Earning distrust: overstated profit and revenue, understated debt, accounting fraud, bribery, theft, insider trading, obstruction of justice, tax evasion, and disregard for human rights and environmental issues all have disgraced the world of business.

Some corporations do everything they can to avoid the costs involved in creating a safe workplace and installing pollution control equipment. These bad actors often move operations to countries where environmental and safety regulations are nonexistent or are poorly enforced.

A recent newspaper report revealed that senior officials in the federal government have been warned that Canadian mining companies operating overseas in developing countries have the potential to create environmental disasters that could "seriously embarrass Canada." The report referred to a 2004 briefing to the Department of Natural Resources, which said the country needs to do something to reduce the risk of a major environmental accident. The warning came about five years after a series of accidents occurred at Canadian-owned mines overseas.

A dam collapsed at Cambior Inc.'s Omai gold mine in Guyana in 1995 and released cyanide into a local river.

In April 1998, a waste reservoir broke at the Los Frailes mine in Spain sending toxic sludge into the nearby Rio Agrio. About five million tonnes of acidic water--containing sulphur, zinc, copper, iron, and lead--spilled, threatening the nearby Coto de Donana wetland area, a world-famous nature reserve. The Los Frailes mine is owned by Boliden, a Canadian and Swedish mining firm. A few people were burned by acidic sludge, and thousands of birds, fish, and shellfish died as a result of the accident. The World Wildlife Fund describes it as "one of the worst environmental disasters ever to happen in Europe." The environmental group accused Boliden and Spanish officials of being negligent because they didn't inform local residents about the dangers of the spill. It was estimated that 6,000 hectares of farmland were affected with long-term economic damage calculated to be around $75 million. Critics said previous warnings about lack of safety at the dam went unheeded.

A month later, in May 1998, there was an accident at another mining site run by a Canadian company in Kyrgyzstan. This one happened when a truck carrying 20 tonnes of sodium cyanide crashed into the Barskoon River. About 1,700 kilograms of the deadly chemical leaked into the river, which is the main source of drinking water for local people. Delays in telling residents resulted in 400 being hospitalized, and at least two deaths.

As of July 2006, the Conservative government had not set up rules to protect the environment and citizens of countries where Canadian mining companies operate.

Corporate critics also target pharmaceutical companies. Some drug manufacturers have put products on the shelves knowing them to be harmful while hiding this knowledge from consumers.

For example, in December 2005, The New England Journal of Medicine accused authors of a Canadian-led study involving the painkiller Vioxx of withholding information about the drug's risk of causing heart problems. The 2000 study, called VIGOR, was funded by the drug's maker Merck & Co. While the study promoted the drug as causing fewer stomach problems than the older anti-inflammatory drug naproxen, critics say it downplayed the possible risk of heart attacks.

RELATED ARTICLE: Deadly dumping.

Tens of thousands of people crowded into hospitals and clinics in Ivory Coast's main city Abidjan in September 2006. They were suffering from illnesses caused by toxic sludge dumped in the city.

The black sludge was found at 18 different sites. According to a report by the United Nations Disaster Assessment and Coordination Mission (UNDAC), the main chemicals found in the hazardous waste were hydrogen sulphide, mercaptans, phenols, and hydrocarbons.

The New York times reports the waste was delivered by "a Greek-owned tanker flying a Panamanian flag and leased by the London branch of a Swiss trading corporation whose fiscal headquarters are in the Netherlands. Safe disposal in Europe would have cost about $300,000, or perhaps twice that, counting the cost of delays. But ... it was dumped on the doorstep of some of the world's poorest people."

By October 2006, eight people had died from exposure to the toxic mixture. A further 85,000 people have sought medical treatment for nausea, breathing problems, skin disorders (as seen in the picture above), and nosebleeds. Ivory Coast's fragile health care system has been overwhelmed. Trafigura, the company that shipped the waste to Ivory Coast, claims it was not toxic.

The Economist reported in November 2004 that, 20 years after lethal gases, which leaked from a Union Carbide pesticide factory, contaminated the Indian dry of Bhopal and the surrounding area, compensation still had not been fully paid to more than 500,000 victims. In addition, the plant had not been dismantled and thousands of tonnes of toxic waste remained on the site, polluting local water supplies. The American company was taken over by Dow Chemical in 2001. Independent estimates suggest the initial death toll was 8,000 and the final figure was more than 30,000 (versus official estimates of 3,000 and 15,000 respectively). Another 570,000 people have qualified for compensation because of health problems, such as weak immune systems, chronic respiratory disorders, and a susceptibility to diabetes. Above are victims of the 1984 disaster. Survivors and their children also continue to suffer from cancer, tuberculosis, and birth defects.

The Economist reported that a year earlier David Graham, a scientist at the Food and Drug Administration (FDA) in the U.S., testified that the FDA overvalues the benefits of drugs and "seriously undervalues, disregards, and disrespects drug safety." He also said that some people who questioned the safety of approved drugs met with "denial, rejection, and heat," and that he had been pressured to change his conclusions about the risks posed by Vioxx.

Also on the health front, the tobacco industry has long been criticized for profiting from a product that can kill. As recently as September 2006 the American Heart Association (AHA) expressed its support for legislation in the U.S. to restrict or prohibit tobacco advertising, promotion, and marketing to young people, minorities, or women, all segments of the population that continue to increase their use of tobacco. The AlIA cited the National Survey on Drug Use and Health, which estimates that more than 4,000 people under 18 try their first cigarette every day--that's more than 730,000 new smokers every year. Another report found that children and adolescents consume more than a billion packs of cigarettes a year.

Some companies are simply run by crooks who see corporate revenue as their private piggy bank. Modern candidates include executives at Enron, WorldCom, Adelphia, and Tyco, to name a few.

Enron's collapse alone took with it more than $60 billion in market value, almost $2.1 billion in pension plans, and 5,600 jobs. Its chiefs, Kenneth Lay (who died from a heart attack in July 2006) and Jeffrey Skilling, were convicted in May 2006 of conspiracy and fraud in one of the biggest business scandals ever to hit the United States.

A year earlier Tyco's CEO Dennis Kozlowski was convicted for stealing hundreds of millions of dollars from the company. He was later sentenced to up to 25 years in prison for his role in the Tyco scandal. Mr. Kozlowski and his colleague Mark Swartz, who was also convicted on multiple counts of fraud, are both appealing the verdicts.

In July 2004, 79-year-old John Rigas, Adelphia's founder and his son Timothy were convicted of conspiracy and fraud for stealing cash from the company and deceiving investors by hiding $2.3 billion in debt. A year later, they both were sentenced to federal prison, 15 years for John Rigas and 20 years for Timothy.

In March 2005, WorldCom's Bernard Ebbers was convicted of fraud, conspiracy, and filing false documents with regulators--all related to the $11 billion accounting scandal at the telecommunications company he founded. He was sentenced to 25 years in prison.

As U.S. Senator Joe Lieberman put it in an article in Blueprint Magazine in May 2002, "... Government has to develop better tools to fight corporate misconduct. What makes Enron's collapse so noxious at the core is that those who broke the rules and shredded their side of the social contract made out like, well, bandits, while those who played fairly lost everything. We can't allow this episode to add to the long list of cases in which white-collar criminals are treated with kid gloves. We must make clear to corporate America that the same law will govern the chief executive officer and the mail-room worker, and that it will be enforced with equal vigor for all. Whatever the colour of your collar, if you break the law, you'll go to jail."

SUGGESTED ACTIVITIES:

1. Write a report on some of the world's mining hot spots--check out Dirty Metals Mining, Communities and the Environment, a 2004 report by Earthworks, Oxfam America at the following website: http:// www.law.arizona.edu/depts/iplp/ assets/pdf/Appendix4DirtyMetals_HR.pdf

2. Some experts (including economist Milton Friedman) say a corporation's only purpose is to make a profit. Discuss whether or not you believe companies should do nothing but maximize their profits.

3. In 2005, a survey by Zogby International found that 38 percent of Americans have a negative opinion of Wal-Mart. Another group of Wal-Mart critics who support Wal-Mart Watch includes the United Food and Commercial Workers (with about 1.4 million members), the Teamsters Unions, the Sierra Club, the Service Employees International Union (with about 1.8 million members), and hundreds of organizations across the U.S. Critics believe the company has damaged America's workers, small firms, and neighbourhoods. Research their lobbying efforts and how successful they have been in altering Wal-Mart's corporate behaviour.

4. Residents of Fort Chipewyan, a community of 1,200 people at the southwest corner of Lake Athabasca in Alberta, think they're getting ill because oil sands development is contaminating their water supply. They are plagued by a rare and lethal liver cancer in numbers that would be more in line with a large city--statistically, there should be only one case for every 100,000 people in a city, yet it has claimed the lives of three people in Fort Chipewyan, with two more diagnosed with the disease over a five-year period. The hamlet also has been hit with leukemia, lymphoma, and lupus. In May 2006, almost four years after the community's doctor expressed concern about the cluster of cancer cases, the provincial and federal governments launched a joint investigation into the illness. Do a follow-up report on the findings of the investigation.

Websites

Human Rights Internet (HRI) Databank--http://www.hri.ca/index.aspx

MSNBC Corporate Scandals--http://www.msnbc.msn. com/id/3032230/

Democracy Watch--http:// www.dwatch.ca

Tobacco Industry Manipulation of Research, Journal article, 2005--http://www. questia.com/PM.qst?a= o&se=gglsc&d= 5009261725&er=deny

Corporate Crime Reporter--http: //www.corporatecrime reporter.com/index.html

The small farming community of Tambogrande, located in Peru's sub-tropical San Lorenzo Valley, is sitting on deposits of gold and copper worth millions of dollars. But, the valley is also Peru's top fruit-growing region. Tambogrande produces close to half of the country's citrus crop. In 1999, the Canadian mining company Manhattan Minerals proposed to relocate half of the town's 16,000 residents, demolish most of the town itself, and create an open pit mine in its place. The proposal included a promise of new jobs and housing. The people of Tambogrande, fearing that the mine would poison streams and farmland, said no thanks.

RELATED ARTICLE: Hitting them where it hurts.

In July 2002, the Sarbanes-Oxley Act of 2002 was signed into law in the U.S. It aims to clean up business by reforming independent audits of public companies and holding chief executives responsible for their firms' financial reports. Any creative financing that smacks of fraud could lead them to jail, or leave them with hefty fines in the millions of dollars.

One section of the act also holds corporate lawyers responsible for at least reporting any wrongdoing and, where necessary, withdrawing from representation.

In Canada, Federal Bill C-13's 2004 amendments to the Criminal Code created the criminal offences of insider trading, tipping, and whistle-blowing retaliation. Both federal and provincial governments have been working on the governance and regulatory issues raised by recent corporate scandals and their impact on investor confidence.

But, it seems new legislation hasn't stopped corporate crime yet.

KPMG, an international consulting firm, conducted an Integrity Survey in 2005-06 that contained a few surprises.

As reported in Canadian Underwriter, the study found that 74 percent of more than 4,000 U.S. employees surveyed reported they had observed misconduct in the prior 12-month period. Half of them said their observations included serious misconduct that could cause "a significant loss of public trust if discovered."

On the plus side though, they also reported that the business environment had improved such that it was easier to deal with fraud and misconduct. For instance, they said there was less pressure to engage in misconduct to meet business objectives, and better resources to meet corporate targets without cutting corners. They also reported that:

* Apathy and indifference toward codes of conduct have declined;

* Comfort levels in using a hotline to report misconduct have risen;

* Confidence that appropriate action would be taken in response to alleged improprieties has increased;

* Confidence that whistleblowers would be protected from retaliation has increased;

* Perceptions of CEOs and other senior executives as positive role models have improved;

* The perception that top management is approachable if employees have questions about ethics or need to deliver bad news has increased; and,

* The perception that business leaders would respond appropriately if they became aware of misconduct has increased.

RELATED ARTICLE: The exploding pinto.

The Ford Pinto, produced from 1971 to 1980, became a focus of a major scandal. It was alleged that the car's design allowed its fuel tank to be easily damaged in the event of a rear-end collision. This sometimes resulted in deadly explosions and fires.

Ford was allegedly aware of this design flaw but argued that it would be cheaper to pay off possible lawsuits from resulting deaths than to redesign the vehicle. Mother Jones magazine obtained the cost-benefit analysis Ford had used to compare the cost of an $11 per car repair against the cost of paying off potential law suits. (Mother Jones article Pinto Madness 1977--http://www.motherjones.com/news/feature/1977/09/ dowie.html). The company's design decision was seen as a gross disregard for human lives in favour of profits. It led to major lawsuits, and a costly recall of all affected Pintos. Ford lost several million dollars and gained a reputation for manufacturing "the barbecue that seats four."

RELATED ARTICLE: Blame it on business schools.

Some experts think that Masters in Business Administration (MBA) programs sometimes teach students the wrong things. The Economist cites a 2005 article in Academy of Management Learning & Education by the late business guru Sumantra Ghoshal. He said that many of the "worst excesses of recent management practices have their roots in a set of ideas that have emerged from business-school academics over the last 30 years."

Mr. Ghoshal was a professor at the London Business School who felt some business schools based their management theories on ideas that focus on corporate self interest. He said many students are taught that managers cannot be trusted, a notion which frees them "from any sense of moral responsibility" when they become managers themselves.

Obviously, not all business scoundrels hold MBAs, and not all MBA graduates are scoundrels. But some business schools, including Harvard and Stanford in the U.S., are taking action by adding ethics classes to their programs.

Here are quotes from some of the Deans of Canadian universities surveyed for the 2006 Knight School Ranking on how they're broadening their approach to include corporate social responsibility:

* "We are not just teaching environmental law in environmental law courses but also attempting to incorporate environmental considerations in business law teaching ranging from corporate governance to international business transactions ... to high-light these issues in the training of all business lawyers."--Dean Mary Anne Bobinsky, University of British Columbia Faculty of Law 

* "Our position as the gateway to the Pacific Rim gives us a unique opportunity in terms of the developing trade and business relations with the two emerging global giants, China and India. Business schools can help to fuel innovative thinking [in these markets] by training next generation business leaders in the fundamentals of 'greater-than triple-bottom-line' perspectives."--Dean Ernie Love, School of Business/Segal Graduate School of Business, Simon Fraser University;

* "No matter what sector or faculty perspective you come from you need to see your wider context and the emerging trends in it; environmental and social responsibility issues are right at the forefront."--Dean Shelley Rinehart, Faculty of Business, University of New Brunswick;

* "I believe that corporate social responsibility is the single greatest trend affecting management education this decade; in much the same way that globalization was the defining trend of the last decade. Simply put, any business school that does not teach social and environmental impact management cannot hope to adequately prepare graduates who can lead and manage in a modern organization."--Dean Dezso J. Horvath, Schulich School of Business, York University.

RELATED ARTICLE: The bottom line.

In 1979, Mother Jones magazine devoted an issue to what it called The Corporate Crime of the Century (http:// www.motherjones.com/news/feature/ 1979/11/dowie.html). Its November/ December issue highlighted the practice of dumping hazardous products that have been banned in domestic markets, usually selling them in Third World countries. At the time, it was estimated that $1.2 billion worth of unsafe goods moved overseas every year. The motive, of course, was profit.

More than two decades later, in May 2002, Blueprint Magazine quoted Senator Joe Lieberman as saying:

"In too many realms of American life, we've seen a dangerous drift away from fundamental values of honesty, equity, and charity toward a single-minded devotion to maximizing profit ... We've seen it in Washington, where the big money raised from a small number of welt-connected donors has too often eclipsed the critical concerns of millions of average Americans. In too many cases, the bottom line has become the only line we're willing to draw. If it's legal and makes money, then we say it's okay, even when we know it's wrong.

"That's wrong. Markets are amoral by nature. They have tremendous power to maximize efficiency, variety, and quality and to minimize price--but market values do not inherently incorporate moral values. As we saw with Enron--a company that literally built part of its false fortune on valueless markets--the drive for earnings, unchecked by other values, usually ends in disaster."

Mother Jones catalogues some of the global damage done in the quest for money.

FACT FILE

According to one estimate, white-collar crime costs Canadians $20 billion a year.

FACT FILE

In June 2005, 16 executives and three financial institutions were charged in a multi-billion dollar accounting fraud at the Italian dairy giant, Parmalat.

FACT FILE

Six months after its workers voted to join a union, Wal-Mart closed its store in Jonquiere, Quebec.

FACT FILE

In July 2006, BF Goodrich shut down its plant in Kitchener, Ontario, leaving 1,100 unionized workers unemployed: the company said the closure was a result of shrinking demand, but a month later if announced plans to expand its non-unionized Michelin tire factory in Bridgewater, Nova Scotia.

FACT FILE

A professor of business ethics at Babson College in Massachusetts, James Hoopes, suggests that the first publicly hated company in the U.S. was the First Bank of the United States, founded in 1791 (and re-founded in 1816 as the Second Bank of the United States): the company is reported to have over-lent wildly and then called in its money, creating financial chaos for borrowers.

FACT FILE

A number of environmental groups have long questioned mining companies' use of cyanide, which is commonly employed to refine gold. Phil DEsposito, a researcher at the U.S.-based Mineral Policy Center, says there are safer ways of refining gold than using cyanide.

FACT FILE

American economist Kenneth Warner, Ph.D., estimates that the tobacco industry needs to recruit 5,000 new young smokers every day to maintain the total number of smokers (due to the number of people who quit or die from tobacco-related illness each year).

DEFINITION

Robber baron is a term used to describe any businessperson who is perceived to have used questionable business practices in order to become powerful or wealthy.