
through a tangle of companies to find a party legally liable for remedy
when a client is in foreclosure due to a bad loan. Often the company
that originated the loan doesn't actually own it but, rather, is acting
as a servicing agent--assuring the cash flow to a securitization trust.
Frequently shifting ownership also complicates attempts to create
accountability: In one case, United Companies Lending, once hired as a
trust by Lehman Brothers, went bankrupt; EMC Mortgage Corporation, a
wholly owned subsidiary of Bear Stearns, placed the highest bid for the
right to service the outstanding loans and collect the servicing fees.
Sheila Canavan, a Berkeley-based attorney who recently won a settlement
that will pay out some $60 million to the plaintiffs in a fraud lawsuit
against First Alliance Mortgage, says, "The industry and lawyers make it
as complicated and arcane as they can so people don't understand." They
also, she adds, want to distance themselves from the frontline predators
who hawk the loans.
Government-sponsored mortgage lenders Fannie Mae (FNMA) and Ginnie Mae
(GNMA) have long bundled conventional loans--in the 8-percent range--to
create mortgage-backed securities. During the mergers and acquisitions
boom in the mid-1990s, when banks began absorbing subprime lenders, Wall
Street caught on to the potential of bunching subprime mortgages,
including predatory loans. "The banks realized that this was a
moneymaker," says Shirley Peoples, a social research analyst for the
Calvert Group, an investment fund specializing in socially responsible
lending. "They put a legitimacy on it, but it still is what it is."
"Wall Street, since it got into securitization, needs product, needs
mortgage loans to pull together," says Canavan. The securities are then
aggressively marketed, she says. "The Wall Streeters go around the
country, pools of loans are sold to institutional investors, pension
And while it looks as if the lenders themselves set up the difficult
loan terms, Canavan says that Wall Street encourages the gouging
practices. The big financial institutions fronting cash for predatory
loans have information on the loans' interest rates and know very well
what it takes to trap borrowers into those rates. They also build in
incentives for dubious practices: "The loan originators are compensated
with late fees," Canavan says, by way of example. "They're going to make
sure payments don't get there on time, that they get lost or, as the
industry says, 'drawered.'"
It's tough for a mutual fund investor to know whether investment dollars
are going toward supporting a predatory loan scheme. The investor who
knows the names of the biggest offenders may be able to detect them in a
prospectus, but many times the information is not included or the names
of the companies change. Socially responsible funds such as Calvert and
organizations like the Interfaith Center on Corporate Responsibility
have been meeting face to face with banking interests to probe their
policies and positions on bundling the predatory loans. And many in the
industry argue that a rash of bankruptcies and financial failures has
pressured the industry to reform.
But not all consumer advocates buy that.
"These companies come and go," says Ackelsberg, "but the residue of
their abusive activity remains because the mortgage loans are still out
Outraged at lenders who prey on the poor, activists are striking back.
Agnostic's what he was, had always been.
He'd never prayed a prayer, confessed a sin.
He's thinking, though, if Martha goes to jail,
On Sundays henceforth he will never fail
To be in church. In fact, forevermore,
He'll be in synagogue the day before.
It's not as if this man's the sort of pill
Who wishes fellow human beings ill.
But he's convinced: If Martha takes the fall,
There is a God in heaven after all.
Dead ends, new beginnings--the industry's twenty-five-year crisis
The Africa trip of Treasury Secretary Paul O'Neill and Irish rock star
Bono produced a bumper harvest of photo ops and articles about aid to
Africa. Unfortunately, media coverage was mired in the perennial and
stale aid debate: Should we give more? Does it work?
If the O'Neill-Bono safari resulted in Washington finally paying more of
its proper share for global health, education and clean water, that
would be cause for applause. But any real change requires shifting the
terms of debate. Indeed, the term "aid" itself carries the patronizing
connotation of charity and a division of the world into "donors" and
At the late June meeting in Canada of the rich countries known as the
G8, aid to Africa will be high on the agenda. But behind the rhetoric,
there is little new money--as evidenced by the just-announced paltry sum
of US funding for AIDS--and even less new thinking. Despite the new
mantra of "partnership," the current aid system, in which agencies like
the World Bank and the US Treasury decide what is good for the poor,
reflects the system of global apartheid that is itself the problem.
There is an urgent need to pay for such global public needs as the
battles against AIDS and poverty by increasing the flow of real
resources from rich to poor. But the old rationales and the old aid
system will not do. Granted, some individuals and programs within that
system make real contributions. But they are undermined by the negative
effects of top-down aid and the policies imposed with it.
For a real partnership, the concept of "aid" should be replaced by a
common obligation to finance international public investment for common
needs. Rich countries should pay their fair share based on their
privileged place in the world economy. At the global level, just as
within societies, stacked economic rules unjustly reward some and punish
others, making compensatory public action essential. Reparations to
repair the damage from five centuries of exploitation, racism and
violence are long overdue. Even for those who dismiss such reasoning as
moralizing, the argument of self-interest should be enough. There will
be no security for the rich unless the fruits of the global economy are
shared more equitably.
As former World Bank official Joseph Stiglitz recently remarked in the
New York Review of Books, it is "a peculiar world, in which the
poor countries are in effect subsidizing the richest country, which
happens, at the same time, to be among the stingiest in giving
assistance in the world."
One prerequisite for new thinking about questions like "Does aid work?"
is a correct definition of the term itself. Funds from US Agency for
International Development, or the World Bank often go not for economic
development but to prop up clients, dispose of agricultural surpluses,
impose right-wing economic policies mislabeled "reform" or simply to
recycle old debts. Why should money transfers like these be counted as
aid? This kind of "aid" undermines development and promotes repression
and violence in poor countries.
Money aimed at reaching agreed development goals like health, education
and agricultural development could more accurately be called
"international public investment." Of course, such investment should be
monitored to make sure that it achieves results and is not mismanaged or
siphoned off by corrupt officials. But mechanisms to do this must break
with the vertical donor-recipient dichotomy. Monitoring should not be
monopolized by the US Treasury or the World Bank. Instead, the primary
responsibility should be lodged with vigilant elected representatives,
civil society and media in countries where the money is spent, aided by
greater transparency among the "development partners."
One well-established example of what is possible is the UN's Capital
Development Fund, which is highly rated for its effective support for
local public investment backed by participatory governance. Another is
the new Global Fund to Fight AIDS, Tuberculosis & Malaria, which has
already demonstrated the potential for opening up decision-making to
public scrutiny. Its governing board includes both "donor" and
"recipient" countries, as well as representatives of affected groups. A
lively online debate among activists feeds into the official
Funding for agencies like these is now by "voluntary" donor
contributions. This must change. Transfers from rich to poor should be
institutionalized within what should ultimately be a redistributive tax
system that functions across national boundaries, like payments within
the European Union.
There is no immediate prospect for applying such a system worldwide.
Activists can make a start, however, by setting up standards that rich
countries should meet. AIDS activists, for example, have calculated the
fair contribution each country should make to the Global AIDS Fund (see
Initiatives like the Global AIDS Fund show that alternatives are
possible. Procedures for defining objectives and reviewing results
should be built from the bottom up and opened up to democratic scrutiny.
Instead of abstract debates about whether "aid" works, rich countries
should come up with the money now for real needs. That's not "aid," it's
just a common-sense public investment.
Attempts to organize are squelched by a flying column of
Would it be too early to sense a sudden, uncovenanted shift against the corporate ethic, if ethic is the word? I can barely turn the page of a newspaper or magazine without striking across either some damaging admission, or at least some damage-control statement, from the boardroom classes.
The camera pans across the room
To see what she has made:
An omelette or a spring bouquet
Or just an inside trade.
- A Police Story Unravels: How Did the NYPD Break an NBA Player’s Leg?
- So... the NYPD Just Broke an NBA Player’s Leg
- The US Carried Out 674 Military Operations in Africa Last Year. Did You Hear About Any of Them?
- Breaking: Leading House Democrat Will Oppose TPP Fast Track
- Why We Must Return to the US-Russian Parity Principle