The Multinational Monitor

  September 2002 - VOLUME 23 - NUMBER 9


N A M E S    I N    T H E    N E W S

Chainsaw Detoothed

The former CEO of Sunbeam, Albert Dunlap, and Sunbeam's former chief financial officer, Russell Kersh, in September consented to the entry of final judgments against them in litigation brought by the Securities and Exchange Commission (SEC).

Without admitting or denying the allegations in the SEC's complaint, Dunlap and Kersh agreed to the entry of judgments permanently barring each of them from serving as officers or directors of any public company, and requiring Dunlap to pay a civil penalty of $500,000 and Kersh to pay a civil penalty of $200,000.

Dunlap gained notoriety in the 1980s and 1990s as "Chainsaw Al" for his record of taking over companies and firing thousands of employees. He celebrated this management approach in a 1996 book, Mean Business.

The SEC alleged that Dunlap and Kersh, together with others, employed improper accounting techniques and undisclosed non-recurring transactions to misrepresent Sunbeam's results of operations.

As a result, Sunbeam's financial statements and press releases reporting 1996 year-end results, quarterly and year-end 1997 results, and first-quarter 1998 results were materially false and misleading.

The SEC alleged that among the illegal conduct of Dunlap and Kersh was failure to disclose that Sunbeam's 1997 revenue growth was, in part, achieved at the expense of future results. The company had offered discounts and other inducements to customers to sell merchandise immediately that otherwise would have been sold in later periods, a practice known as "channel stuffing."

Animal Factory Rap Sheet

Just weeks after the second-largest beef recall in history, the Sierra Club released a report in August exposing hundreds of criminal and civil violations committed by the largest U.S. animal factories.

The report, "The Rap Sheet on Animal Factories," documents convictions at corporate animal factories for animal cruelty, bribery, records destruction, fraud, worker endangerment and pollution violations.

"Environmental violations by the meat industry add up to a rap sheet longer than War and Peace,'" says Ed Hopkins, director of the Sierra Club's environmental quality program.

Among other findings, the Rap Sheet documents 60 misdemeanor or felony charges against 50 companies and their managers, 43 public health recalls that total approximately 67,000 tons of meat, hundreds of manure spills, and over $50 million in criminal fines.

The Rap Sheet report highlights violations committed by 10 of "America's Least Wanted Animal Factories."

Violations exposed in the report include:

A Cargill Pork factory in Missouri violated the Clean Water Act when it dumped hog waste into the Loutre River, killing approximately 53,000 fish along a five-mile stretch;

A Smithfield Foods factory in Virginia was fined $12.6 million for chronically dumping slaughterhouse wastes into a tributary of the Chesapeake Bay;

Buckeye Egg factories in Ohio illegally disposed of dead chickens by dumping them in a nearby field, and violated their clean water permits more than 800 times.

Other meat companies who earned the title of "Least Wanted" include ConAgra Beef Company, ContiGroup PSF, DeCoster Farms, Foster Farms, Sand Livestock Systems, Seaboard Farms and Tyson Foods.

Nuclear Liability Shield

Nuclear power companies are relying on complicated Enron-style corporate structures to minimize liability in case of accident. The corporations are setting up limited liability corporations (LLCs) to reap maximum corporate profits while minimizing legal liability and responsibility to the public in the event of a catastrophic accident.

That's the conclusion of an August study, "Financial Insecurity: The Increasing Use of Limited Liability Companies and Multi-Tiered Holding Companies to Own Nuclear Power Plants," by the environmental groups Star Foundation and Riverkeeper.

The report says LLCs are increasingly used to shield the assets of a parent corporation from liability while shifting the risks of a nuclear accident, cleanup and other financial liabilities to home and business owners and lending institutions working with nearby communities.

In nuclear power's first two decades, accident insurance requirements were seriously inadequate. Decommissioning costs were overlooked entirely.

After the 1979 accident at Three Mile Island, the federal nuclear self-insurance requirement known as the Price-Anderson Act was increased from $560 million to the current $9.3 billion, and each plant was required to set up a dedicated decommissioning trust fund to assure that funds would be available to clean up a closed plant.

But the Star Foundation-Riverkeeper report finds that "with the passage of two more decades, renewed complacency has eroded these safeguards."

"The consolidation of nuclear ownership now risks the shifting of accident and decommissioning costs from the plant owners to the general public because the relatively secure financial backing of substantial utility companies has in many cases been replaced by a limited liability subsidiary whose only asset is an individual nuclear power plant," the report found.

Russell Mokhiber