Names in the News

Ticket Skyjacking Cartel

British Airways and South Korean Air Lines in August agreed to plead guilty and pay separate $300 million criminal fines for their roles in conspiracies to fix the prices of passenger and cargo flights.
           
Federal officials say that two other airlines — Virgin Atlantic and Lufthansa — have agreed to cooperate in the government’s ongoing investigations. Virgin Atlantic entered the Justice Department’s leniency program — conditioned on being the first to report involvement in activities violating anti-trust rules — after reporting its participation with British Airways in a passenger fuel surcharge conspiracy. Lufthansa was conditionally accepted after disclosing its role in an international cargo conspiracy with British Airways and Korean Air.
           
Federal officials alleged that passengers who flew on British Airways flights between the United Kingdom and the United States paid more for their tickets as a result of the illegal cartel. In 2004, British Airways’ fuel surcharge for round-trip passenger tickets was around $10 per ticket. By the time the conspiracy was cracked in 2006, the surcharge was nearly $110 per ticket — a 10-fold increase.
           
During the air cargo conspiracy, British Airways’ fuel surcharge on shipments to and from the United States changed more than 20 times and increased from four cents per kilogram of cargo shipped to as high as 72 cents per kilogram.
           
Federal officials alleged that Korean Air agreed with air cargo competitors on rates for international air cargo shipments. The conspirators agreed to increase the fuel surcharge over time from 10 cents per kilogram to as high as 60 cents for each kilogram of cargo.  
           
The Justice Department also charged that Korean Air reached an agreement with its rivals to fix certain passenger fares for flights from the United States to Korea.
           
The conspiracy raised the price on virtually every ticket purchased between 2004 and 2006 for the conspirators’ long-haul international flights, according to Justice Department officials.

Corporate Convictions

Five years after President Bush created the President’s Corporate Fraud Task Force in response to a wave of corporate scandals, the task force has obtained 1,236 total corporate fraud convictions, the Justice Department announced in July.
           
The Department said that those convictions include:

• 214 chief executive officers and presidents;
• 53 chief financial officers;
• 23 corporate counsels or attorneys; and
• 129 vice presidents.

A subsequent analysis by CFO Magazine identified an additional 10 chief financial officers who have pled guilty or been convicted since July 2002.
           
“These prosecutions were complex and challenging,” said then-Deputy Attorney General Paul J. McNulty in July. McNulty left the Department of Justice in the wake of the controversy over the U.S. attorney firings. He has since signed on with the law firm Baker & McKenzie.
           
“The Enron Task Force alone,” McNulty said, “brought criminal charges against 27 former Enron corporation executives and obtained 20 convictions. The chief financial officer was sentenced to 292 months in prison. And that sentence doesn’t stand alone — Adelphia’s senior executives were sentenced to 15 and 20 years; Worldcom’s CEO received a 25-year prison term; and the former CEO of Cendant Corporation was sentenced to more than 12 years in prison and ordered to pay $3.2 billion in restitution. These sentences sent a dramatic message — corporate executives will be held accountable.”

Toxic Beauty

Hundreds of cosmetics sold in the United States contain chemicals the cosmetics industry itself has determined to be unsafe even when used as directed, according to a September Environmental Working Group (EWG) investigation.
           
Many of the products lining the shelves of stores in the United States include chemicals most other countries have outright banned, according to EWG.
           
“Cosmetics do not have to be approved as safe by the FDA [Food and Drug Administration] before they are sold,” says EWG’s Jane Houlihan. “As a result, they too often contain dangerous ingredients banned in Europe and Japan or chemicals deemed unsafe for specific uses by their own industry scientists.”
           
In an analysis of the ingredients in more than 23,000 products, EWG discovered that nearly one of every 30 products sold in the United States fails to meet one or more industry or governmental cosmetics safety standards. EWG’s investigation also found nearly 400 products sold in the United States containing chemicals that are prohibited for use in cosmetics in other countries, and over 400 products containing ingredients the U.S. cosmetic industry’s own safety panel has determined to be unsafe when used as directed.
           
Unlike for drugs and food additives, the FDA has no authority to require that cosmetics be tested for safety before they are sold. An industry-funded panel, not a government health agency, reviews the safety of cosmetic ingredients in the United States. EWG says its research shows that this largely self-regulated industry routinely fails to adhere to its own safety panel’s advice and to heed the health warnings inherent in cosmetic safety standards set in other countries.                    

— Russell Mokhiber