Archive for the ‘Ethics’ Category

Last week, the Consumer Financial Protection Bureau (CFPB) fined Wells Fargo $185 million for the astounding abuse of opening more than two million unauthorized deposit and credit card accounts.

Now, Senate Majority Leader Mitch McConnell (R-Ky.) is employing a rarely used procedure to force a rushed vote on a bill to defang the CFPB.

Ok, now here’s a quiz. Can you guess which member of Congress with his wife holds more Wells Fargo stock than any other, at least according to the most recently available financial disclosure forms?

You guessed right! Mitch McConnell.

Let’s walk this through in more detail.

On Friday, the CFPB announced $185 million in fines and penalties against Wells Fargo for the jaw-dropping, illegal practice of opening deposit and credit card accounts for consumers who did not request them and did not know they existed. Not just a few such accounts — 2 million of them. According to Wells Fargo, more than 5,000 employees were involved in setting up the sham accounts.

One hundred million of that total penalty was imposed by the CFPB; $35 million goes to the Office of the Comptroller of the Currency, and $50 million to Los Angeles. The $100 million fine is the largest ever imposed by the CFPB.


Enter Mitch McConnell.

This week, he announced plans to rush to the Senate floor S. 3318, “A bill to amend the Consumer Financial Protection Act of 2010 to subject the Bureau of Consumer Financial Protection to the regular appropriations process, and for other purposes,” introduced by Georgia Republican Senator David Perdue.

You might be curious to read the bill.

Too bad.

It was just introduced on Monday, and the text does not yet appear, the website where proposed bills are posted.


But the title tells you what you need to know. When the CFPB was created, Congress gave it budget autonomy — it is funded by transfers from the Federal Reserve system, and its budget is set at 12 percent of Federal Reserve operating expenses. The CFPB creators built in this feature because they knew that otherwise the Big Banks could destroy the consumer bureau by stripping its funding. This isn’t unique among banking regulators — the Fed, the OCC, the FDIC and others all share this autonomy, as it has long been recognized that our cops on the financial beat should not be subject to appropriations while policing Wall Street. Since then, the Big Banks have lobbied hard to subject the CFPB to congressional appropriations, almost explicitly for the purpose of slashing its funding and stopping it from doing its job.

S. 3318 is not following the traditional pathway to the floor of the Senate. It has not yet been debated and voted on in committee. Instead, using a special procedure, Majority Leader McConnell is taking it straight the Senate floor.

Which raises the question: Senator, what’s the rush?

Well, it just may be that Mitch McConnell brings a special passion to the issue, in the wake of the CFPB penalty on Wells Fargo.

In his 2015 financial disclosure form, McConnell reports between $1,000,001 and $5,000,000 in deferred compensation for his wife, Elaine Chao, from Wells Fargo. Chao, the former Secretary of Labor, serves on Wells Fargo’s board of directors.


The bank paid her a not inconsiderable $291,027 in 2015 for her board service.


Quite something, right?

We cannot assume that McConnell is acting just to punish the CFPB for imposing a modest fine on Wells Fargo for its systematic misdeeds.

It’s entirely possible — arguably more likely — that McConnell is acting to please his Wall Street paymasters, more than out of pique in response to the CFPB penalizing a megabank to which he’s unusually close.

It’s true that that can pass as a kind of ethics defense in Washington, D.C. (see theongoing case of Rep. Roger Williams, R-Texas, also an auto dealer, who is defending himself against charges of wrongdoing related to the introduction of an amendment to benefit auto dealers on the grounds that he was not trying to benefit himself but was instead doing a favor for a lobbyist for the National Automobile Dealers Association). But it doesn’t wash among Americans uncontaminated by Washington corruption.

Transparency controversies have dominated this year’s presidential campaign, but observers might be missing one of the most important transparency-related topics of all: What insight will the public have into the candidates’ transition planning?

This and other related questions were covered during a National Press Club event sponsored by Public Citizen on Wednesday that featured the deputy general counsel for President-elect Obama’s 2008 transition team, an expert helping the two major party nominees conduct their transition planning right now, a leading academic expert and advocates with varying perspectives.

Norman L. Eisen, the deputy general counsel to Obama’s transition team, said the 2008 work was the last “pre-historic” transition effort because laws passed by Congress since then have formalized processes for the transfer of power from outgoing to incoming administrations.

Eisen, who subsequently became the “ethics czar” of the Obama administration, also promoted Obama’s decision to adopt an ethics policy for transition team members and to implement various sunshine-oriented policies, such as making the White House visitors’ log public.

But Taylor Lincoln, research director of Public Citizen’s Congress Watch division, noted that various measures Congress has passed to make the transitions more efficient have done little to ensure that transitions are conducted in accordance with small-d democratic principles. Despite the fact that transition work is largely publicly funded, the open records and ethics rules that apply to normal government activities do not apply to it.

These shortcomings are significant because the work of transition teams might be among the most important in a presidential administration, Lincoln said, noting that these teams choose the personnel to fill key positions and formulate policy positions.

Sean Moulton, open government project manager at the Project on Government Oversight, advocated applying the Freedom of Information Act to certain transition period records.

Heath Brown, assistant professor of Public Policy at the City University of New York, pointed out that much of the record from past transitions has been lost to history because records were not retained.

Kevin R. Kosar, senior fellow and governance project director at R Street Institute, indicated general agreement with the principle of transparency but noted a tension between transparency and privacy concerns. He noted that transition teams vary for ordinary government work because of hazy lines that separate official participants with informal advisors on the periphery.

Also on the panel was David Eagles, director of the Center for Presidential Transition at the Partnership for Public Service, which is advising the current nominees on their ongoing work. An alum of Mitt Romney’s transition planning team, Eagles noted a significant increase in the comprehensiveness of transition processes in recent years.

Public Citizen will be revisiting this issue next week with the release of a report on the policy advisors closest to Hillary Clinton and Donald Trump.

Here are some photos from the event:
Presidential Transition Event

wallstThis month shareholders at Fluor Corporation and NiSource Inc. voted to approve resolutions that require the companies to disclose their political spending. Fluor is a global engineering and construction company and NiSource supplies natural gas and electricity to nearly 4 million customers in seven U.S. states. Support for corporate political spending transparency has been growing nationwide as more and more shareholders demand to know whether their companies are using their investments to engage in potentially risky political behavior or investing in issues that are not aligned with their corporate values.

In a great trend, some companies- more than half of the S&P 100– have moved to voluntarily increase transparency around their political spending, however many still prefer to hide their campaign and lobbying spending from public view. With the majority votes at Fluor and NiSource, shareholders are demanding transparency.

The recent majority votes at Flour and NiSource demonstrate the continued momentum for corporate transparency, but they are also significant because both companies are recipients of major government contracts. Fluor Corporation and its subsidiaries have been awarded over $470 million in federal contracts in fiscal year 2016 alone. NiSource was awarded almost one million dollars in government contracts in 2015 and 2016, and has been awarded almost $12 million since 2011.

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Thirty-three years ago today, the World Health Organization adopted the International Code of Marketing of Breastmilk Substitutes (AKA the “WHO Code”) to promote breastfeeding and limit formula companies’ influence over women’s infant feeding decisions. Today, most health care facilities and the largest formula makers continue to violate the Code in the U.S. and worldwide.

To mark the anniversary of the WHO Code, more than 20 organizations and thousands of moms and citizens today are participating in a day of action led by Public Citizen, directed at the largest formula makers in the U.S. and Canada – Mead Johnson (of Enfamil), Abbott (Similac) and Nestle (Gerber Good Start). Participants are urging the companies to end the unethical practice of promoting formula in health care facilities, particularly through the distribution of commercial discharge bags with formula samples – a longstanding violation of the code.

Mothers and leaders are delivering a petition with more than 17,000 signatures to Mead Johnson at its headquarters outside of Chicago. The petition will also be presented to Abbott and Nestle. Thousands of others are taking action remotely, sending photos and messages to companies on Facebook, Twitter and other online platforms. A diverse group of consumer rights, public health, women’s health, corporate accountability and breastfeeding advocacy organizations are co-sponsoring the effort. The day of action is not meant to advocate against formula use if necessary but to focus on the need to give mothers information that hasn’t been influenced by formula companies.

Most health care professionals and the American Academy of Pediatrics recommend that mothers exclusively breastfeed for six months. A large body of research shows that antibodies passed from a nursing mother to her baby can help lower the occurrence of many conditions among infants including ear and respiratory infections, diarrhea, meningitis and higher risks of allergies, sudden infant death syndrome and other health risks. Mothers also benefit, with a reduced risk of type 2 diabetes, breast cancer, obesity, ovarian cancer, post-partum depression and bladder infections.

Public health experts overwhelmingly discourage hospitals and doctor’s offices from distributing formula company-sponsored gift bags and formula samples – common marketing tactics – but formula companies still find ways to market formula in facilities nationwide. Studies show such formula sample distribution undermines women’s breastfeeding success because the practice is viewed as an endorsement of formula by health care providers. In 2011, then-U.S. Surgeon General Regina A. Benjamin called for more enforcement of the WHO Code through the Baby-Friendly Hospital Initiative, which requires designated hospitals to comply with the code.

Nearly half of the world’s countries have adopted legislation to implement the Code, but in the U.S. — as a result of formula industry lobbying and political influence— legislation currently remains out of reach.

But advocacy efforts have led many hospitals to end formula promotion over the past decade. According to the Centers for Disease Control and Prevention (CDC) Maternity Practices in Infant Nutrition and Care (mPINC) surveys, 27.4 percent of hospitals had discontinued the formula discharge bags for breastfeeding mothers in 2007, and by 2011, 45.5 percent had ended the practice. All hospitals in Massachusetts and Rhode Island have voluntarily banned discharge bags, and a recent Public Citizen and Ban the Bags report found that 82 percent of the U.S. News and World Report’s top-ranked hospitals, and more than two-thirds of the highest ranked hospitals in gynecology, no longer hand out commercial formula discharge bags with samples. However, formula companies have increasingly managed to push formula samples in doctor’s offices and clinics, often without the knowledge of health care providers within those offices.

Diverse organizations are co-sponsoring the day of action with Public Citizen. They include the U.S. Breastfeeding Committee (composed of more than 50 member organizations), the Best for Babes Foundation, Food and Water Watch, Corporate Accountability International, the National Women’s Health Network, Our Bodies Ourselves, La Leche League USA, HealthConnect One, the National Alliance for Breastfeeding Advocacy, the California WIC Association, Power U Center for Social Change, Breastfeed Chicago, the Chicago Region Breastfeeding Task Force, the Massachusetts Breastfeeding Coalition, the North Carolina Breastfeeding Coalition, the Coalition of Oklahoma Breastfeeding Advocates, the Pennsylvania Breastfeeding Coalition, the New York State Breastfeeding Coalition, United States Lactation Consultants Association and Women Empowered Systems Enrichment (WISE).

To learn more about the Public Citizen’s campaign to stop infant formula marketing in health care facilities, visit

Eva Seidelman is a Researcher for Public Citizen’s Commercial Alert.

The tide is turning in the nationwide movement to end junk food commercialism in schools. That’s thanks in part to a campaign to address childhood obesity initiated by First Lady Michelle Obama. Last month, the U.S. Department of Agriculture (USDA) proposed a new rule which will limit unhealthy food marketing on school property during the school day, and the agency is seeking public comments on it.  The rule is part of the Local School Wellness Policy Implementation under the Healthy Hunger-Free Kids Act of 2010.

On Friday, April 25, Public Citizen will submit detailed comments, and summary comments endorsed by thousands of supporters, urging the USDA to provide the strongest and broadest possible protections for students. We anticipate that our comments will be taken seriously since our School Commercialism: High Costs, Low Revenue report was cited directly in the proposed rule.

In 2009, junk food companies spent $149 million on marketing in our schools — with ads for sugary drinks like Coke and Pepsi accounting for 90 percent. And the marketing seems to be having some effect: In 2012, more than one- third of children and adolescents struggled with the health effects of being overweight or obese.

While the proposed rule is an important step forward, it has some potential loopholes. For example, the USDA should include a provision that urges schools to eliminate advertising of all brands that market unhealthy food, not just specific unhealthy products. Schools should also be provided the freedom to eliminate all food marketing, in order to streamline the process of monitoring brand and product compliance with the USDA’s Smart Snacks guidelines.

The USDA should also include a more expansive definition of food marketing to cover the range of tactics used by food and beverage companies.  Public Citizen and allies are encouraging the USDA to provide guidance to schools on the various types of marketing including, but not limited to posters, curricula, websites promoted for educational purposes or recommended by the school (ex., vending machine exteriors, food or beverage cups or containers, equipment, uniforms, school supplies, in-school television (such as Channel One) and on computer screen savers and/or school-sponsored Internet sites. Additionally, branded fundraisers and corporate-sponsored programs (ex. McTeacher’s night), corporate incentive programs that provide children with free or discounted foods or beverages (ex. Pizza Hut Book It! Program), free samples and naming rights to school property.

Research suggests that commercialism in schools generally poses a threat to children’s psychological health, in addition to threats to physical health.  Children exposed to advertising suffer displacement of values and activities other than those consistent with materialism  and heightened insecurity about themselves and their place in the social world among other issues.  Commercial messaging in education compounds the overall effects of children’s exposure to ubiquitous commercialism while undermining students’ capacities to think creatively, critically and independently in school.

Public Citizen maintains that no commercial marketing or advertising should be present in the education context given its demonstrated harms to children’s physical and psychological health. But since the USDA can address only unhealthy food marketing in this proposed rule, Public Citizen will urge the agency to make its rule on food marketing as strong as possible.

We encourage citizens to endorse our summary comments to the USDA by Friday, April 25. Supporters should also sign our petition to keep commercialism out schools entirely.

Eva Seidelman is a researcher for Public Citizen’s Commercial Alert.

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