Next week, the Corporate Congress will continue pushing anti-consumer and anti-environmental measures. Lawmakers will try to shut down class-action lawsuits, which are key to holding corporations accountable for wrongdoing, and subvert the U.S. Environmental Protection Agency’s (EPA) sensible rule to limit emissions from existing power plants. And lawmakers will keep mulling over the aftereffects of the BP disaster. What they need to know: in part because of legislative inaction, a similar disaster could happen again.
Business for Democracy
Here are more specifics about what’s coming up:

• At 3 p.m. Wednesday, April 29, the U.S. House Judiciary Committee’s Subcommittee on the Constitution and Civil Justice will hold a hearing on H.R. 1927, the “Fairness in Class Action Litigation Act of 2015.” Actually, this measure is anything but fair, because it will make it harder for those injured by corporations or other wrongdoers to file class actions. The bill permits class-action certification only if each proposed class member “suffered an injury of the same type and extent as the injury of the named class representative or representatives.” The trouble is, those injured by a common corporate or other action do not typically have the “same” type and extent of injury. The same bank rip-off may have cost someone $50 and someone else $75. Two victims of a polluters’ toxic dumping may have different diseases. A dangerous car defect may have resulted in death for one victim and a head injury for another. The bill might be more accurately titled, the “No Class Action Litigation Act of 2015.”

• We told you a couple of weeks ago about efforts by the Corporate Congress to scuttle the EPA’s proposal to curb power plant emissions (called the “Clean Power Plan”). Lawmakers are still at it. A measure sponsored by U.S. Rep. Ed Whitfield (R-Ky.) would help states opt out of participating in the plan. The House of Representatives’ Subcommittee on Energy and Power, which Whitfield chairs, approved the bill this week. Next, it moves to the full Energy and Commerce Committee. We are told the committee could mark it up as soon as next week. This is a public interest attack because the EPA’s plan would be a great deal for consumers (PDF). The plan relies heavily on efficiency methods to reduce energy use, which means consumers would see their electricity bills shrink.

• The fifth anniversary of the beginning of the BP disaster was this past Monday, April 20. At 9:30 a.m. on Wednesday, April 29, the U.S. Senate Committee on Commerce, Science, and Transportation will hold a hearing titled, “Five Years After Deepwater Horizon: Improvements and Challenges in Prevention and Response.” The hearing comes at the request of U.S. Sen. Bill Nelson (D-Fla.) and will focus on lessons learned in the wake of the spill and the steps taken to make offshore oil and gas exploration safer. The answer is: not enough. The few new drilling rules issued since 2010 are insufficient. They help address the state of the industry five years ago, but not today – when companies are drilling deeper and expanding their operations. Here are five reasons a BP-scale disaster could happen again.

• At 10 a.m. Tuesday, April 28, the Senate Committee on Environment and Public Works will consider S. 544, the “Secret Science Reform Act of 2015.” This misleadingly named bill is based on a faulty premise and unfounded claims about studies of fine soot pollution conducted almost two decades ago, none of which have been proven despite lengthy congressional inquiries. The legislation would radically diminish the EPA’s ability to fulfill its mission. It would require the agency to ignore significant science when carrying out its statutory responsibilities to safeguard public health and the environment.


Statement of Bartlett Naylor, Financial Policy Advocate, Public Citizen’s Congress Watch Division

Note: U.S. regulatory agencies and the Department of Justice (DOJ) today announced a collection of settlement agreements with Deutsche Bank covering frauds in the manipulation of an interest rate standard known as LIBOR, the London InterBank Offered Rate.

While Public Citizen applauds the guilty plea that law enforcers secured against a Deutsche Bank subsidiary, the actual penalties still reflect that some institutions seem to be deemed “too big to jail.”

Law enforcers found repeated examples of manipulation as they investigated the bank. For example, they discovered pervasive fraudulent practices where traders gave false information about rates at which they borrowed or loaned money with other banks. That established false benchmarks on which other rates were based. That harms average Americans when they agree to mortgages. Law enforcers also found that Deutsche Bank withheld and even destroyed information about the investigation. Yet, surprisingly, despite the severity of these offenses, the government concluded that these crimes should be punished only through a financial penalty.

This settlement, which involves no jail time for any traders, seems out of sync with the problems identified. To make matters worse, many of the traders responsible for the frauds remain employed at Deutsche Bank. The DOJ claims that it may still prosecute individuals, and we hope it will pursue such work. To date, some traders at other firms such as Rabobank have been convicted, but no senior officers of any of the banks involved in the LIBOR case have faced charges.

What’s more, shareholders ‒ not the executives responsible ‒ will be paying this $2.5 billion fine, and taxpayers will subsidize much of it when the company deducts it as a business expense. In addition, Deutsche Bank reported to shareholders Wednesday that the company would face higher “litigation costs,” and this likely will be another cost borne by the corporation’s investors.

The government did secure a guilty plea, but only by a Deutsche Bank subsidiary. A guilty plea by the parent company could have triggered a forfeiture review of the charter for Deutsche Bank’s U.S. bank. Since that might lead to real harm for the company’s operations, we can only speculate that law enforcers agreed to minimize the actual harms to Deutsche Bank’s ongoing business.

Public Citizen has detailed (PDF) the increased and dangerous reliance on the use of deferred prosecution agreements to settle criminal charges against major banks. Fundamentally, these allow the Department of Justice to subcontract the investigation of a fraud to the very company responsible, and then settle with a fine that will be borne by shareholders. Still worse, the settlements allow the bankers to shield individuals from accountability. Such a win-win dynamic for the bad actor undermines the goal of deterring future criminal behavior.

There is not one good reason to break up the Bank of America, the Charlotte-based giant with $2.1 trillion worth of properties that include Merrill Lynch and Countrywide Financial.

There are many good reasons.

As a shareholder, I submitted a resolution for a vote at the annual meeting May 6 that calls for the board of directors to study the merits of a break-up. Public Citizen, where I work as a financial policy advocate, has amassed more than 20,000 signatures in a petition supporting this proposal. Here are 10 reasons to support this study.

1. BoA’s stock trades at about $15 a share. Before this acquisition in Merrill Lynch, the stock traded above $50.

2.The company’s book value is greater than the stock value. If the company is liquidated, with the $2.1 trillion in assets sold to pay off the $1.86 trillion in liabilities (deposits, bonds, etc), this will leave a net of $240 billion. But the stock is only worth about $160 billion. Buy all the stock, liquidate the bank, and shareholders can earn more than $80 billion.

3. The company earns (in after-tax income) a paltry 0.23 percent on these $2.1 trillion in assets. Imagine a factory that costs $2.1 trillion that only returns 0.23 percent on that investment each year. Investors might consider Microsoft, which generates 18 percent on its assets. Much of this difference between Microsoft and BoA is explained by the bank’s massive $1.86 trillion in debt. After servicing that debt, there is little left for shareholders. But even among BoA’s peer mega-banks, that 0.23 percent return is poor. Wells Fargo returns 1.4 percent on assets.

4. BoA’s return on shareholder equity is also poor. It has not been above 5 percent since the Merrill Lynch acquisition. Before that, it often returned more than 15 percent. That 15 percent is close to what Wells Fargo returns currently.

5. One reason that BoA performs so poorly with all this money is that it is too big to manage. The company owns hundreds of subsidiaries. Undoubtedly, the CEO couldn’t list them all, let alone recite their specific business purposes.

6. The company miscalculated its regulatory capital by some $4 billion—not just for one year, but for five years. It has restated operating line results numerous times.

7. JP Morgan posts better figures and enjoys a better management reputation than BoA, but an analyst believes JPMorgan would be worth more to shareholders broken up as well. John Reed and Sanford Weil who merged Citibank and Travellers Group into Citigroup both now agree that Citi would be better broken up. They understand the impossibility of managing the daily operation and risks of such a behemoth.

8. General Electric decided to sell GE Capital—and the stock price rose by more than 10 percent on the news

9. BoA managers failed to prevent massive fraud. In August 2014, BoA agreed to a $17 billion settlement with the Department of Justice. Explained the DOJ, “Bank of America caved to the pernicious forces of greed and cut corners, putting profits ahead of their customers.” Shareholders funded that $17 billion settlement with the government, not those responsible for the fraud at BoA. That precedent can serve as an invitation for other BoA managers to flout the law as well if there’s no personal accountability.

10. BoA’s size isn’t necessary to serve large customers. BoA joins syndicates for large loans. Boutique Lazard Freres brokered the sale of Heinz to Berkshire Hathaway.

Bartlett Naylor is the financial policy advocate for Public Citizen’s Congress Watch division. 

By Emily Myers

It’s Earth Day and we have something to celebrate: released a report on the use toxic chemicals called phthalates in vinyl flooring. Phthalates have been shown to be hormone disruptors and could cause many health problems including reproductive issues. As mentioned in the report, the Mind the Store campaign of the Safer Chemicals, Healthy Families coalition, a campaign to push big retailers to do the right thing and put safer products on their shelves, has achieved a major milestone. One of the largest retailers in the country will remove phthalates in all virgin vinyl flooring by the end of this year. This is great! It will help protect consumers from having unsafe chemicals in their homes.

Continue Reading

Spring is in the air and that can only mean one thing: Investors across the country are gearing up to take on corporate executives at annual shareholder meetings.

Shareholders have filed more than 100 resolutions at companies asking for more information about electioneering and lobbying spending. Year after year, these types of resolutions are the most popular type of social resolutions that companies see. Since the U.S. Supreme Court’s 2010 Citizens United decision opened the floodgates to unlimited corporate political spending, investors have filed more than 500 resolutions calling for more transparency in corporate political activity.

This is also the time of year that the Corporate Reform Coalition, a group of investors, good governance advocates, elected officials and labor organizations (chaired by Public Citizen) steps up to make some serious hay around political spending resolutions.

This year, the coalition is highlighting ten companies’ political spending proposals. These companies represent a diverse set of industries, but they all have one thing in common: a lack of true transparency when it comes to how they influence policy in Washington. These companies are some of the biggest spenders on politics, and their influence peddling has gridlocked important issues like climate change, net neutrality and financial reform.

Continue Reading

© Copyright . All Rights Reserved.