The Multinational Monitor

July/August 2001 - VOLUME 22 - NUMBER 7& 8

T h e  C a s e  A g a i n s t  G E

GE: Decades of Misdeeds and Wrongdoing

GE has a lengthy record of criminal, civil, political and ethical transgressions, some of them shocking in disregard for the integrity of human beings. Here are a few examples:

In 1995, with the establishment of a Presidential Advisory Commission, the full extent of GE’s human experiments with nuclear radiation were revealed. General Electric ran the Hanford Nuclear Reservation in Richland, Washington as part of the U.S. weapons program. Beginning in 1949, General Electric deliberately released radioactive material to see how far downwind it would travel. One cloud drifted 400 miles, all the way down to the California-Oregon border, carrying perhaps thousands of times more radiation than that emitted at Three Mile Island.

In 1986, Representative Edward Markey, D-Massachusetts, held hearings in which it was disclosed that the United States and General Electric had conducted experiments on hundreds of United States citizens who became “nuclear calibration devices for experimenters run amok.” According to Markey: “Too many of these experiments used human subjects that were captive audiences or populations ... considered ‘expendable’ ... the elderly, prisoners and hospital patients who might not have retained their full faculties for informed consent.”

One of GE’s most gruesome experiments — disclosed in the Markey hearings — was performed on inmates at a prison in Walla Walla, Washington, near Hanford. Starting in 1963, 64 prisoners had their scrotums and testes irradiated to determine the effects of radiation on human reproductive organs. Although the inmates were warned about the possibility of sterility and radiation burns, the forms said nothing about the risk of testicular cancer. Markey’s committee heard allegations that, at the time of the experiments, General Electric violated both civil and criminal laws.

GE’s nuclear testing is merely one example of a lengthy corporate history of malfeasance that includes conviction of criminal price-fixing in the 1960s and many equivalent deeds. This article highlights only General Electric’s recently adjudicated or settled criminal or civil violations.

+ GE is wholly or partially liable for at least 78 federal Superfund sites.

+ On September 29, 1998, General Electric agreed to a $200 million settlement in principle of environmental claims resulting from pollution of the Housatonic River and other areas by chemical releases from GE’s plant in Pittsfield, Massachusetts. (The settlement was reached with the Environmental Protection Agency and the Department of Justice.)

The claims result from a long history of GE’s use and disposal of polychlorinated biphenyls (PCBs) and other hazardous substances at the plant, which GE no longer uses for manufacturing. (PCBs, which have been linked to cancer, were commonly used in electrical devices and lubricants from the 1930s through the 1970s, when they were banned.)

Under the settlement, GE will remove contaminated sediments from the one-half mile of the Housatonic River nearest the GE plant. Through a cost-sharing agreement, GE will also fund much of the anticipated cost of an additional mile-and-one-half of river cleanup to be conducted by EPA.

These river cleanups will include contaminated riverbanks and soils in properties in the flood plain along the river. Later, after a cleanup plan is selected for downstream portions of the river, GE will perform that cleanup as well.

In addition, GE will remedy contamination at the Pittsfield plant and other nearby areas, including a school and several commercial properties. The settlement also will address claims that hazardous substances released from the GE plant caused injuries to natural resources in the Housatonic River downstream of the plant, extending through Massachusetts and into Connecticut.

In addition to cleaning up, GE agreed to pay $15 million in damages and to conduct a number of projects designed to acquire or enhance wildlife habitat. The damages payment will be used by the natural resource trustees –– the U.S. Fish and Wildlife Service, the National Oceanic and Atmospheric Administration, and agencies of Massachusetts and Connecticut –– to restore, replace or acquire the equivalent of the injured natural resources.

GE has also agreed to a “brownfield” redevelopment project on a portion of the defunct plant, including a multi-million dollar investment in Pittsfield, in conjunction with the new Pittsfield Economic Development Authority (“PEDA”). PEDA will commit up to $4 million of anticipated revenues from the redevelopment to further enhancement of natural resources.

+ On March 26, 1998, General Electric agreed to pay a $92,000 fine for previous violations of environmental reporting requirements for toxic releases at its silicone manufacturing plant in Waterford, New York, according to EPA’s regional office. In addition, GE agreed to spend about $112,000 to upgrade local emergency response capabilities in surrounding communities. Between 1991 and 1996, EPA cited GE for 23 violations when toxic releases were un- or underreported. Chemicals involved include dimethyl sulfate, chlorine, 1, 1, 1, -trichloroethane, ammonia, and toluene.

+ On September 15, 1995, General Electric agreed to pay $137,000 in fines and expenses and to clean up a hazardous waste dump at a former plant where it repaired and rebuilt transformers.

The agreement was part of a settlement with the Florida State Department of Environmental Protection.

In October 1993, investigators swooped down on the GE Apparatus Service Center in Brandon, Florida with search warrants to take soil samples and confiscate computer records and files. Inspectors found 30 violations, including hazardous waste pumped from underground storage tanks into a nearby railroad spur, reports show. They also discovered groundwater contaminated with elevated levels of PCBs and a layer of petroleum and cleaning solvents floating on the groundwater. Complaints from previous employees and discoveries during routine inspections sparked a sheriff’s office’s investigation of the center, where employees cleaned and serviced heavy-duty electric motors and generators for 20 years.

GE closed the facility in December 1993.

+ On March 13, 1992, the Nuclear Regulatory Commission (NRC) issued a $20,000 fine against General Electric for violations of regulations at the fuel fabrication plant in Wilmington, North Carolina. On May 29, 1991, GE personnel accidentally moved about 320 pounds of uranium to a waste treatment tank. The danger of the mistake was that the size and shape of the waste container caused unsafe concentrations of uranium, which could have led to a nuclear accident. The NRC dispatched a special incident investigation team the same day and an inspection began two days later. The NRC found that the mistake was the result of lax safety controls.

+ According to documents obtained by Public Citizen under the Freedom of Information Act, GE-designed nuclear reactors around the world have a design flaw that make it virtually certain (90 percent) that in the event of a meltdown, radiation would be released directly into the environment and into surrounding communities, leaving the public without any protection. The NRC acknowledges that the reactor containment structure in GE-built nuclear power plants does not work, but they licensed the reactors anyway. (Also, a dozen or more GE-designed boiling water reactors in the United States and abroad have evidence of cracking in the reactor core shroud — a metal cylinder surrounding the reactor’s radioactive fuel rods.)

+ GE continues to mislead government officials and the public about the dangers of PCBs. At an April 22, 1998 shareholder meeting, GE CEO Jack Welch claimed: “PCBs do not pose adverse health risks.” Testifying in Albany on July 9, 1998, EPA Administrator Carol Browner stated: “GE tells us this contamination is not a problem. GE would have people of the Hudson River believe, and I quote: ‘living in a PCB-laden area is not dangerous.’ But the science tells us the opposite is true ... And concern about PCBs goes beyond cancer ... The science has spoken: PCBs are a serious threat...”

+ GE was a big proponent, and prime beneficiary, of the “business-friendly” initiatives undertaken by former New York State Environmental Conservation Commissioner Michael Zagata, who was ousted by Governor Pataki after a controversial tenure. This “business friendly” policy, in 1995, let GE avoid paying a fine and gave the company a tax write-off. The settlement, reached through the program, let General Electric off the hook for permitting an industrial landfill to burn out of control for nearly a year in Waterford, Saratoga County. The deal allowed the company to avoid paying a fine, gave it a $1.5 million tax writeoff, and resulted in a boat launch being built near the Columbia County residences of former Environmental Conservation Commissioner Michael Zagata and his chief deputy. (These “business-friendly” initiatives were later rescinded.)

Defense Contracting Fraud
+ On July 23, 1992, GE pled guilty in federal court to civil and criminal charges of defrauding the Pentagon and agreed to pay $69 million to the U.S. government in fines — one of the largest defense contracting fines ever.
General Electric said in a statement that it took responsibility for the actions of a former marketing employee who, along with an Israeli Air Force General, diverted Pentagon funds to their own bank accounts and to fund Israeli military programs not authorized by the United States.
Under the settlement with the Justice Department over violations of the Foreign Corrupt Practices Act, GE paid $59.5 million in civil fraud claims and $9.5 million in criminal fines.

+ GE’s civil and criminal transgressions stemming from the Israeli military program are by no means isolated. GE is a repeat offender when it comes to Defense Department fraud. The company has repeatedly violated the False Claims Act — a measure originally proposed by Lincoln to protect federal coffers. When the Project on Government Oversight surveyed defense contractors, it found that General Electric was responsible for 15 instances of fraudulent activity in just a four year period (1990-1994) — more than any other defense contractor. GE:

1. Paid $7.1 million to settle a qui tam suit alleging that the company failed to satisfy electrical bonding requirements for its jet engine contracts, thereby creating a safety risk.
2. Paid $5.87 million (along with Martin Marietta) to settle a qui tam suit associated with improper sales of radar systems to Egypt.
3. Paid fines between 1990 and 1994 ranging from a $20,000 criminal fine to a $24.6 million civil fine for a variety of defense contracting frauds, including: misrepresentation, money laundering, defective pricing (2 incidents), cost mischarging (3 incidents), false claims, product substitution, conspiracy/conversion of classified documents, procurement fraud and mail fraud.
4. Was convicted on February 3, 1990 in U.S. District Court in Philadelphia of defrauding the government out of $10 million for a battlefield computer system.
5. Pled guilty on May 19, 1985 to charges of fraud and falsifying 108 claims on a missile contract.
6. Was convicted of defrauding the Air Force out of $800,000 on the Minuteman Missile Project.
7. Was convicted of bribing the Puerto Rico Water Resources Authority.

Consumer Wrongdoing
+ GE was among four companies which paid New York City more than $4 million in 1982 to settle a lawsuit charging that wiring and cables in 754 subway cars were defective.

+ GE in 1992 agreed to pay $165,000 to settle a suit brought by 11 state attorneys general alleging the company deceptively advertised its lightbulbs. According to the state AGs, the ads promised consumers the same amount of light for less energy, but in fact the lightbulbs simply delivered less wattage.

+ GE Capital was ordered to pay $100 million for unfair debt collection practices, as part of a 1999 class-action lawsuit settlement. The suit alleged that GE solicited agreements from bankrupt creditors to pay their credit card agreements without notifying bankruptcy courts of the agreements.

+ GE recalled 3.1 million dishwashers beginning in 1999, stating that a side switch could melt and ignite, presenting a fire hazard.

+ In April 2001, New York State AG Eliot Spitzer won a ruling in state court that, in connection with the dishwasher recall, GE falsely told consumers the problem could not be repaired, prodding customers with partial rebates to buy new GE dishwashers.

Other Litigation
+ Workplace Safety. The Occupational Safety and Health Administration (OSHA) cited GE for at least 858 violations of OSHA rules from 1990 through March 2001. From 1994 to 1999, OSHA cited GE for at least 98 “serious” violations. OSHA issues “serious” citations to companies for conditions posing “a substantial probability that death or serious physical harm could result.”

+ Employment Discrimination. In a lawsuit, a black worker at GE’s Burkville, Alabama plant claims that General Electric officials have fostered a racially hostile environment. GE reached settlements with two ex-GE employees employed at the plant. The workers claim that they’ve been subjected to Ku Klux Klan symbols, swastikas and a hangman’s noose at the plant.

Recidivistic GE
What distinguishes General Electric is not merely the number of crimes committed — or the dollar amount of the crimes — but a consistent pattern of violating criminal and civil laws over many years.

Exacerbating the situation, General Electric has been a leader in using political influence to attempt to overturn the environmental and defense contracting laws that it persistently violates.

The GE Rap Sheet

23 March 1990 Shepherdsville KY - GE and others ordered to cleanup PCB contamination of soil and water
27 March 1990 Wilmington NC - GE fined for discrimination against employees who report safety violations - $20,000
11 May 1990 Ft. Edward/Hudson Falls - GE ordered to clean up PCB contamination of Hudson River - $10 million
27 July 1990 Philadelphia PA - GE fined for defrauding government in defense contacts - $30 million
11 Oct 1990 Waterford NY - GE fined for pollution at Silicone Products plant - $176,000
20 May 1991 Washington, D.C. - GE Ordered to pay damages over improperly tested aircraft parts for Air Force and Navy - $1 million
27 Feb 1992 Allentown PA - GE ordered to pay damages for design flaws in nuclear plants - $80 million
4 March 1992 Orange County CA - GE fined for violating worker safety rules on handling PCBs - $11,000
13 March 1992 Wilmington NC - GE fined for safety violations at nuclear fuel plant - $20,000
22 May 1992 Illinois - GE ordered to pay damages for design flaws of nuclear plants - $65 million
22 July 1992 Washington, D.C. - GE fined for money laundering and fraud over illegal sale of fighter jets to Israel - $70 million
13 Sep 1992 Chicago IL - GE ordered to pay damages for airplane crash - $1.8 million
12 Oct 1992 Nashville TN - GE ordered to pay damages for deceptive advertising on lightbulbs - $165,000
27 Oct 1992 Washington D.C. - GE ordered to pay damages from overcharging on defense contracts - $576,215
12 May 1992 Washington D.C. - GE ordered to pay damages to whistleblower on illegal sale of fighter jets to Israel - $13.4 million
2 March 1993 Riverside CA - GE and others ordered to pay damages for contamination from dumping of industrial chemicals - $96 million
11 March 1993 Grove City PA - GE and others ordered to clean up mining site - $1.81 million
16 Sep 1993 NY - GE ordered to compensate commercial fisherman for PCB contamination of the Hudson River - $7 million
11 Oct 1993 San Francisco - GE ordered to offer rebates to consumers after deceptive light bulb advertising - $3.25 million
18 July 1993 Hudson Falls NY - GE ordered to clean up PCB contamination of Hudson R. - $2.5 million
2 Feb 1994 Perry OH - GE settles with utility companies on defective Perry Nuclear Plant.
14 Mar 1994 Ft. Edward NY - GE ordered to clean up contamination of sediment in the Hudson River - $100,000
14 Sep 1994 Washington D.C. - GE fined for overcharges in defense contracts - $20 million
2 Sep 1995 Waterford NY - GE fined for air pollution and contamination of Hudson River - $1.5 million
15 Sep 1995 Brandon FL - GE fined for groundwater contamination - $137,000
9 Sep 1996 Waterford NY - GE Fined for Clean Air Act violations - $60,000
7 Oct 1996 Hendersonville NC - GE ordered to cleanup contamination of soil and groundwater - $1.029 million
8 Oct 1996 Cook County IL - GE ordered to pay settlement from airline crash in Sioux City - $15 million
22 Feb 1997 Somersworth NH - GE and others ordered to clean up contamination of groundwater and public water supply - $ 7 million
Feb 1998 Waterford NY - GE fined for pollution violations - $234,000
20 April 1998 Waterford NY - GE fined for pollution violations - $204,000
Oct 1998 United Kingdom - GE ordered to pay for asbestos cleanup and related pollution claims - 2 billion pounds
26 Oct 1998 Puerto Rico - GE and others ordered to cleanup contamination of drinking water supply - $4.2 million
5 Nov 1998 South Whitehall PA - GE and others ordered to cleanup contamination - $1.035 million
24 Jan 1999 Chicago - GE ordered to reimburse consumers over unfair debt collection practices -$147 million
19 Aug 1999 Piscataway NJ - GE, others ordered to cleanup contaminated groundwater - $23 million
2 Sep 1999 Malvern PA - GE and others ordered to clean up groundwater contamination - $18.8 million
17 Sep 1999 Moreau NY - GE ordered to build drinking water system after PCB contamination of water supply - $5 million
9 Oct 1999 Pittsfield MA - GE ordered to clean up PCB pollution in Housatonic River - $250 million
18 Oct 2000 New York NY - GE and others ordered to clean up contamination of soil - $28 million
Jan 2001 NY - GE and others ordered to refund overcharges on mortgage insurance - $4 million
4 Feb 2001 NY - State Supreme Court rules GE deceptively misled consumers into purchasing new dishwashers after recall while sending commercial customers a replacement part.

GE Tax Abatement Ripoffs

A November 1998 Time magazine profile of GE concluded that “[t]here is no starker example of the phenomenon of corporate welfare and vanishing jobs than General Electric Co.”

The company has been a master at reducing its federal income tax obligations, particularly through complicated arrangements whereby GE stands in as the owner of assets for businesses that for one reason or another can’t use the tax breaks for these assets [See “Of Tax Cuts, Loopholes and Avoidance: Working for Tax Justice,” Multinational Monitor, June 2001].
General Electric has also proven itself adept at extracting tax breaks and subsidies from local and state governments, even as it has slashed employment.

This listing of subsidies is not a complete inventory. Because state and local subsidies come from so many different sources –– city agencies, county boards, regional bodies, state agencies and state tax credits –– and because they take so many different forms –– property tax reductions and abatements, training grants, low-interest loans, investment tax credits, research and development tax credits, job creation tax credits, sales tax waivers, utility tax cuts, etc. – there exists no centralized repository of information about subsidies provided to GE or any other large, multi-plant corporation.

Louisville: GE's Appliance Park has seen both subsidies and job loss. Between 1984 and 1999, unionized employment declined by almost 6,000, or 53 percent. In 1988, the state contributed to $1 million worth of subsidies for a customer-service center, and the previous governor had earlier pledged $3.5 million in annual training funds for the refrigeration line. In a 1993 episode, the State of Kentucky provided an estimated $19 million in tax breaks, the City of Louisville and Jefferson County provided another $1 million in incentives, and the union gave contract concessions valued at about $80 million, for total cost reductions of $100 million. Recently, the union again granted concessions after the company announced the relocation of range and laundry work to Georgia and Mexico and indicated that refrigerator work was at risk of being moved.

New York City: No U.S. city has been pressured more often or at greater expense to give tax breaks to companies that say they may leave than

New York. One of the earliest high-profile subsidy events was the city's 1987 deal with the National Broadcasting Corporation (NBC) for subsidies against the possibility that the network would relocate its operations to New Jersey. (GE acquired NBC in 1986, in the midst of the network's relocation decision-making process.) The city provided a 35-year property tax cut worth an estimated $72 million, $800 million in partly-tax exempt financing, a partial rent tax cut and a waiver on city sales taxes on at least $1.1 billion worth of machinery and equipment the network planned to buy. The financing amount was about six times larger than the previous record set by the New York Industrial Development Agency, $135 million for Morgan Stanley & Co.

Other news reports of subsidies to GE include:

Lowndes County, Alabama: A GE plastics plant received “millions” in local tax concessions in 1985 in one of the poorest counties in the nation.

Melbourne, Florida: GE Harris Railway Electronics received a state and local incentive package valued at $1.9 million for its new corporate headquarters, including a 10-year property tax abatement.

Springfield, Illinois: Garrett Aviation Services, acquired by GE in 1997, benefited from $8.5 million in tax-exempt revenue bonds for an aircraft painting facility from the Capital Airport Authority and from being included in a tax increment financing (TIF) district, which provides a sales tax exemption on building materials.

Fort Wayne, Indiana: The city granted GE tax abatements in 1983 when GE said it was moving consumer-product work to Mexico. GE's aircraft-engine division was granted $2.5 million in federal retraining funds when the company relocated about 800 jobs to Fort Wayne from

Evendale, Ohio in 1983; the additional State of Indiana subsidies raised the total package to $4.1 million.
Mount Vernon, Indiana: GE’s plastics plant expansion received a tax abatement valued at $1.3 million in 1988.

Bloomington, Indiana: GE received $150,000 for training from Indiana for an expansion of refrigerator production in 1988, and a total of $725,000 for training and road improvements from the state in 1992. It also received a 10-year tax abatement package from Monroe County in 1992, and possibly inclusion in a TIF district. And in 1994, the state gave GE another training grant of $60,000.

Jeffersonville, Indiana: GE’s GEA Parts L.L.C. received a 10-year property tax abatement from the Jeffersonville City Council when it consolidated operations there from New Concord, Ohio and Lexington, Kentucky.

Bangor, Maine: A GE facility there received a “STIF” or State TIF district, which provides for the state to rebate to the company up to 25 percent of state income tax revenues generated by new jobs, sometime prior to mid-1995.

New Hampshire: In 1985, the state's Industrial Development Authority approved $1.75 million in industrial development bonds for GE.

Camden, New Jersey: In 1991, the state's Economic Development Authority acted as a conduit for public funds from itself, Camden County, the Urban Development Corporation and the Casino Reinvestment Development Authority that subsidized a 575,000 square foot facility that GE leased from a private developer; total private and public funding was reportedly $65 million, including $46 million in bonds. The state also provided a training grant of $374,500. (The facility was taken over by Martin Marietta in a sale by GE in 1993.)

Evendale, Ohio: GE Aircraft Engines filed for tax abatements through Evendale and Hamilton County Development Company in a 1997-1998 expansion.

Hamilton, Ohio: A GE Aviation Service facility is located in the Southwestern Ohio Industrial District, an enterprise zone, under which companies are eligible for tax abatements of up to 50 percent.

Hebron, Ohio: GE’s Newark Quartz Plant expansion in 1994 was slated to receive from Licking County a 75 percent property tax abatement for four years and 50 percent for three years on new equipment.

Ravenna, Ohio: GE's lamp plant received tax abatements on $17 million in new investments in 1994 from Portage County. The 10-year abatement was estimated to save GE $2 million. The abatement was granted after a rumor circulated that GE might be looking to relocate the plant.

Willoughby, Ohio: GE's Willoughby Quartz plant received a tax abatement in 1994 on a $2.2 million addition, 75 percent for seven years on equipment and 40 percent on real estate over four years. The abatement was estimated to save GE $114,113, and was to encourage GE to expand in Willoughby rather than in Newark, Ohio. GE received an additional seven-year, $2.5 million tax break in 1995 on a $17 million expansion.

Philadelphia, Pennsylvania: GE benefited from a 1993 $50,000 training grant to Delaware Area Vocational Technical School to train and retrain GE workers, and from a $218,315 training grant in 1993 to the same school for training and retraining.

Grand Prairie, Texas: GE received a 10-year inventory tax abatement worth an estimated $280,000 in 1996 on a warehouse in the Great

Southwest Industrial Park, into which the company announced it was moving its regional appliance distribution center. The warehouse's developer also received a 10-year 50 percent tax abatement worth $350,000.