JUNE 1997 · VOLUME 18 · NUMBER 6
N A M E S I N T H E N E W S
SEARS ROEBUCK AND CO. will forgive millions of dollars in debt and repay millions more to consumers nationwide to settle allegations that the giant retailer pressured consumers who were in bankruptcy to continue to pay off their debts and threatened to repossess their goods. In June, Sears resolved disputes with 39 states and agreed to pay $165 million to the states and to consumers.
"Businesses have a right to collect debts, and consumers have a responsibility to pay their bills," Massachusetts Attorney General Scott Harshbarger says. "But collection practices must be conducted legally, and consumers must be protected. Sears went too far, and now it is paying the price."
Sears reported the problem to Harshbarger's office in April 1997. Harshbarger's investigation confirmed that Sears, by threatening to repossess consumer goods, pressured consumers to make payments on debts even after the debtor was in bankruptcy, and obtained the payments without the knowledge of bankruptcy courts.
For at least 10 years, Sears obtained so called "reaffirmation agreements" from Sears customers in bankruptcy. A reaffirmation agreement is a written contract by which a debtor agrees to pay a particular debt even though the debt would otherwise be forgiven in bankruptcy. Such an agreement can be valid during bankruptcy, but only if it is voluntary and is filed with the bankruptcy court prior to the close of the bankruptcy and is reviewed by the court.
State officials alleged that Sears, on a massive scale, obtained reaffirmation agreements but did not file them with bankruptcy courts, thereby avoiding the courts' review.
THE INDUSTRY CAMPAIGN against the Environmental Protection Agency's (EPA's) proposed clean air rules claims that EPA's regulations will restrict backyard barbecue grills, lawnmowers and fireworks displays. But it is big corporate polluters which the rules will most affect. A report released in May by the Environmental Working Group (EWG) found that 100 companies accounted for the majority of the smokestack pollution in each of three major categories covered by the EPA proposal.
The report found that the 100 top sulfur dioxide polluters accounted for 83 percent of those emissions, 100 companies accounted for 70 percent of nitrogen oxide emissions, and 100 companies accounted for 51 percent of fine particles emitted directly from smokestacks.
The report, "Smokestacks and Smokescreens: Big Polluters, Big Profits and the Fight for Cleaner Air," is the first comprehensive accounting of emissions from major stationary sources of particulate air pollution. The report also tabulates revenues and profits of major smokestack polluters.
"Our report shows that the major pollution sources are large, enormously wealthy companies," says Richard Wiles, the lead author of the report. "The real issue is not the affordability of pollution control measures. It is really a question of corporate strategy to maximize profits. Most of these companies are choosing spin control over pollution control -- public relations over pollution reduction. Thousands of lives stand in the balance."
THE PRATT & WHITNEY GROUP of United Technologies Corporation Inc. (UTC) agreed in May to pay the United States $14.8 million for allegedly conspiring to divert $10 million in United States military aid into a slush fund subject to the exclusive control of an Israeli Air Force officer. U.S. federal officials previously recovered about $2 million in funds related to the scheme. Federal officials alleged that UTC and former Israeli Air Force officer Rami Dotan set up a $10 million fund with U.S. military aid that could be spent at Dotan's discretion, without the required oversight of the Defense Security Assistance Agency or procurement authorities within Israel. In 1991, Dotan was sentenced to 13 years' imprisonment by an Israeli military court for his role in related schemes.
The U.S. federal complaint alleged that UTC acquired the $10 million in funds for Dotan through false billings under a contract with Israel to develop and manufacture a PW1120 turbojet engine for an Israeli LAVI fighter aircraft.
UTC allegedly prepared false purchase orders and submitted false invoices to Israel between March and July 1987 to collect $10 million for engine improvement work that was never performed, according to the complaint. UTC and Dotan unlawfully concealed a side-deal to use this $10 million as a "bank" for Dotan.
Federal officials alleged that, at the direction of Dotan, UTC paid approximately $2.4 million of the $10 million to Yrretco Inc. and Airtech Inc., two New Jersey companies.
The manager of Yrretco and Airtech deposited hundreds of thousands of dollars of the U.S. military aid into the personal bank accounts of Nehemia Oron, a former Israeli Air Force Colonel, and Yoram Ingbir, the owner of Ingbir Engineering.
In 1992, the United States recovered $2 million from Yrretco, Airtech and Oron, an alleged co-conspirator.
Dotan confessed to the Israeli police that he and Ingbir planned to split Ingbir's earnings.
General Electric and the National Airmotive Company previously have pled guilty to felony counts, and paid civil damages and penalties, for similar schemes carried out at the request of Dotan.
-- Russell Mokhiber