Subsidizing Corporate Offenders
By Phil Mattera, Dirt Diggers Digest
The recent Credit Suisse guilty plea, which is not doing much to impair the
bank’s operations, shows that big companies can even go
about their business with a criminal conviction.
That’s not the worst of it. It turns out that many of these corporate offenders have received tax breaks and other forms of financial assistance from state and local governments around the country. This does not come as a complete surprise, but it is now possible to quantify the extent to which this unfortunate practice is taking place.
This estimate comes from mashing up two datasets. The first is
the Subsidy Tracker I and my colleagues at
Good Jobs First have compiled. In recent months we have enhanced the database
by matching many of the individual entries to their corporate parents. For
1,294 large companies we now have summary
pages that provide a full picture of the subsidies they and their subsidiaries
have received.
The other data source is a list of the companies that have
entered into deferred-prosecution and non-prosecution agreements with the
Justice Department to settle a variety of criminal charges. (Although I refer
to these firms as corporate miscreants or offenders, it must be pointed out
that they were never formally convicted.)
The list appeared in the May 26, 2014 issue (print version only)
of Russell Mokhiber’s excellent Corporate
Crime Reporter. Mokhiber obtained it from University of
Virginia Law Professor Brandon Garrett, author of a forthcoming book on corporate
crime prosecution, and used it for an article showing that the bulk of those
agreements are negotiated by a small number of law firms.
I took the liberty of using the list for another purpose:
determining how many of the companies also appear in Subsidy Tracker. The
results are striking: more than half of the miscreants (146 of 269, or 54
percent) have received state and local subsidies. These include cases in which
the awards went to the firm’s parent or a “sibling” firm.
Even more remarkable are the dollar amounts involved. The total
value of the awards comes to more than $25 billion. A large portion of that
total ($13 billion) comes from a single company —
Boeing, which is not only the largest recipient of subsidies among corporate
miscreants but is also the largest recipient among all firms. Boeing made the
Justice Department list by virtue of a 2006 non-prosecution agreement under
which it paid $615 million to settle criminal and civil charges that it
improperly used competitors’ information to procure contracts for launch
services worth billions of dollars from the U.S. Air Force and NASA.
To be fair, I should point out that not all the subsidies came
after that case was announced. In the period since 2006, Boeing has received
“only” about $9.8 billion.
The other biggest subsidy recipients on the list are as follows:
- Fiat (parent of Chrysler): $2.1 billion
- Royal Dutch Shell (parent of Shell Nigeria): $2.0 billion
- Toyota: $1.1 billion
- Google: $751 million
- JPMorgan Chase: $653 million
- Daimler: $545 million
- Sears: $536 million
These results suggest two conclusions. The first is that state
and local governments might want to pay more attention to the legal record of
the companies to which they award large subsidy packages. A company that ran
afoul of federal law might not be punctilious about living up to its
job-creation commitments.
More broadly, the ability of companies caught up in criminal
cases to go on getting subsidies suggests that there is insufficient stigma
attached to involvement in such cases. If companies know that they can not only
avoid serious punishment but still qualify for rewards such as tax breaks and
cash grants, they are more likely to give in to temptations such as fraud,
bribery, tax evasion, price-fixing and the like. Without real deterrents, the
corporate crime wave will continue.