The Corporate Crime of the Century

It's called dumping: When the U.S. government forces a dangerous drug, pesticide or other product off the domestic market, the manufacturer then sells that same product—frequently with the direct support of the State Department—throughout the rest of the world.

Tom Mboya was the hope of the western world. Bright, energetic, popular and inclined to be democratic—he was a born leader who, Washington hoped, would rise to power in Kenya and help keep Africa safe for United States commerce. In 1969 he was shot down in the streets of Nairobi. An emergency rescue squad was by his side in minutes. They plugged him into the latest gadget in resuscitative technology—a brand new U.S. export called the Res-Q-Aire. What the rescue team didn't know as they watched Tom Mboya's life slip away was that this marvelous device had been recalled from the American market by the US government because it was found to be totally ineffective. The patient died.

Losing Mboya to the Res-Q-Aire was perhaps a subtle retribution for the US, for to this day we allow our business leaders to sell, mostly to Third World nations, shiploads of defective medical devices, lethal drugs, known carcinogens, toxic pesticides, contaminated foods and other products found unfit for American consumption.

Ten years after Mboya's assassination, in fact, Kenya itself remains a major market for unsafe, ineffective and contaminated American products. At the 1977 meeting of the United Nations Environmental Program, Kenyan Minister of Water Development Dr. D. J. Kiano warned that developing nations would no longer tolerate being used as "dumping grounds for products that have not been adequately tested" and that their people should not be used as "guinea pigs" for chemicals.

The prevailing sentiment in Washington contrasts considerably with Dr. Kiano's. Say the word "dumping" in federal government circles and the predominant response will be "Oh, yes, 'dumping.' Really must be stopped. It's outrageous, not in our economic interests at all...unscrupulous bastards...."

Sounds as if we've solved the problem, doesn't it, except what our bureaucrats are talking about, one discovers, is foreign corporations "dumping" low-priced goods on the American market -- Japanese cars, Taiwanese televisions, Hong Kong stereos, Australian beef, etc. The export of banned and hazardous products, which Mother Jones calls "dumping," is considered business as usual.

As the following articles make painfully clear, dumping is, in fact, big business as usual. It involves not only manufacturers and retailers, a vast array of export brokers, tramp steamers, black marketeers and go-betweens who traffic an estimated $1.2 billion worth of unsafe goods overseas every year, but also the United States Export-Import Bank, which finances large dumps; the Commerce, State and Treasury Departments, which have the statutory authority to stop or control dumping, but won't; and a President who, in his quiet way, subverts the efforts of the few progressive members of Congress who seek to pass uniform anti-dumping legislation.

Hard evidence of dumping and its tragic consequences has repeatedly been brought to the attention of federal agencies, the Congress and the White House. Here are some examples:

  • 400 Iraqis died in 1972 and 5,000 were hospitalized after consuming the by-products of 8,000 tons of wheat and barley coated with an organic mercury fungicide, whose use had been banned in the U.S.
  • An undisclosed number of farmers and over 1,000 water buffalos died suddenly in Egypt after being exposed to leptophos, a chemical pesticide which was never registered for domestic use by the Environmental Protection Agency (EPA) but was exported to at least 30 countries.
  • After the Dalkon Shield intrauterine device killed at least 17 women in the United States, the manufacturer withdrew it from the domestic market. It was sold overseas after the American recall and is still in common use in some countries.
  • No one knows how many children may develop cancer since several million children's garments treated with a carcinogenic fire retardant called Tris were shipped overseas after being forced off the domestic market by the Consumer Product Safety Commission (CPSC).
  • Lomotil, an effective anti-diarrhea medicine sold only by prescription in the U.S. because it is fatal in amounts just slightly over the recommended doses, was sold over the counter in Sudan, in packages proclaiming it was "used by astronauts during Gemini and Apollo space flights" and recommended for use by children as young as 12 months.
  • Winstrol, a synthetic male hormone, which was found to stunt the growth of American children, is freely available in Brazil, where it is recommended as an appetite stimulant for children.
  • Depo-Provera, an injectable contraceptive banned for such use in the United States because it caused malignant tumors in beagles and monkeys, is sold by the Upjohn Co. in 70 other countries, where it is widely used in U.S.-sponsored population control programs.
  • 450,000 baby pacifiers of the type that has caused choking deaths have been exported by at least five manufacturers since a ban was proposed by the CPSC. 120,000 teething rings that did not meet recently established CPSC standards were cleared for export and are on sale right now in Australia.

Occasionally, a particularly scandalous dump like one of these will come to the attention of conscientious Americans. Most dumps, however, are performed quietly, the product moving unnoticed in the fast flow of normal trade between nations. And dumping is not limited to chemicals and consumer products. When a firm's production facilities and industrial equipment are condemned by the Occupational Safety and Health Administration, the manufacturer often simply closes up shop and moves the factory to Mexico or Jamaica, where occupational health standards are virtually nonexistent. Even entire technologies are dumped. Nuclear power, which seems certain to receive a "hazardous" classification before long in the US, is today being dumped on energy-starved nations like the Philippines and India.

We are only beginning to discover how toxic and carcinogenic are some of the chemicals we use, chemicals with the potential to affect the entire global environment and human gene pool. Moreover, the number of other consumer products that maim or kill shows no sign of diminishing. The list of banned and hazardous products is, thus, bound to grow, which should making dumping a major international issue for the 1980s.

Early in our investigation, however, we discovered that exposing dumpers was more challenging than we thought it would be. "They're really smugglers," said one of our team in a story meeting. "The only difference between drug smugglers and dumpers is that the products are usually moving in opposite directions."

There is another difference: The government protects dumpers. We talked to countless officials in countless agencies and departments of the government while researching this story—a few of them outspoken opponents of dumping. They would tell us about contaminated foods, baby pacifiers, pesticides and drugs that were being dumped overseas. They often knew how many of each item were shipped to specific countries, but they would never tell us the brand names, the manufacturers or the names of the export brokers. The answer was always the same. "I'm sorry, that's proprietary information...trade secret...confidential corporate information. And as we shall see, government protection afforded to dumpers goes way beyond this kind of cover.

Although the bottom line motive is always profit, hazardous products are dumped to solve different problems. For nonmanufacturers—wholesalers, retailers, brokers, importers and exporters—the problem is generally just a matter of inventory. Salvation often comes in the form of a broker, offering to buy the banned goods at a "close-out" price for resale in an unnamed (read, Third World) market.

It's not that simple, however, for manufacturers who have invested capital in tools, dies, assembly plants, personnel, machines and land. When a company like A. H. Robins foresees the withdrawal of a product like the Dalkon Shield intrauterine device, it dumps a million units on foreign countries, voluntarily withdraws the product and closes up shop. The company takes a small loss buying back recalled inventory (which it writes off), and its capital investment is amortized.

Carter Dumps Dumping

It was Tris that brought dumping into the political arena. And the political arena for dumping is Washington. Tris (2,3-dibromopropyl) phosphate is a fire-retardant chemical used to treat synthetic flammable fabrics. In June of 1977, after Tris was found to cause cancer in animals, millions of pairs of infant pajamas and tons of children's sleepwear were suddenly withdrawn from the US market by the CPSC. When some of the manufacturers, stuck with huge repurchased inventories of these carcinogenic garments, threatened to dump them on the overseas markets, the CPSC claimed at first that it had no statutory authority to stop them from doing so. In fact, although the CPSC, the EPA and the FDA together have removed over 500 pesticides, drugs and consumer products from the American market for health, safety or environmental reasons, the patchwork of regulations obfuscates what limited power these agencies have to prohibit the export of dangerous products.

When President Carter, who does have the authority to stop dumping with a simple Executive Order, learned of the Tris situation, he authorized the formation of an Interagency Working Group to develop a uniform national policy on dumping. Although such task forces can provide a valuable forum for intra-government communication and often make important policy recommendations, the Interagency Working Group on Hazardous Substances Export Policy (HSEP)—chaired by Carter's Special Assistant for Consumer Affairs, Esther Peterson—is, in fact, being used to table the issue until our balance of trade improves. Dumping, you see, is exporting; and although banned and hazardous products represent only about one percent of our total trade, every percent seems to count when we are consistently running a trade deficit of over $25 billion a year.

To determine why the task force report is still nonexistent, we took our investigation to Washington. In a long series of interviews with task force members and White House staff the reason for the delay became clear. The President, intimidated by Congress, is unwilling to take the issue to the Hill, in the face of growing "export fever" and antiregulatory sentiment.

Edward Cohen, staff counsel to both the HSEP task force and the White House Office of Consumer Affairs, asked us to turn off our tape recorder as he explained the dilemma. He also told us he was "one of the good guys in the story." We can't quote what he told us when the recorder was off, but since we don't believe him, it really doesn't matter. Cohen refused to tell us the names of any agency representatives on the task force and throughout our investigation went to elaborate lengths to stop any flow of information to our researchers. When we asked him for innocuous background material on the task force, Cohen exercised "executive privilege" and gave us nothing, forcing us to file Freedom of Information requests with the 16 agencies and departments in the task force. Despite White House efforts to discourage compliance with our requests, we obtained the material from friendly sources in the agencies. More on the contents later.

During the interview, Cohen struggled to remember the correct name of the task force. The records, files and minutes from past meetings were stuffed in a cardboard box under a radiator in his otherwise tidy office. It was clear that dumping and HSEP had slipped a notch or two on the White House agenda. Cohen admitted eventually that it was barely on his own agenda. He persisted, however, in his "good guy" stance.

When we persisted with our investigation, Cohen realized he had a public relations problem on his hands. In fact, when we called the White House to interview Esther Peterson recently, Cohen turned up unexpectedly on the line to tell us he was working on a fourth policy draft for task force review. But when we talked to representatives from all but three of the agencies involved, most barely remembered the task force and felt that the issue was dead. And Cohen recently told Ralph Nader's office that if the fourth draft is not approved, the entire matter will be dropped.

The President can place any product he wants on the Commodity Control List, which makes exportation of the product absolutely illegal. There are three statutory justifications for placing a commodity on this list: scarcity, national security and foreign relations.

When Tris-treated clothing was found to be a cancer threat to infants and it became clear that President Carter wasn't going to do anything to stop its export, an alarmed S. John Byington, chairman of the CPSC, wrote in June 1977 to Secretary of Commerce Juanita Kreps, whose department administers the Commodity Control List. Byington asked her to place the garments on the list, pointing out to her that their export would have "serious implications for foreign policy."

On October 7, nearly four months and, as it turns out, many pajama dumps later, Kreps answered Byington. She had taken the time to consult the State Department, which "has advised me that the controls on Tris and Tris-treated garments are not, in the language of the statute, 'necessary to further significantly the foreign policy of the US to fulfill its international responsibilities.'" Frustrated by months of bureaucratic waffling, the CPSC finally reversed its position on June 14, 1978 by prohibiting the export of Tris-treated sleepwear.

This delay, obfuscation and inactivity are all too typical. Records of Interagency Working Group meetings, which we were able to obtain despite White House efforts to stonewall us, show that Commerce and State Department representatives are doing everything in their power to prevent the adoption of a uniform policy on dumping.

Although President Carter has mumbled a word or two about the ethics of exporting, he clearly does not consider the use of safe products a human right for non-Americans. In fact, his actions on this matter have pleased the most conservative pro-dumping forces.

On September 26, 1978, the day before the HSEP task force report was due for release, Carter issued a public statement on exports. The wording of the statement so clearly subverted the intent of any reforms the task force might have conceivably proposed that it's little wonder not a word has been heard from the group since.

Notification Before the Dump

The liberal compromise on the dumping issue is notification. Invoking the principles of national sovereignty, self-determination and free trade, government officials and legislators have devised a system whereby foreign governments are notified whenever a product is banned, deregulated, suspended or cancelled by an American regulatory agency. The notification system is handled by the State Department, whose policy statement on the subject reads, in part, "No country should establish itself as the arbiter of others' health and safety standards. Individual governments are generally in the best position to establish standards of public health and safety."

Based on this judgment, an unwieldy and ineffective notification procedure allegedly places announcements in the hands of the proper foreign government officials, telling them a certain drug has been found to be toxic or that babies have strangled in particular brands of cribs.

The main problem with notification is the logic behind it. Other governments are generally not in a position to establish safety standards, let alone control imports into their countries. In fact, the countries where most of our banned and hazardous products are dumped lack regulatory agencies, testing laboratories or well-staffed customs departments. In 1978, Nigeria's Environmental Protection Ministry was one person. He recently told the US EPA that it didn't matter whether or not he was notified when a pesticide was suspended; there was nothing he could do to stop its importation.

When our EPA, FDA or CPSC finds a product to be hazardous, they notify our State Department as required or as a matter of protocol. State, which we have found to be no opponent of dumping, is then supposed to send a communiqué to each American embassy overseas. Each embassy is, in turn, supposed to notify the appropriate foreign officials. However, the Commerce, Consumer and Monetary Affairs Subcommittee of the House Committee on Government Operations discovered in hearings held in July of 1978 that the agencies frequently neglected to inform the State Department when they banned a product. For example, the EPA failed to notify State after suspending such notorious pesticides as kepone, chlordane and heptachlor. The Government Accounting Office (GAO) also discovered and testified to the same subcommittee that even when the agencies did notify State, the communiqués rarely went further than the US embassies overseas—they almost never reached the foreign officials who might have been able to warn foreign buyers or intercept shipments. One embassy official even admitted to the GAO that he "did not routinely forward notification of chemicals not registered in the host country because it may adversely affect US exporting." The GAO would not tell us the name or location of the official they quoted, but said the sentiment was not unusual.

Some of the foreign officials who have been notified have complained that the communiqués are vague and ambiguous, or else so highly technical that they are incomprehensible.

Of course, even if clear notification about a product were to reach officials in an importing nation, there is nothing to stop the exporters from changing a product's brand name before they ship.

It's All Coming Back

Perhaps the only aspect of the whole dumping travesty that has kept the issue alive in Washington is reimportation. Congressmembers and bureaucrats who would otherwise ignore or even encourage dumping become irate upon learning that a hazardous product is being reimported (smuggled) into the US for sale, or that an imported fruit or vegetable contains residue of a pesticide long-since suspended for American use. Even Esther Peterson, in a memo to the President, expressed concern about reimportation.

Remember, it is perfectly legal to dump hazardous products abroad. There are, however, strict measures to prevent reimportation. The FDA allows manufacturers to export banned drugs, stale-dated drugs and even unapproved new drugs if they are shipped under "an investigational protocol" (for experimentation on other people). But one of the stipulations for the export of drugs removed from the American marketplace is that they never be offered for domestic sale again.

The CPSC, however, can prohibit the export of goods forced off the American market. It can also stop exports that present "an unreasonable risk to persons in the US" (through their reimportation, for example), but the CPSC admits that proving unreasonable risk is "very difficult."

How to Stop It

The White House Office of Consumer Affairs remains confident that a uniform policy on the export of banned and hazardous products will protect foreign consumers. Our investigations, however, indicate that the corporate dumping urge is rooted in a criminal mentality and that dumpers will, as they already have, find new ways to circumvent whatever legal and regulatory barriers stand between their warehouses and profitable markets for their deadly goods.

Global corporations, with their worldwide network of subsidiaries, high technology and marketing systems, far outstrip the puny regulatory efforts of a government that considers corporate crime a minor nuisance at worst. Nothing short of a complete moral transformation of the corporate ethos will stop dumping. Until that unlikely transformation takes place, we recommend the following:

  • Dumping must be clearly defined by statute, and one term, such as "illegal for export," should be applied to American products found to be too dangerous for use here and, hence, anywhere. We should recognize that there are a few—a very few—products that are unsafe for use in the US for which the benefits far outweigh the risks in other countries—for example, certain drugs used to treat tropical diseases or pesticides used to kill the malaria-carrying mosquito. In such cases, when the foreign government is apprised of the risk, the products should be cleared for export to that country only.
  • Dumping should be made a criminal offense.
  • The government, which already controls exports through the Commodity Control List and the Bureau of Census (where all exports of over $250 are registered), must accept the responsibility of monitoring the outflow of banned and hazardous products. This responsibility should be taken from the Department of Commerce, where it represents an untenable conflict of interest.
  • Notification of product bans, suspensions, cancellations and withdrawals from registration should be made directly by the US regulatory agencies to appropriate foreign officials, in language that can be understood.
  • The State Department should be relieved of any anti-dumping responsibility, since it has so deliberately failed to coordinate an effective notification program.

    Until all of the above are accomplished, the President should use his powers to stop dumping immediately.

What Dumping Really Is

Executives in major exporting corporations, with the strong support of Commerce Secretary Juanita Kreps, argue that if the export of banned and hazardous products is prohibited by statute or Executive Order, foreign buyers will merely turn to European or other suppliers, as they have in the past for weapons and ammunition. Other developed nations do dump; Germany dumps at least as many toxic pesticides as the US, and no nation on earth can match Switzerland for dumping baby formula. However, the assumption that foreign buyers will import known toxins and recognized lethal products from one country when they can't get them from another is patently ridiculous.

American business leaders, who tout themselves as the most ethical businesspeople in the world, should lead the way in ending dumping worldwide. It's in their best interest to do so, for by dumping toxins on the Third World they are actually poisoning the very markets they seek to develop. Perhaps one day they will even see dumping for what it really is—a subtle genocide.

Research assistance was provided by Carolyn Marshall, Victoria Dompka and the Center for Investigative Reporting.