The Corrupt Corporate Culture Run Amok

by Molly Ivins

Jack A. Blum, a Washington lawyer and expert in money-laundering and other forms of tax evasion, wrote the following for an academic conference held earlier this year at the University of Texas: "Corporate managers have spent the last century developing tools for avoiding regulation and taxation. They brag that acts of tax avoidance are part of corporate productivity. For them, each dollar of tax not paid because of their machinations is the added value they bring to a company. Tax avoidance is a profit center. Avoidance of regulation and supervision is an equally high priority. Corporate contributions and the personal contributions of senior corporate managers have funded anti-regulatory think tanks and anti-regulatory scholarship. Political contributions have turned theory into reality."

Blum points out that the tools used to avoid taxes and regulation -- shell subsidiaries, partnerships and joint ventures, foreign subsidiaries, special purpose entities and sophisticated transfer pricing techniques -- have long been in use, but "the difference is that when they were first used, their purpose was to avoid state regulation and hide from state law enforcement. ... Today ... the techniques are being used to beat what is left of federal taxation and regulation. Corporations have turned international borders into barriers that block national level taxation and regulation. The international community has failed to produce effective machinery for cooperation in the areas of regulation and taxation, and as a consequence, the social control of corporate behavior stops at the border."

The social control of corporate behavior also stops with this administration. George W. Bush's first choice for chairman of the Securities and Exchange Commission, Harvey Pitt, famously planned "a kinder, gentler SEC." Pitt proved himself so unable to get tough, even after Enron, that he was replaced with William Donaldson, a former head of the New York Stock Exchange -- but of course, that was before the stock exchange was hit by its own scandals.

At the Treasury Department, John Snow, master of paying no corporate taxes and the golden parachute, is now in charge. Bush's Federal Power Commission, with one member banished by Ken Lay of Enron and another selected by him, couldn't be bothered to notice the enormous fraudulent "energy crisis" in California until $30 billion had been sucked out of that state.

Talk about the lunatics running the asylum. Former lobbyists for special interests now dominate the top of the bureaucracies -- not to regulate, but to facilitate corporate rip-offs. Michael Powell at the Federal Communications Commission thinks more media mergers will be good for the nation. At the Interior Department, it is rip and run, all-out exploitation of natural resources, leaving nothing but a trash heap behind -- a trash heap, incidentally, that the taxpayers will have to pay to clean up, since the Superfund for toxic waste cleanups has been allowed to lapse entirely.

Richard Todd, writing about the mutual fund scandal in the Times Sunday Magazine, asked: "Were these laws and rules taken seriously by anyone -- or was it common knowledge in the industry that they were routinely flouted? Who was in on the deal? Was all this done more or less in the open with a genial nod and wink among hundreds of guys who understood the game? Or was the money inhaled like cocaine in a surreptitious instant in the back room? Did non-players know? Did 'my' broker know?"

I don't know about his broker, but try talking to young people in the financial industry, and you will get an earful.

There is a hero in all this, New York State's attorney general, Eliot Spitzer. Spitzer is not only doing a hell of a job on his own patch, he has literally forced the SEC into action. As Spitzer said before breaking the latest financial scandal, the mutual fund mess, "Heads should roll at the SEC."

Normally, the press would pick up this storyline: "huge mess, but one honest man fights valiantly against corruption and powerful special interests." But here's an interesting thing abut media in our day: The Wall Street Journal's editorial page -- one of the weirdest publications on earth -- continually derides Spitzer as "an ambitious politician." No shine, Sherlock? What?! You cry in disbelief. Surely no on in electoral politics is ambitious?! The Wall Street Journal's editorial page itself should get, I suspect, some of the credit for a corporate culture gone mad with greeed (it needs three eee's).

And the corrupt corporate culture has in turn bought the political system. Medicare "reform" is huge boondoggle for the drug companies. The energy bill is nothing but corporate subsidies. We have seen people like Dennis Kozlowski and Ken Lay loot their corporations. We are now watching the looting of an entire country.