FUNDS
Recently I had some money I wanted to put away and, really, never think about again. I was convinced to talk to someone at my credit union about investing it somewhere, rather than just stashing it away under my bed or in a hollowed-out hardcover edition of Atlas Shrugged. So I made an appointment, went in, and sat down with their ethical investing specialist.
We had a lovely conversation about my needs and expectations: that I just wanted to hang on to my money, not gamble it away, and that if I was supporting companies they had to be organizations making a positive contribution. We talked a bit about “sustainable investments”, about social and environmental responsibility. I laughed nervously and told her that I just didn’t want find out that I’m supporting union-busting in El Salvador, sweatshops in Bangladesh, weapons manufacturing in the US, or clear-cutting in Indonesia. The conversation wasn’t too long or too specific – after all, I was sitting down talking with the head of ethical investing at a local credit union – but we did look at some different options and she assured me that she deals with many clients with similar values and concerns and that I had nothing to worry about.
She talked me into a certain mutual fund. The stated “Investment Objectives and Strategies” of the fund were to “increase investors’ capital by investing in companies anywhere in the world that conduct their business in a socially responsible manner.” That sounded about right. According to the documentation the companies in the fund were said to be evaluated based on “corporate governance, ethical business practices, community involvement, human rights practices, human resource practices, and environmental impact.” And that’s really all I wanted. I understood the downsides of mutual funds but was just happy to not have to worry about where my money was going and was just as happy to give this lady a cut for putting my mind at ease and doing all the work for me. Nervous, but feeling like I was being an adult and doing the right thing, I left my credit union and thought little about my money again for about a year.
Eventually I got a statement in the mail, my “Report of Fund Performance”, detailing who I was invested in and what my money had been up to. I browsed the document for a few minutes and then tossed it on my desk. There it sat for almost two weeks until the cynical skeptic in me just couldn’t take it any longer. I told myself to just trust the system. I told myself that I didn’t need to question everything and that this lovely person had, in person, assured me that I could rest easy, that all would be well. But the names were all right there. It would be so simple to look up a few of these companies and see if any of them had run into trouble recently. I really couldn’t help myself. So I typed the names of all the companies I didn’t recognize into the Googles. I opened both the corporate website and the Wikipedia entry for each business. Then to each company name I'd queried I appended nouns like “scandal”, “court”, “charges”, and “corruption” and searched them all again. More often than not these searches elicited groans and, when enough pressure built up, the occasional muffled, clenched-jaw scream of “What the FUCK!?”
Below are some of the companies I held shares in, and made money off of, through my “sustainable”, “ethical”, “socially responsible” mutual fund:
Banco Bradesco SA Pref ADR
(One of the largest financial services companies in Brazil)
• CEO, Luiz Carlos Trabuco Cappi, and two other company executives, Executive Managing Director Luiz Carlos Angelotti and Vice President Domingos de Abreu, have been accused by Brazilian federal police of involvement in corruption and money laundering
• Relating to fraud at Brazil’s Finance Ministry, police are investigating Banco Bradesco for the mysterious elimination of $828 million in fines against the bank
China Mobile Communications Corporation
(A Chinese state-owned telecommunication company)
• China Mobile receives protectionist and preferential benefits as a state-owned company. As such, China Mobile is essentially an arm of the government; a government that is, as we all know, responsible for all manner of egregious human rights and environmental violations
• Two China Mobile executives have recently been charged with bribery involving $67 million. One was sentenced to life in prison and the other to death for these crimes
• Fourteen senior executives of China Mobile are currently being investigated for corruption
EOG Resources
(The successor to a little company called Enron. Maybe you’ve heard of it? They were that Houston Texas-based firm involved in, at the time, the largest-ever corporate scandal, bankruptcy, and corporate collapse in the history of business – which came as a result of the company’s massive, institutionalized accounting fraud, its involvement in insider trading, and other illegal activity. The name Enron is synonymous with corporate corruption)
• Rebranded as EOG, the company is now a leader in “unconventional energy” as a major hydraulic fracturing firm. They frack shale formations across the US and are responsible for seismic activity, oil spills, and water contamination everywhere they operate
• In Pennsylvania in 2010, a fracking well operated by EOG Resources failed and 35,000 gallons of toxic, highly-flammable wastewater contaminated a near-by spring and stream. The company was fined $400,000 after the Department of Environmental Protection and an independent investigator showed that the accident was preventable and that it was caused by “irresponsible drilling practices”
Gilead Sciences Inc
(An American biopharmaceutical company)
• In 1988 Donald Rumsfeld became a Board member of Gilead and in 1997 he became its Chairman. And in 1999 Gilead’s drug Tamiflu was approved for treatment of influenza. In 2001 Rumsfeld stepped down from his position with Gilead when he was appointed as US Secretary of Defence by George W. Bush. In 2005 George W. Bush allocated $7 billion in emergency funding to prepare for a possible bird flu (H5N1) outbreak. $1 billion was dedicated solely to the purchase and distribution of Gilead’s Tamiflu. The H5N1 virus did not arrive anywhere in North or South America and has never shown up
• Despite developing its drugs in the US – with research and development funding from the US Department of Veterans Affairs and the US National Institutes of Health – Gilead Sciences Inc moved its patents to Ireland, dodging $10 billion in US taxes
• In 2015 the US Senate Finance Committee showed that Gilead Sciences executives determined they could make a considerable profit on their hepatitis C drug by charging $55,000 for a 12-week treatment, and that to deliver higher profits the company introduced a derivative drug under a different name, pricing it at $96,000. In Egypt Gilead charges $900 for the same course of drugs
Hess Corporation
(An oil company that explores, produces, transports, and refines oil and natural gas)
• Hess has been responsible for major oil spills in major waterways like, for example, the Hudson river
• In 2008 Hess paid a $422 million settlement over drinking water contamination and is responsible to cover treatment of those sources for the next thirty years
Intesa Sanpaolo SPA
(A banking group based in Italy)
• Intesa’s head of special projects and private equity, Fabio Cane, came under investigation for market-rigging and insider trading in 2011
• In 2013 Intesa agreed to pay $3 million to the US Treasury Department over sanctions violations when they were caught processing 120 transactions involving entities in Iran and Sudan
• In a class action suit in 2014, Intesa was found to have collected unlawful overdraft charges from its customers
Novartis AG Reg
(A Swiss pharmaceutical company)
• In 2008 Novartis was warned by the US FDA for overstating the effectiveness of its ADHD drug, Focalin XR
• In 2010 Novartis pleaded guilty to a misdemeanour charge of mislabelling, paid $422 million in criminal and civil claims, and was forced to enter into a Corporate Integrity Agreement with the US Inspector General for having paid illegal kickbacks to health care professionals
• In 2013 Novartis was again charged with off-label marketing and paying kickbacks. The company was accused of inducing pharmacies to switch transplant patients onto its immunosuppressant drug and with the off-label marketing of three separate drugs
• Also in 2013, Novartis was found to have manipulated clinical trials of its cardiovascular drug at two Japanese universities
• Japan’s Ministry of Health filed criminal charges against Novartis, in 2014, and suspended its operations across Japan for failing to report drug side effects and misleading consumers through data manipulation
• At the same time, South Korean officials raided the offices of Novartis over corruption and illegal kickbacks to healthcare practitioners intended to boost drug sales
• China’s Securities and Exchange Commission has also charged Novartis with $25 million in penalties over bribery allegations in that country
Oversea-Chinese Banking Corp Ltd
(A financial services company)
• In 2013 OCBC and a number of other financial institutions were censured in Singapore for attempting to manipulate bank-to-bank trading rates and derivatives. An investigation by the Monetary Authority of Singapore said that OCBC traders’ conduct “reflected a lack of professional ethics”. The bank was asked to set aside $800 million, the largest sum of all the institutions under investigation
• Following the censure, a lawsuit was then filed against OCBC for rigging key currency and borrowing rates, traced back to the 2013 investigation
Petrobras Brasileiro SA
(A petroleum company involved in exploration, production, and distribution)
• Petrobras is at the center of the largest corruption scandal in Brazil’s history. Company executives colluded with sixteen other firms to bribe government officials with an estimated $3 billion. 117 indictments were issued, five politicians were arrested, and thirteen companies received criminal charges
• Petrobras has been responsible for major oil spills, of hundreds of thousands and even millions of barrels, from 1975 to present and has paid many millions in penalties
Schlumberger Ltd
(The world’s largest oilfield services company)
• On two separate occasions Schlumberger was fined for losing radioactive materials during transportation, once in off the coast of Western Australia and again in the North Sea
• Schlumberger has paid record fines for US sanction violations. They paid $232 million in criminal fines for illegally operating in and exporting materials and equipment to Iran and Sudan, as well as disguising financial activity related to these operations between 2004 and 2010
• A class action lawsuit has been filed against Schlumberger by former employees over unpaid overtime and benefits. The suit also seeks penalties
• The company is formally incorporated in Curacao and routes its many operating companies through subsidiaries in the Netherlands, British Virgin Islands, and Panama to avoid taxes, hide illegal activity, and avoid sanctions
Schneider Electric SA
(A corporation specializing in electricity distribution and automation management)
• For emissions of hazardous air pollutants and putting public health at risk, Schneider Electric paid a $7 million penalty – the largest-ever penalty for cleanup of a Superfund site and the third largest penalty in EPA history
• In 2004, Schneider Electric pleaded guilty to sixteen counts of bribery related to its operations in Africa, and was fined nearly £1 million
• A Schneider subsidiary in Pakistan was sanctioned by the World Bank for engaging in collusion when bidding on World Bank-financed contracts
• In 2014, an American subsidiary of Schneider Electric, called APC, was ordered to pay $10 million in damages)
Standard Chartered PLC
(A financial services company)
• The bank was fined $667 million in 2012 when it was caught laundering billions of dollars for parties in Iran, Sudan, Myanmar, and Libya directly against existing sanctions
• In 2014, the US Department of Financial Services fined Standard Chartered an additional $300 million for failing to address issues relating to money laundering. The USDFS investigation referred to the company as a “rogue institution” whose actions left the entire US financial system “vulnerable to terrorists, weapons dealers, drug kingpins and corrupt regimes”. In addition the regulator forced Standard Chartered to close 8,000 small business accounts in the United Arab Emirates and banned it from clearing US dollar transactions for its clients in Hong Kong
Takeda Pharmaceutical Co Ltd
(A Japanese drug company)
• In 2012 Takeda Pharma went to court over failing to report that their diabetes drug could cause cancer. In 2014 Takeda paid out a $2.4 billion (yes, BILLION) settlement to 9,000 people who likely acquired bladder cancer through use of their drug
• In 2014 Takeda was questioned and later sanctioned by the Japan Pharmaceutical Manufacturers Association for data manipulation, conflict of interest, and inappropriate use of study data for promotions
Tenaris SA
(A major steel pipe manufacturer for the oil and gas industry)
• Tenaris is one of the companies accused of paying bribes to Brazilian officials in the Petrobras corruption scandal
• In 2011 Tenaris paid the US Department of Justice $9 million for being found to have bribed officials of a state-controlled oil company in Uzbekistan
• Tenaris fired its workers in Mexico for attempting to elect a new union leader. The workers are currently in a legal battle with the company over this unfair dismissal
• Tenaris is headquartered in Luxembourg. (Everybody does it. I mean, this couldn’t possibly be for the purpose of tax evasion, money laundering, or other criminal activity. No)
Zurich Insurance Group Ltd
(Formerly known as Zurich Financial Services AG)
• In 2006 Zurich Financial Services settled a $171 million case related to a price fixing and bid rigging scandal. They were required to pay an additional $122 million settlement to policyholders as part of a related class action lawsuit
• In 2007 a ZFS subsidiary paid a $17 million settlement for helping four hedge funds hide their identities to avoid detection when making illegal trades
• In 2008 ZFS paid $25 million in penalties for securities fraud. It had artificially inflated its value and understated its losses using improper accounting
• In 2010 ZFS settled for $455 million in a class action lawsuit over inappropriate service fees
...I suppose this is just what social and environmental responsibility looks like in the 21st century. #VancityRocks
Comments