By which I refer to those multi-state, multi-million-dollar settlements between state Attorneys General and misbehaving corporations. Bill Sorrell has offered two major reasons for his re-election: Experience, and the millions he’s brought into state coffers by participating in lawsuits against big corporations.
And it’s true; in each of the last two years, Vermont has gained about $40 million from settlements — the bulk of it from the big enchilada of multi-state settlements, the deal with the tobacco industry, which was signed 15 years ago but still brings in about $33 million a year.
But I have two questions about these settlements and how much credit Sorrell deserves.
First, and simplest: How long can he continue to claim credit for something that happened long ago? The tobacco settlement was signed shortly after Sorrell took office. Previously I have questioned whether he could have possibly played a significant role in a complicated deal that had been in the works before he even became AG. Now I question whether he can rightly claim perpetual credit for an action he took 15 years ago. I’m not saying he deserves no credit; I’m just questioning how much he really deserves. (The tobacco money will continue to flow indefinitely as long as sizeable numbers of people continue to smoke. Which, it should be noted, gives the states a perverse incentive NOT to fund anti-smoking programs; if people stopped smoking, they’d stop raking in the bucks.)
Second, and more fundamental: Are all these multi-state, mega-million-dollar settlements actually a good thing? Sure, it gooses the states’ bottom lines, and it does provide some measure of punishment for corporate misdeeds. But rarely does the settlement come close to equaling the profits made through said misdeeds. And the settlements close the door on further prosecution. In effect, the Attorneys General have put a price tag on corporate misbehavior. And that price is often very affordable.
As a bonus, since the settlements are struck out of court, corporate documents aren’t entered into the public record, and executives escape the necessity of testifying under oath. Confidentiality agreements are often part of the package, which means no one ever sees the evidence, and none of us can make our own judgments on the corporation or the vigilance of public officials.
Since the tobacco deal, state AGs have pursued a number of similar cases, and have often won significant dollars. Usually, the money has not gone to help victims; it’s been rolled straight into state’s general funds. Multistate settlements have become a reliable revenue stream for states, helping them balance budgets without raising taxes or fees. Which is why so many Republican AGs are happy to participate; they’re not normally the most anti-business of folks, but they see this as a win for their states and a manageable loss for corporations.
Furthermore, the people who actually bear the cost of these settlements aren’t the perpetrators — the executives who pursued or approved illegal or unethical acts, and who evade any personal responsibility in these settlements. The costs are borne by shareholders, who suffer reduced profits and stock prices. That’s not just Warren Buffett; that’s any American with stock or mutual fund investments or a retirement plan.
In the short run, these settlements are a win-win all around. Corporations get out from under the threat of prosecution, AGs look like heroes, and governors get a bit of budgetary relief. In the long run, I question whether they’re good public policy. The states and misbehaving corporations have implicity established an unhealthy relationship. States depend on continued corporate malfeasance, and have a financial incentive to loosen regulation and oversight. Corporations have a financial incentive to break the law, because they know that even if they get caught, they can pay a penalty and still come out ahead on the deal.
So I ask Bill Sorrell and his fellow AGs: Are these multistate settlements really a good thing? Are there better ways for state Attorneys General to spend their time and resources?
I wrote this piece after reading an article in The Economist about a settlement between the New York Department of Financial Services (DFS) and Standard Chartered, a London-based multinational bank. SC had been accused of widespread financial dealings with Iran, in violation of international sanctions. It settled the case out-of-court by paying a $340 million fine to the state of New York. The illicit dealings with Iran amounted to $250 billion. The fine is undoubtedly a fraction of SC’s total profits on its Iran business. The Economist painted a picture of a morally tainted win-win:
The deal gives the DFS a notable scalp, not to mention a considerable financial boost. The state’s self-promoting governor, Andrew Cuomo, responded to the settlement by praising himself for creating the agency. Standard Chartered gains some benefits as well. The bank’s management avoided censure; its shareholders shouldered the fine, which is large but digestible. Its ability to operate through America’s financial system remains intact, removing a big source of uncertainty. Standard Chartered’s share price rose on the news, and has now recaptured over half of the dramatic 22% drop after the accusations were announced on August 6th.
The gratuitous anti-Cuomo swipe aside, I have to agree with The Economist’s portrayal. And it’s not a pretty picture. Granted, this isn’t a multistate settlement, but it’s a good example of the questionable ethics and efficacy of such deals. It made me stop and think. And it made me wonder whether I want my public officials to continue making deals like this.
Then there’s the millions that Vermont taxpayers owe in corporate legal bills and court costs for the last several cases Willy Sorrelly lost. Those should be deducted from the AG’s vaunted “take.”
NanuqFC
I hope we shall crush in its birth the aristocracy of our moneyed corporations which dare already to challenge our government in a trial of strength, and bid defiance to the laws of our country.” ~ Thomas Jefferson
Back when the DAGA funded Committee for Justice and Fairness (Dean narrated)ads started, Seven Days reported where the groups funding comes from.
http://7dvt.com/2012knockout-p…
As you say these settlements appear to be a win-win the AG’s look like heroes and the corporations are absolved from prosecution. But maybe it’s more of a win-WIN as a corporation can go ahead and do the crime and can afford the fine. Get the speeding ticket but get to work on time.It’s just the cost of doing business.
Esther Hartigan Sorrell died in 1990 (cancer). She ran for and was elected to the Vermont Senate in 1973 (5 terms). Several sources acknowledge that she was “instrumental” in launching the political careers of both Madeleine Kunin and Howard Dean, resulting in Dean’s offering his mentor’s son (
BullyBilly) a job as Secretary of Administration.The way I heard and observed the story, Billy hated the job and begged Dean to find him another. Dean tried and failed to get the legislature to accept a Sorrell nomination to the state Supreme Court. Frederic Allen retired after 15 years as Chief Justice. Dean then used that Supreme Court vacancy, to which he appointed then-A.G. Jeff Amestoy (R), to conveniently and purposefully create a non-election-year vacancy at the A.G.’s office, to which Dean then appointed his mentor’s son, Billy.
Interestingly enough, Jeff Amestoy was the Chief Justice before whom Billy Sorrell argued – and lost – the state’s case for denying legal recognition to same-sex couples. The grounds he chose to argue on were the state’s interest in child-rearing (coincidentally, the same grounds are being used by the Republican House to defend DOMA).
In the present, don’t forget that although he’s selling himself to gay and lesbian voters as a pro-marriage-equality candidate, he has not signed on to any of the several challenges from other states to DOMA’s constitutionality that are wending their way toward the U.S. Supreme Court. He apparently continues to believe, as did Governor Jim Douglas (R), that “your community has enough rights.”
BTW, don’t buy all that Pundit Emeritas claptrap (this time from long-time journalist Hamilton Davis) about how Vermonters don’t “fire” a man from his (elective) job unless he has really screwed up. Charles Gibson (R) was defeated after one term by Democrat John Connarn, who also served one term, followed by single-term A.G. James Oakes (R). Republican Kim Cheney (who followed two-term A.G. Jim Jeffords) was a one-termer, defeated by Democrat M. Jerome Diamond.
NanuqFC
Self-declared leaders must be rejected at once when they lack the integrity to stand publicly for the principles they claim to adhere to in private. ~ Woodrow Wilson