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#556 - WMI: A Culture of Fraud and Dishonesty, 23-Jul-1997

Waste Management, Inc. (WMI --formerly WMX Technologies), the largest
waste hauler in America, has fallen on hard times. Lately the NEW YORK
TIMES has taken to calling the company "troubled"[1] and
"beleaguered."[2] In 1996, WMI reported profits of only $192.1 million
on revenues of $9.19 billion; in 1995, the firm had reported profits of
$603.9 million on revenues of $9.05 billion. WMI stock is selling for
about the same price it brought in 1989 and stockholders are distinctly
unhappy. For mismanaging the company, WMI's chief executive, Phil
Rooney, was forced to resign in February, 1997,[3] with severance pay
of only $2.5 million per year until 2002.[4]

Rooney had joined WMI in 1969 and had masterminded its public relations
campaign to present the company as "environmentally responsible," even
though WMI's core business is burying millions of tons of dangerous
wastes in the ground year after year. For a time, Rooney even got
himself appointed to the Board of Directors of the National Audubon
Society, a mainstream environmental group, and Dean Buntrock, WMI's
founder, joined the board of the National Wildlife Federation. Under
Rooney's guidance, WMI even insinuated itself into the Environmental
Grantmakers Association (EGA) --creating quite a flap among the funding
community at the time --and now makes cash donations to environmental
groups. Such grants serve WMI's business goals by creating chasms of
mistrust within the environmental community.

In general, mainstream environmental groups like Audubon, National
Wildlife Federation, and Environmental Defense Fund ignore --or openly
cooperate with --WMI's environmentally destructive core business and
its greenwashing tactics.[5] On the other hand, local grass-roots
groups are often engaged in a life-or-death struggle with WMI at the
local level and they are not fooled in the least by WMI's greenwashing.
They know that when all is said and done, WMI is a company that plays
hardball. That is how, in the early 1960s, WMI entered an industry
dominated by the Mafia and soon became king of the mountain.[6]

According to the company's world wide web site, within the U.S., WMI
owns 133 garbage dumps; seven hazardous waste dumps; two hazardous
waste incinerators; one hazardous waste deepwell injection site; and
one "low-level" radioactive waste dump. Wheelabrator Technologies, a
subsidiary of WMI, owns 16 garbage incinerators and 3 sewage sludge
processing facilities. Outside the U.S., Waste Management
International, another subsidiary of WMI, operates eight incinerators
and 56 solid and hazardous waste dumps.

Over the years WMI has developed several winning strategies for
overcoming citizen opposition. Its earliest tactic was purchasing
leaking dumps and promising to clean them up in return for permission
to expand operations. The purchaser would often be a newly-created WMI
subsidiary corporation with few or no assets of its own. The threat was
clear: If the community refused to allow expanded operations, the
corporation would have limited income and might have to declare
bankruptcy, leaving the community saddled with leaking poisons
threatening its groundwater. Under these circumstances, many
communities allowed WMI to expand dumping operations --a Faustian
bargain at best. Given that all landfills eventually leak (see REHW
#37, #316) those communities were choosing to improve their lot today,
passing the environmental health costs on to their children or
grandchildren.

Another tactic that WMI pioneered was to offer communities a part of
the profits --perhaps 1% of their revenues from a facility, which can
add up to a substantial sum. Because landfills are often located in
poor communities, such an offer would dazzle local politicians
struggling to pay for public services. Furthermore, such an offer would
gain the support of property owners in the community because it
promised an alternative source of revenue besides the property tax.

After December, 1996, however, communities receiving an offer of
profit-sharing from WMI have had reason to think carefully about the
wisdom of making such a deal:

In December, 1996, a federal judge in Tennessee declared that "top
corporate officers" of WMI had "decided upon and followed a well-
defined plan to cheat Plaintiffs out of money rightfully due them under
the terms of the purchase agreement for the Emelle hazardous waste
disposal facility."[7,pg.54] WMI's hazardous chemical dump in Emelle,
Alabama is the largest such facility in America.

In 1974, U.S. Environmental Protection Agency (EPA) identified Emelle
as a good place for a big hazardous waste dump. Ten individuals then
bought 340 acres in Emelle and sought a license from the state of
Alabama to operate a dump. Among the 10 was James Parsons, the son-in-
law of former Alabama governor George Wallace.[7,pg.10] The license was
granted.

WMI purchased the Emelle dump site from the 10 individuals February 23,
1978, promising to pay them 12.5% of all the money made by the facility
for 21 years. In 1992, a WMI employee --presumably by mistake --sent a
secret document to one of the 10 sellers, showing that WMI had doctored
its accounts to reduce its payments to the 10 individuals. The 10
individuals took WMI to court in 1993 and federal judge Odell Horton
issued his opinion and order December 11, 1996.[7]

The judge calculated that WMI had cheated the 10 individuals out of
$76.5 million dollars between 1981 and 1993. He ordered WMI to pay that
sum plus another $15 million in punitive damages. WMI denies any
wrongdoing.

In his written opinion, Judge Horton went on to say that, "The Court
finds Defendant [WMI], through its top corporate officers, consciously
and deliberately engaged in fraud and misrepresentation towards
Plaintiffs."[7,pg.55] Judge Horton did not mince words: "What is
troubling about this case," he said, "is that fraud, misrepresentation
and dishonesty apparently became part of the operating culture of the
Defendant corporation."[7,pg.54]

Under a new kind of law in many U.S. states, a corporation's "culture"
can become the basis for denying business opportunities. These new "bad
boy" laws, or "good character" laws, give states the right to refuse
licenses and permits to companies that have a history of violating the
law. (And of course, all states have the right to revoke a
corporation's charter, effectively ending their existence as a legal
entity, if they choose to. See REHW #309, #449, #488, #489.)

The state of Indiana in June of this year denied WMI a license to
expand its Adams Center Hazardous Waste Treatment and Disposal Facility
near Fort Wayne. It was a stunning victory for Allen County
Dumpstoppers, a group of citizens who had fought the Adams Center dump
for about 10 years.

WMI had tried several legal maneuvers to get around the Indiana law,
which says the state can deny a permit application if the applicant has
not demonstrated good environmental stewardship. Indiana passed the law
in 1990; WMI's wholly-owned subsidiary, Chemical Waste Management
(CWM), challenged the constitutionality of the law, but in 1994 it was
upheld by the Indiana Supreme Court.

After the law was declared valid, WMI created a new paper corporation,
which they called Chemical Waste Management, L.L.C. (CWMLLC). CWMLLC
then applied for a permit to expand the dump, claiming it had no
environmental record and thus had a good character. CWMLLC said it was
not associated in any way with Chemical Waste Management of Indiana
(CWMI), which is a subsidiary of Chemical Waste Management (CWM), which
is itself a wholly-owned subsidiary of WMI. Despite claims of
independence by CWMLLC, the $34,000 application fee was paid by a check
drawn on the account of CWMI, clearly linking CWMLLC to CWMI, CWM and
WMI with their miserable environmental records.[8]

It is interesting to note that CWM tried the same tactic in the case of
the fraud and misrepresentation at Emelle. CWM currently owns Emelle,
but in 1978 it was Alabama Solid Waste Systems (ASWS), a subsidiary of
WMI, that bought the 340 acres from the 10 developers.[7,pg.11] ASWS
later became Waste Management of Alabama (WMA), which later merged into
CWM, a wholly-owned subsidiary of WMI. When the cheating was
discovered, one of CWM's defenses was, "We never signed any contract
with those 10 individuals. Somebody else did it." Judge Horton rejected
that defense.[7,pg.34]

Indiana also rejected the claim that CWMLLC was distinct from CWM and
WMI. Indiana said it denied CWMLLC the license to expand because:

** February 14, 1992, CWM buried waste illegally in an Illinois
landfill and was fined $25,000.8

** In Alabama July 4, 1992, WMI paid a $25,000 fine for burying wastes
illegally.[8]

** In California July 29, 1992, WMI paid a $25,000 fine for spilling
hazardous wastes from a leaking tank.[8]

** In Pennsylvania August 9, 1992, CWM pleaded guil-ty to six felony
violations of the federal Superfund law and was fined $3 million.[8]

** In California November 13, 1992, WMI paid a $65,000 fine for various
violations of law.[8]

** In Illinois December 31, 1992, CWM paid a $275,000 fine for
incinerator violations.[8]

** In Louisiana July 7, 1993, WMI paid a $25,000 fine for various
environmental violations.[8]

** In Louisiana November 30, 1993, CWM paid a $261,918 fine after a
judicial finding of environmental violations.[8]

** In Texas April 8, 1994, CWM paid a $15,000 fine for faulty analytic
methods at its Port Arthur incinerator.[8]

** In Alabama June 24, 1994, CWM paid a $35,000 fine for illegally
handling PCBs [polychlorinated biphenyls] at the Emelle dump.[8]

** In Illinois June 1, 1995, CWM paid a $1.9 million fine for serious
problems at its Chicago incinerator.[8]

CWMLLC is now appealing the denial of the expansion permit in Indiana,
claiming that the new paper corporation should not be penalized for the
crimes and violations of others.

What all this really shows is that we have allowed corporations to
escape sensible controls. Up until 1886, corporations were entirely
defined by state legislatures. They could only do what their corporate
charter said they could do. After 1886, corporations were defined as
"persons" under the law, which allowed them to do anything that any
other person could do. Recent history reveals that this was a serious
mistake.

The solution to this problem is to go back to the way things used to
be, to deny corporations the rights of persons under the Constitution,
just as our grandparents did. Corporations bear no resemblance to
persons, so why treat them as such?

--Peter Montague (National Writers Union, UAW Local 1981/AFL-CIO)

=====

[1] Claudia H. Deutsch, "Waste Management Hires Sprint President," NEW
YORK TIMES July 15, 1997, pg. 2.

[2] Claudia H. Deutsch, "Recent Changes at WMX Satisfy Dissident, for
Now," NEW YORK TIMES February 22, 1997, pg. 36.

[3] Claudia H. Deutsch, "Under Pressure, Chief Resigns at WMX," NEW
YORK TIMES February 19, 1997, pg. 2.

[4] Bloomberg News, "$2.5 Million a Year for Ex-WMX Chief," NEW YORK
TIMES March 15, 1997, pg. 40.

[5] See, for example, REHW #156, #157, #403.

[6] Edwin L. Miller, Jr. [District Attorney, San Diego County,
California], FINAL REPORT, WASTE MANAGEMENT, INC. (San Diego: San Diego
Board of Supervisors, 1992). 260 pages. Copies may still be available
for $32.75 from: Clerk of the Board of Supervisors, Room 402, County
Administration Center, San Diego, CA 92101-2471. Phone: (619) 531-5430.
Be sure to ask for the full 260-page version of the report.

[7] Odell Horton, "In the United States District Court for the Western
District for Tennessee, Western Division, Mark W. Gregory, et al.,
Plaintiffs, vs. Chemical Waste Management, Inc., Defendant. Civil No.
93-2343-H/V, Opinion and Order" stamped with the date December 11, 1996
by the clerk of the court. See also, Jeff Bailey, "Judge Orders WMX to
Pay $91.5 Million to Hazardous-Waste Dump Developers," WALL STREET
JOURNAL December 16, 1996, pg. A3.

[8] "IDEM Uses Good Character Law to Deny Hazardous Waste Landfill
Expansion," IDEM [Indiana Department of Environmental Management] NEWS,
press release dated June 13, 1997. Contact: Jo Lynn Ewing at (317) 232-
8560.

Descriptor terms: waste management, inc.; wmi; wmx; cwm; chem waste;
emelle; landfilling; fraud; lawsuits; al; tn; tx; ca; in; bad boy laws;
waste industry; waste hauling industry; mafia; odell horton; phil
rooney; edf; audubon; national wildlife federation; ega; incineration;
corporations; waste management international;