Wednesday, September 30, 2015

Nuts and Beatles

My object all sublime,
I shall achieve in time-
To let the punishment fit the crime.

—Sir William Schwenk Gilbert, The Mikado

Although I have never met Martin Winterkorn, the purpose of this column is to offer him the reassurance I am sure he badly needs. The news about his company’s misfortune came out at almost exactly the same time we learned of the sentencing of Stewart Parnell. News of that sentencing has probably given Mr. Winterkorn considerable concern. It needn’t. That’s because there is a difference between how the U.S. Justice system deals with criminal conduct involving cars and criminal conduct involving peanuts.

Stewart Parnell is the 61-year-old millionaire owner of the now defunct Peanut Corporation of America who was just sentenced to 28 years in prison. It all happened because of peanuts. In 2008 there was a salmonella outbreak that killed 9 people and sickened 714 others. The outbreak was traced back to peanut butter paste that Mr. Parnell’s company shipped to its customers. At the time of the shipments the company knew the shipments were contaminated with salmonella. At his criminal trial in 2014, Mr. Parnell was convicted of 72 counts of fraud, conspiracy and the introduction of adulterated food into interstate commerce. The sentence was a good news-bad news scenario for Mr. Parnell. The bad news was that he was the first corporate executive of a food company to be convicted of felony charges arising out of food poisoning caused by the company’s product. The good news was that he was only sentenced to 26 years in prison. The conviction could have resulted in a sentence of 803 years in prison but the judge decided Mr. Parnell was entitled to leniency and imposed a shorter sentence than the maximum allowed by law. Bill Marler who represented some of the victims of Mr. Parnell’s criminal conduct said: “Although his sentence is less than the maximum, it is the longest sentence ever in a food poisoning case. This sentence is going to send a stiff, cold wind through board rooms across the U.S.” Although not in the U.S., a boardroom in Wolfsburg, Germany may be feeling the chill and one of the occupants feeling the stiff cold wind may be Mr. Winterkorn. If recent events are a guide, however, he doesn’t need a sweater to protect him from the cold. The American justice system will do the trick.

At almost the same time that Mr. Parnell was sentenced, we learned that Volkswagen, a pillar of the automobile industry, had engaged in a different kind of corporate misbehavior from the peanut folk. It didn’t kill anyone outright. It just contributed more pollution to our world than anyone except a few people at Volkswagen, realized. Volkswagen’s transgressions are well known by now and need no reiteration here. Mr. Winterkorn and other Volkswagen executives who read about Mr. Parnell’s sentence may be worried that notwithstanding the absence of deaths as a result of their misconduct, they may nonetheless be facing long jail terms if found guilty of criminal conduct. They needn’t be concerned. That is because peanuts are different from cars,

There are two recent examples of corporate misbehavior by executives of car companies that have resulted in multiple deaths. General Motors executives, for example, knew that the company was installing faulty ignition switches in several models of cars it made. These switches caused the deaths of 124 people and severe injuries to another 275. Readers skilled in numbers will immediately note that the faulty ignition switch had much more serious consequences than the bad batches of peanut butter. Nonetheless, shortly before Mr. Parnell got his 28 years, General Motors agreed to pay a $900 million fine and entered into a deferred prosecution agreement with the government. No executive in that company will face criminal charges.

In 2014 Toyota agreed to pay a $1.2 billion penalty to settle the criminal probe into how it dealt with the consequences of the unintended acceleration problems that not only resulted in the deaths of a California Highway Patrol officer and three of his family members but the recall of 8.1 million vehicles. In announcing the Toyota settlement, then attorney general, Eric Holder, said: “Put simply, Toyota’s conduct was shameful.” At the time of the settlement of the criminal probe there were 400 wrongful death and personal injury lawsuits still pending because of the defect in Toyota’s vehicles. As a result of the settlement of the criminal probe, no one at Toyota needs to worry about facing any time in prison.

The foregoing is simply historical. All it is intended to do is to show Mr. Winterkorn and his colleagues that, although the Volkswagen Company may end up paying billions in fines and penalties, if history is a guide, no one in the company will go to prison, irrespective of what criminal investigations may disclose. And there is even a bright side to the fines that the company will have to pay. Although they will reduce the profitability of the company for the years in which the fines are paid that simply reduces the amount of money available to pay dividends to shareholders. It is a win-win situation. No one goes to jail and shareholders, rather than the executives, suffer the financial losses. That’s a great example of good old American know how. Christopher Brauchli can be emailed at For political commentary see his web page at

Thursday, September 24, 2015

Taxes Roads and Bridges

You can’t use tact with a Congressman! A Congressman is a hog! You must take a stick and hit him on the snout.

— Quoted by Henry Adams, The Education of Henry Adams

It is not uncommon to see legislation introduced in Congress that, as soon as it is introduced, finds itself encumbered with seemingly irrelevant provisions. It is not uncommon to see a Senator with an axe to grind, sharpen it by attaching those provisions to a piece of legislation that, to anyone but the Senator, would seem to be a peculiar place for it. The Highway Trust Fund Bill is a good example of the first and Senator Charles Grassley of Iowa, a good example of the second.

The Highway Trust Fund Bill being considered in Congress has given Senator Grassley an opportunity to let everyone see how tenacious he can be. Surprisingly, his persistence has nothing to do with highways or bridges although the uninformed might think that was what a bill with such a name was concerned. The Bill includes a provision that would provide for using private collection agencies known as PCAs to help collect delinquent taxes. In order to fully appreciate Senator Grassley’s obsession with private debt collection, a brief history lesson is in order. It goes back to the late 1990s.

In 1996 and 1997 Congress came up with the idea of permitting the IRS to turn delinquent IRS accounts over to PCAs. The program lasted one year and by the time it had ended had cost the government $17 million instead of generating the additional revenue that proponents of the legislation were confident would be realized. Not only was no additional revenue generated. The PCAs were found to have regularly violated the terms of the Fair Debt Collection Practices Act. Notwithstanding that failure, Republicans, who support anything that has the word “private” in it, were determined to give it a second chance.

In 2004 Congress “passed”: the American Jobs Creation Act. Among the jobs created by that Act were those created by handing out IRS debt collection to PCAs, the same kind of PCAs the IRS had been authorized to hire eight years earlier and was told to fire seven years earlier. As in 1996, proponents of the procedure anticipated great results from the activities of the PCAs. Projections in 2004 were that the PCAs would be able to collect $1.3 billion. Out of those collections they would receive commissions of $350 million or eight times more than it would cost the IRS to collect the same amount. In 2008 the House Ways and Means Committee held hearings to determine how well the program was working. The committee learned that 85 per cent of people contacted by PCAs did not owe back taxes. In addition it learned that whereas it cost the IRS $.07 for every dollar collected, it cost the PCAs $.24 to collect the same amount. The IRS had an 11 per cent success rate whereas the PCAs had a 4% success rate. Instead of collecting the anticipated $1.3 billion, it turned out the IRS only received an additional $4.5 million from the efforts of the PCAs.

Confronted with those facts, in 2009 President Obama decided to eliminate the program. Senator Grassley, a big supporter of PCAs, was outraged. He said: “The administration has decided that after spending nearly a trillion dollars in the stimulus bill to keep people working across the country, they are going to cut a program that provides jobs to hundreds of people during the middle of a recession, including 60 in Iowa. It’s hard to believe that after worrying so much about keeping people employed, the administration has chosen this route,” a cave in he attributed to union pressure. He did not care about the failure of the program to generate additional revenue. It created jobs in the private sector.

Now, thanks to the need for repairs to highways and bridges, the PCAs may again be back. As this is written Congress is considering the Highway Trust Fund Bill and an unresolved question is whether or not to turn over some IRS debt collection activities to PCAs. Support for the proposal is again being heard from Senator Grassley who continues to think it is a good idea even though it has been proven not to work. Commenting on the need for private debt collection he said: “The IRS just had one of the worst filing seasons for customer service on record. The IRS hung up on callers because it couldn’t handle the calls. “ The projection is that the PCAs will collect $2.4 billion, twice as much as was projected in 2004. If the results this time are the same as they were the last time, the IRS will receive an addition $9 million rather than $2.4 billion..

Senator Grassley ignores the fact that the PCA program has been a failure twice in the last twenty years. He ignores the fact that the reason the IRS offers poor service is that it is understaffed and it is understaffed because it is underfunded. Its funding has been slashed by $1.2 billion since 2010. This year Congress is considering funding it at $2.8 billion less than the administration has requested. Someone should explain to Senator Grassley that the need for principal trumps the need for principle when it comes to governing. He wouldn’t understand.

Wednesday, September 16, 2015

Carson, Campassion and Evolution

The progress of Evolution from President Washington to President Grant was alone evidence enough to upset Darwin.
—Henry Brooks Adams, The Education of Henry Adams

If you are a Republican and evolution happens to be your thing, you may have difficulty finding a candidate to support. When asked about evolution over the years, responses from the candidates now running have ranged from Chris Christie’s response to a questioner that his views on the subject were none of the questioner’s business, to Rick Santorum who said in 2008 that: “I think there are a lot of problems with the theory of evolution, and do believe that it is used to promote to a worldview that is anti-theist, that is atheist.” During a visit to London in 2015 Scott Walker responded to a question about where he stood on evolution saying: “I’m going to punt on that one. . .. That’s a question a politician shouldn’t be involved in one way or the other.” There is one candidate capable of responding in more than short sentences-Ben Carson. He does not dismiss evolution with a sound bite or say, as Marco Rubio did: “At the end of the day, I think there are multiple theories out there on how the universe was created and I think this is a country where people should have the opportunity to teach them all.” Dr. Carson can discuss evolution in a way other candidates cannot. That is not surprising. His background and profession, after all, suggest a man of extraordinary intelligence. His words suggest otherwise.

In an interview with David Boze for the Discovery Institute which took place in February 2013 (before Dr. Carson concluded he had what it takes to be president) he was given the opportunity to explain in scientific terms his views on evolution. He doesn’t believe in it. Mr. Boze asked Dr. Carson: “What things come to mind when people ask you, why do you question the theory of materialist evolution?” Dr. Carson responded: “Well, the first thing is, how does something come out of nothing. And the second thing is, how does life evolve from non-life? Which, if you want to talk about fairy tales, those are incredible fairy tales.” Dr. Carson doesn’t stop there. He continues saying: “And to say that that [evolution] just came about sort of randomly by various mutations over the course of time, when as I just said mutations tend to lead to degeneration rather than improvement, just doesn’t make any sense. So, the very things that they claim are evidence for evolution are the very things that damn the theory.” Dr. Carson also does not believe that finding similarities in various forms of life prove that one evolved from the other and to make his point he uses the automobile, something that those who support the theory of evolution have often used to demonstrate that evolution does in fact occur. He explained that: “General Motors, same basic chassis as Chevrolet, a Buick, a Pontiac, or a Cadillac. And yet, they’re different. And one did not evolve from the other. And why would you have to go and completely change the motor, the chassis, and all the other infrastructure because you’re creating a different model. That doesn’t make any sense to me.”

As useful as it is in understanding Dr. Carson’s views on evolution to consider various automobiles (and he could have thrown in a Jaguar or Mercedes Benz in his example to make it more relevant to wealthy Republicans) even more startling than his view on evolution was his view on the hundreds of thousands of refugees trying to find safe haven. On NPR’s Weekend Edition Saturday on September 12 he was asked what he thought the United States response to the refugee crisis should be. He first said that none of them should be admitted to this country without complete background checks. He said we would need a “very excellent screening mechanism. Until we had such a mechanism in place, we should not be bringing anybody in.” The hundreds of thousands of mothers with infants and small children facing the prospect of a winter in refugee camps will understand the doctor’s fear that among their number might be terrorists. Furthermore, they do not have to view the lack of a screening system as the main barrier to their entry. Most of them would not be admitted even if a screening system were in place. That is because in saying how many people he would admit Dr. Carson said: “I would admit people that we need, people that can boost our economy based on their skills and what they bring in, and I don’t know what that number is.” Simply stated, “ask not what we can do for the homeless and poor seeking refuge from years of conflict but ask what they can do for us.”

Dr. Carson’s description of evolution makes it fairly obvious that working on other people’s brains has had little effect on his. His attitude towards the struggling immigrant makes it obvious he spent no time working on hearts. It is hard to imagine what a wonderful country this would be if from the outset we had only admitted immigrants who met his criteria.