Many of us know about the the scandals involving Enron, Andersen, and Worldcom (now MCI) - from fraudulent transactions to accounting fraud and document shredding.  But this is only the tip of the iceberg for USCSI members, a group saturated with accusations of shady dealings...

II.  USCSI Members and the corporate scandals of 2002

Many of us know about the the scandals involving Enron, Andersen, and Worldcom (now MCI) - from fraudulent transactions to accounting fraud and document shredding.  But this is only the tip of the iceberg for USCSI members, a group saturated with accusations of shady dealings.  (At least) three other USCSI members --- Citigroup, Halliburton and the healthcare group Cigna --- have also allegedly been involved in the corporate scandals:

Citigroup, the world's largest bank is right in the thick of the scandals:

Citigroup has very much been a part of the Enron scandal.  There are currently probes by Federal and New York State prosecutors, an investigation by the Securities and Exchange Commission, and a large number of investor lawsuits.  According to a July 23rd, 2002 NY Times article, internal bank documents have revealed that Citigroup intentionally manipulated the written record of a 1999 transaction with Enron so that Enron could ignore accounting requirements and hide its financial condition.  This kept $125 million in debt off the books, helping Enron to look better publicly and falsely keep its share price up.  Citigroup, along with JP Morgan and other banks, is being scrutinized in Congressional investigations for its role in setting up complex energy deals which allowed Enron to boost its cash flow.  Citigroup and JP Morgan made $200 million in fees off of these deals.

Said Senate investigator Robert Roach: "The evidence indicates that Enron would not have been able to engage in the extent of the accounting deceptions it did, involving billions of dollars, were it not for the active participation of major financial institutions willing to go along with and even expand upon Enron's activities." (see AP, July 23rd, 2002).  In December 2002, a U.S. Senate Governmental Affairs Committee investigation panel charged that Citigroup and J.P. Morgan Chase knowingly helped Enron deceive investors in complex, multi-million dollar transactions involving Enron's pulp and paper business which investigators say helped Enron disguise its true financial condition in 2000 and 2001.  Enron reported transactions that were loans as revenue-generating sales.  Citigroup (and J.P. Morgan) denies any wrongdoing and the investigation continues.

The US Attorney in Manhattan, state and federal regulators, and the National Association of Securities Dealers have also investigated Citigroup unit Salomon Smith Barney and one of its research analysts, Jack Grubman, charging that they violated securities rules by giving seriously misleading statements to investors.  In August, the probe was widened to examine how Salomon won a huge financing contract from AT&T (another CSI member), including investigation into Grubman's high rating on AT&T stock and the role Citigroup CEO Sanford Weill played, given that he is an AT&T board member.  In the end, Citigroup agreed to pay $300 million US in a settlement, Weill was let off the hook from prosecution, and Grubman was fined $15 million and barred from the investment analyst business for life.  The $300 million settlement has been called a 'slap on the wrist' by Citizen Works commentator Lee Drutman in the Providence Journal-Bulletin, as it represents less than 1% of Citigroup's annual revenues of $100 billion.

In another case of questionable business practices, Citigroup paid $215 million to settle with the Federal Trade Commission (FTC), over allegations that a Citigroup subsidiary in Texas was involved in "predatory lending to consumers" including abusive debt collection policies and deceptive marketing practices. By settling, Citigroup does not admit to any wrongdoing, but the fact that this is the largest ever consumer-protection settlement in the history of the FTC exposes the length to which Citigroup was willing to go to close this issue.

Beyond the corporate scandals, Citigroup is infamous for its various socially and environmentally destructive projects. Though Citigroup has recently announced - under enormous pressure - that it plans to adopt more responsible social and environmental policies in deciding what projects to finance, it is currently the worlds top financial backer of fossil fuel exploration. This makes Citigroup the worlds number #1 funder of global warming.

Halliburton

In addition to lawsuits recently settled for over $4 billion US over use of cancer causing Asbestos inherited when Halliburton bought Dresser Industries, many other questions abound around Halliburton - the company Dick Cheney ran before becoming US Vice President.  One question which has placed Halliburton in legal trouble is whether or not Halliburton improperly recorded revenue from cost overruns on various big construction jobs during and after the time that Cheney ran the company in order to boost revenue and profits.  This has brought forth a formal Securities and Exchange Commission (SEC) probe into the potential wrongdoing and has prompted numerous securities fraud lawsuits as well, including a lawsuit against Cheney himself for fraud from the right-leaning government watchdog group Judicial Watch.  On May 30th, 2003 Halliburton announced that it has agreed to settle approximately 20 shareholder lawsuits, combined into a class action.  Halliburton did not disclose the amount of the settlements, but stated that the payment "is immaterial and will not impact second quarter results".   As is usually a corporate demand in such settlements so that the corporation will be able to more easily rebuff other suits, Halliburton refused to accept any wrongdoing as a condition of the settlement.  It is noteworthy that current Halliburton CEO David Lesar, while defending Halliburton's accounting practices, publicly acknowledged that Cheney knew about the firm's accounting practices, stating that "the Vice President was aware of who owed us money, and he helped us collect it." 

Over the years, Halliburton has also left its mark internationally. The Environmental Rights group EarthRights International put together a scathing report of Halliburton's practices in Burma called "Halliburton's Destructive Engagement: How Dick Cheney and USA Engage Subvert Democracy both at home and abroad".  According to the report, Halliburton subsidiary European Marine Contractors (EMC) helped lay the offshore portion of the Yadana natural gas pipeline and, though Halliburton's involvement with the pipeline was not as thorough as Unocal's, it certainly helped in propping up the Burmese government though its work on the project.  This was a Burmese government that was routinely violating human rights through rape, torture, human slavery, and murder as a means to ensure full compliance - including using human slavery to ensure the Yadana pipeline was completed.  As Dick Cheney told the crowd at the [Texas] Panhandle Producers and Royalty Owners Association annual meeting in 1998: "You've got to go where the oil [or, in the Burma case, natural gas] is.  I don't think about it [political volatility] much." 

Halliburton is also notorious for receiving enormous corporate welfare and special privileges from the U.S. government, most notably during the Cheney years.  In the five years before Cheney took over in 1995, Halliburton received $100 million in government backed loans and subsidies.  However, during the Cheney years this skyrocketed to $1.5 billion in loans and subsidies for oil services projects in Algeria, Angola, Bangladesh, and Russia and they gained $2.3 billion in U.S. government contracts, mostly for military base support.  Halliburton also received $896 million from the World Bank for fossil fuel extraction and other projects.  And in the past two years even, though now-VP Cheney denies he had any influence, Halliburton has been the main beneficiary of contracts from the Pentagon for "anti-terrorism" military bases around the world. 

Despite his lack of experience in having ever run a company, Cheney obviously was worth bringing on board for the connections he had made in his 25+ years working inside the political power corridors of Washington.  Halliburton certainly felt it was getting value for their money as they rewarded Cheney with over $30 million in salary and stock options in his last two years with the company. And he continues to be paid by Halliburton as Vice President in the form of "deferred compensation" of up to $1m (600,000) a year, even as Halliburton is gaining contracts to "cleanup" Iraq's oilfields (and more) after the Iraq war that Cheney promoted so heavily. (See the articles "Cheney's Grimy Trail in Business" and "Cheney is Still Paid By Pentagon Contractor" for details)

Halliburton also has long standing connections to Iraqi oil.  The Washington Post reported that through foreign subsidiaries, Halliburton under Cheney did $73 million in business with Iraq in 1998-99, helping rebuild Saddam's damaged post-Gulf War oil fields - despite Cheney publicly saying Halliburton had a "firm policy" against dealing with Iraq.  According to a Boulder Daily Camera column by Molly Ivins, this was made possible by a 1998 UN resolution allowing Iraq to avert sanctions to buy spare parts for its oil fields, which is tragic considering that hundreds of thousands of Iraqis were still denied medicine and similar supplies under the sanctions because of concerns that medicines could be used for making weapons. Many Iraqi children died directly because of this policy.   It therefore appears to be highly hypocritical that Dick Cheney was a key booster for the U.S. war on Iraq, after having made enormous money off of the Iraqi people for Halliburton just a few short years before.

Cigna

While governments and WTO officials dismiss concerns that the GATS agreement will threaten public healthcare, CIGNA corporation, a massive for-profit Health Maintenance Organization (HMO), is playing a prominent role in the USCSI which is lobbying hard for massive 'opening up' of private access to public services - including those parts of the  healthcare sector that are still public.  As the top representative of the for-profit health industry in the USCSI, Cigna is in a pivotal position to shape the GATS international trade in health services rules currently being negotiated at the WTO.  Cigna has had some significant financial problems lately as their share price has plummeted in the past year and they lost over $800 million.   In addition to these financial problems, Cigna is also reeling from some legal and ethical business concerns.

Physicians and medical associations in several U.S. states filed class action suits against Cigna and other HMO corporations for failure to pay for medical work and treatment prescribed for patients. In Texas, Cigna was charged with failures to properly pay doctors, including failing to provide a fee schedule to the physicians and arbitrarily changing the steps that doctors must take to be paid. Shortly after signing a contract with Cigna, one oncologist said he was told the contracted fees were no longer valid and hed have to accept a new, lower reimbursement. In November 2002, Cigna attempted to take what amounts to a $50 million settlement charge in Illinois to end a lawsuit on favorable terms to Cigna, but the Judge on the U.S. case in Miami, Federico Moreno, denied this by putting a hold on on the Illinois settlement plan, saying that Cigna is trying to 'snooker' the broader case in Miami.  Doctors involved in the lawsuits applauded Moreno's injunction, saying that Cigna is paying too little to settle the cases and hasn't agreed to end the billing practices that created the litigation in the first place. Jack Lewin, head of the California Medical Association, which is involved in the lawsuit, said "Cigna's actions [in attempting to settle on the side in Illinois] show they have little intention of stopping their over-reaching and unfair practices.  [That is] how they have done business with us for years: fast and loose."  Cigna denies this and challenges Moreno's hold on the Illinois settlement.  The lawsuit continues.

In a large class action suit currently before the courts in the U.S., Cigna along with other major HMO corporations, is being charged with violating federal racketeering laws by using financial incentives for physicians to deny treatment and cut costs.  Cigna has also been charged with fraudulently over billing U.S. taxpayers. A Cigna employee blew the whistle on a Cigna subsidiary, Connecticut General Life Insurance, charging they over billed U.S. Medicares Health Care Financing Administration for nearly 10 years. Cigna settled, agreeing to pay the U.S. Federal Government nearly $9 million.

And consider the case of Cigna insurance holder Thomas Concannon, who was diagnosed with a rare cancer, multiple myeloma, requiring a bone marrow transplant in order to survive. Cigna refused to pay for the transplant operation, effectively handing Concannon a death sentence. Only after heavy pressure and media coverage, did Cigna finally agree to pay for Concannons transplant.

See Part III: Other cases of USCSI members connected to corporate scandals...