The Great Electrical Industry Conspiracy
While the bulk of the cases cited have involved the uncamouflaged criminal jurisdiction, with the judges properly accoutered with everything except the black cap, there have been many recent thumping reminders that carefully planned crime is an inseparable companion of big business.
While the bulk of the cases cited have involved the uncamouflaged criminal jurisdiction, with the judges properly accoutered with everything except the black cap, there have been many recent thumping reminders that carefully planned crime is an inseparable companion of big business.
Lundberg - The-Rich-and-the-Super-Rich-by-Ferdinand-Lundberg
" 28 The crimes committed
mostly by the propertied and wealthy in the course of managing their property include embezzlement; most big fraud; restraint of trade; misrepresentation in advertising and in the sale of securities; infringements of patents, trademarks and copyrights; industrial espionage; illegal labor practices; violations of war regulations; violation of trust; secret rebates and kickbacks; commercial and political bribery; wash sales; misleading balance sheets; false claims; dilution of products; prohibited forms of monopoly; income-tax falsification; adulteration of food and drugs; padding of expense accounts; use of substandard materials; rigging markets; price-fixing; mislabeling; false weights and measurements; internal corporate manipulation, etc. , etc. Except for tax fraud the ordinary man is never in a position to commit these crimes.
A distinction between most white collar crime and most ordinary crime is that the white collar criminal does not usually make use of violence; he depends chiefly on stealth, deceit or conspiracy. In the case of illegal labor practices, however, he does often through agents employ violence leading to death of workers. And there may be violent, even fatal, reactions to some of its nonviolent forms, such as the consequence of adulteration or improper preparation of foods and drugs.
The "white collar criminals, however, are by far the most dangerous to society of any type of criminals from the point of view of effects on private property and social institutions. " 29 For their predations gradually tend to undermine public morale and spread social disorganization. 30 Large-scale stock swindles, bank manipulations and
food and drug adulteration administer particularly convulsive shocks to broad segments of the populace. The volume of total violations, much of it officially unchallenged, leads to a spreading mood of public cynicism and more and more rank-and-file lawbreaking. It is finally echoed in the statement: "There's one law for the rich and another law for the poor. " Government itself stands impugned. The stage is set for anarchy, sometimes emerging in riots.
An equally grave consequence, which Sutherland does not notice but upon which I shall later touch, is that the attempt to gloss over, conceal, minimize and apologize for white collar crime in general and in specific cases trammels the channels of public communication, undermines the terms of public debate and clouds the critical faculties even of many scholars.
The laws relating to white collar crime, as Sutherland remarks, tend to "conceal the
criminality of the behavior" and thus do not reinforce the public mores as do other laws. 31
Sutherland surveyed the laws and took note of those instances in which white collar crime is explicitly stated to be crime and those where it is only implicitly indicated. White collar crimes are committed by individuals and by corporations, mostly the latter as the transmission mechanisms of widespread illegal planning. They are committed against a small number of persons in a particular occupation or against the general public; it is rarely a case of individual versus individual. Individuals only commit such white collar crimes as embezzlement and fraud, and when they do they come under statutes clearly labeled criminal.
But there are many newer statutes, developed incident to the emergence of machine technology and the modern corporation.
There are, first, the antitrust laws--the Sherman Act, the amendment thereto establishing the Federal Trade Commission, the Clayton Act and other amendments. The Sherman Act is explicitly stated to be criminal law, and various of its amendments explicitly define violations as crimes. The amendments are largely under the jurisdiction of the Federal Trade Commission, which may issue cease-and-desist orders or enter into stipulations for the termination of some behavior. If a stipulation is violated there may be issued a cease-and-desist order, and if this is violated there may be issued a court injunction, the violation of which is punishable as contempt of court, provided for in the original Act. If the interim procedures (similar to probation in the ordinary courts) are not effective, fines and imprisonment may be imposed for contempt. An unlawful act, as Sutherland remarks, is not legally defined as criminal by the fact that it is punished but by the fact that it is punishable. It follows from these and other considerations that "all the decisions made under the amendments to the antitrust law are decisions that the corporations committed crimes. " 32
Laws against false advertising, designed to protect competitors and consumers, and the National Labor Relations Law, designed to protect employees against coercion and the public from interference with commerce, are adaptations of the common law to modern conditions. Laws against false advertising relate to common-law fraud. There are, too, laws against infringement of patents, which relate to the common-law prohibitions of restrictions on freedom in the form of assault, false imprisonment and extortion. Prior to the enactment of these and other laws the basic common law already expressed itself against restraint of trade, monopoly and unfair competition.
False labeling, a variant of false advertising, is defined as crime in the Pure Food and Drug Act. False advertising in the Federal Trade Commission Act is defined as unfair competition, and comes under the same criminal procedure as its other violations. It is fraud.
As to the National Labor Relations Act, "all of the decisions under this law, which is enforceable by penal sanctions, are decisions that crimes were committed. " 33
Most white collar criminal statutes are relatively nonstigmatic--that is, they don't arouse an automatic reaction of reprehension in the broad public. That someone has been convicted of using the mails to defraud, or has restrained trade, does not sound as heinous as if he had been convicted of robbing post boxes even though in the first cases very large sums may have been illegally taken from millions of people and in the latter case perhaps only a Social Security check from a single individual.
The crimes of the lower socio-economic classes, however--most of them embalmed in the Federal Uniform Crime Reports-- do carry with them deep social stigmas, They are, in part owing to newspaper emphasis, socially disgraceful. They exclude one from respectable society and curtail one's civil privileges.
In the case of most crimes in the white collar area, too, the penalties are notably lighter than for crimes reportable to the police. Few of these crimes, even when they individually involve sums greatly exceeding all the burglaries and bank holdups in a year, call for prison sentences. Most call for nominal fines, and some require that the defendant merely not repeat the crime. In a few the action is broken off with the defendant signing a consent decree agreeing to terminate a lucrative course of illegal action.
There would be difficulty in imposing jail sentences or executions in many of these cases, because the defendants are usually corporations. While the courts have decreed in their wisdom that corporations are "persons" and are entitled to all the protections of persons, it is a fact that one can't jail or execute a corporation. And officers of a corporation, being quite different persons, cannot, it seems, justly be held responsible by a careful Congress for the acts of the corporation. Even where the acts of the corporation have netted millions in illicit gain, the fines prescribed by a benevolent Congress are trivial compared with the gains. It is true that the legislation establishing the Sherman Act and the Federal Trade Commission did provide for prosecution of officers of offending corporations; but such prosecutions have rarely been launched by business-minded public officials. And prosecutions under the Sherman Act are wholly at the discretion of the Attorney General. They are not mandatory, hence are subject to political juggling.
Corporate Crime
Sutherland centered his study on the behavior of corporations, the instruments of much steadily continuing crime. 34
He took the seventy largest nonfinancial corporations as given on two lists, that of Berle and Means in The Modern Corporation and Private Property (1933) and that of the Senate Temporary National Economic Committee (1938). He then excluded from these lists public utility corporations (he examined fifteen power and light companies separately) and the corporations in one other industry. Left with sixty-eight corporations, he added two that appeared on the list of 1938 and not on the list of 1929. It was a list representative of the cream of corporate society, the elite. 35
The average life of these corporations was forty-five years. Their criminal histories were traced through official records, which Sutherland names.
He found a total of 980 decisions against these corporations, with a maximum of 50 for one and an average per corporation of 14. 0. No fewer than 60 (or almost all) had decisions against them for restraining trade, 53 for infringements, 44 for unfair labor practices, 43 for a variety of offenses, 28 for misrepresentation in advertising and 26 for rebates. In all there were 307 adverse decisions on restraining trade, 97 on
misrepresentation, 222 on infringement, 158 on unfair labor practices, 66 on rebates and 130 on other cases.
One hundred and fifty-eight of these decisions were entered in criminal court, 296 were in civil court, 129 were in equity court, 361 were by commission order, 25 were by commission confiscation and 11 were by commission settlement.
Even if the analysis had been limited to explicit criminal jurisdiction, 60 per cent of the corporations (or 42), with an average of four convictions each, had experienced that particularly stigmatic jurisdiction. As Sutherland points out, in many states persons with four convictions are defined as habitual criminals or "repeaters. " Applying this concept to corporations, on the average at least 60 per cent of the leading corporations are habitual criminals.
Few cases initiated after 1944 are included in the Sutherland study, and the author warns that his work does not include all violations that have taken place because not all administrations were vigorous in enforcing the law and not all cases were systematically recorded. In general, there was lax enforcement under Republican Administrations-- only 40 per cent of the cases from 1900 to 1944 date from prior to 1934--and more alert enforcement under Democratic Administrations. The most serious attempts at enforcement occurred under the New Deal, although the bulk of the laws had been on the books for many decades. One gets some insight here into reasons for the pre- Johnsonian enthusiasm of the corporate world for the foot-dragging Republican Party as well as some understanding of the quid pro quo for heavy national campaign contributions.
Of these seventy corporations, Sutherland found, thirty were either illegitimate in origin or began illegal activities immediately thereafter. Eight others, he found, were "probably" illegal in origin or in beginning policies. The finding of original illegitimacy was made with respect to twenty-one corporations in formal court decisions, by "other historical evidence" in the other cases.
Sutherland does not attempt any estimate of the total loot (all depressing to the common living standard) produced by these and unadjudicated violations, But, as many violations continued for long periods of time, it must run into large sums that make the work of Mafias, Cosa Nostras, and spurious labor unions look like extremely petty operations. One cannot, of course, attribute the entire income of these corporations to criminal behavior although a part of net income was the consequence of criminal activity. In the case only of the twenty-nine that were born in crime--to which Balzac's phrase would certainly apply--could one attribute all the subsequent earnings to criminal behavior. But the total criminal haul, throwing a garish light on the maxim "Crime doesn't pay," ran into billions upon billions of dollars for these seventy corporations alone. Crime, carefully planned and executed, is demonstrably the royal highroad to pecuniary success in the United States.
Corporate crime is, indeed, crime in the grand manner. But it isn't part of the pattern of crime as presented by the newspapers. Why the newspapers aren't fully alert to this sort of wrongdoing apart from ineptitude, why they don't include it in the standard pattern of crime, is not difficult to decide. Nearly all the advertising revenues of the newspapers and mass magazines, as well as of radio and television stations and networks, come from these same corporations and their smaller counterparts. Although reporting individual large cases as they arise (not always prominently or fully) the newspapers have never despite recent sociological revelations ventured statistical summaries of the situation as they regularly do with lower-class, police-reported crimes--a marked case of class bias. Even the large individual cases are only reported
fully in a few leading metropolitan papers. They tend to be ignored by the many hundreds of others.
Not only are acts of commission unreported or diminished in significance, but those who commit these acts with the corporations as pliant tools are in their general modus operandi held up to public view as the cream and bulwark of society, the very pillars of the nation. Such a strange state of mind is inculcated in the public that a correct statement of the facts inevitably seems bizarre, overdrawn, tendentious and even perversely subversive.
The leading stockholders in these corporations--80 per cent of all stock being held by 1. 6 per cent of all adults--consist of the wealthiest property owners in the country. The leading company executives are the most highly paid group in the country, drawing remuneration astronomically exceeding that of skilled professional people. 36
Corporations as Ideal Delinquents
Sutherland compares the behavior of corporations and their officers with that of the professional thief, "the ideal delinquent, of which he made a special almost classical study. 37 Both are "repeaters," persistent operators; illegal behavior of both is more extensive than complaints and prosecutions show; neither loses status with associates but may instead be admired; each customarily orally expresses contempt for law, government and governmental personnel; and the crimes of both are not only deliberate but organized. They are, however, different in their self-conceptions. The professional thief recognizes himself as a criminal and is so regarded by the public; the corporate man thinks of himself as respectable and is generally so regarded by the public.
But white collar criminals often, as Sutherland points out, admit to being "law violators," a distinction without a substantial difference. Another difference is that the crime of the professional thief is plainly visible whereas the crime of the corporation is camouflaged, hard to detect. Corporate men, unlike professional thieves, rationalize their acts by semantic substitutions. Fraudulent representation is excused as merely puffing one's wares, and so on. Extravagant or insistent claims are called "the hard sell," conspiracy in restraint of trade is "a gentleman's agreement," price fixing is "stabilizing the market," monopolistic practices are suggested as laudatory evidence of "a hard competitor. " Yet both the professional thief and the corporation use aliases, the latter by forming subterfuge subsidiaries, dummy companies, inventing new brand names for the same product to escape new regulations or developing "fighting" brands. In public defense both employ "mouthpieces. " The professional thief usually has only a lawyer, but the corporation and the corporate man have lawyers, advertising agents and public relations counselors. These latter influence lawmaking and law enforcement as they relate to the corporation as well as defend the company in court and before the public. The object is the same in both cases: to get the client off scot free.
But although different from the professional thief in that it is directed by a group and thus invokes for itself the maximum of rationality, the corporation is similar, says Sutherland, in that it selects crimes risking the least danger of detection and identification and against which victims are least likely to struggle. It selects crimes that are difficult to prove and it engages in the wholesale "fixing" of cases. The corporations when they encounter officials they cannot "fix" have gone as high as the president of the United States to remove them. In general, says Sutherland, the "fixing" of white collar criminals is much more extensive than that of professional thieves. It is also much more costly, and he cites the case of the bribe of $750,000 by four insurance companies that sent Boss Pendergast of Missouri to jail, later to be pardoned by President Truman (who originally belonged to the Pendergast organization). It was almost ten years before the
insurance companies were convicted. Then they were only fined; no insurance executives went to jail.
There was, too, the case of Federal judge Martin Manton who was convicted of accepting a bribe of $250,000 from agents of the defendant when he presided over a case charging exorbitant salaries were improperly paid to officers of the American Tobacco Company. While the attorney for the company was disbarred from the federal courts, the assistant to the company president (who made the arrangements) was soon thereafter promoted to vice president: a good boy.
In the case of white collar crimes of corporations, if any individual is punished (usually none is) it is only one or a very few. The authorities do not dig pertinaciously with a view to ferreting out every last person who had anything to do with the case. But, as Sutherland points out, it is different with crimes of the lower classes. In kidnapping, for example, the FBI, in addition to seizing the kidnappers, flushes to the surface anyone who (1) rented them quarters to conceal the kidnapped person or to hide out in; (2) acted as unwitting agents for them in conveying messages or collecting ransom; (3) transported them; (4) in any way innocently gave them aid and assistance; or (5) was a witness to any of these separate acts. The government men do such a splendid job that almost everyone except the obstetricians who brought the various parties into the world are brought before the bar, where the aroused judge "breaks the book over their heads" in the course of sentencing. Sovereignty, it turns out after all, is not to be trifled with.
It may be argued that kidnapping, which resorts to violence, is a more serious crime than bribing a judge. With this I would disagree. Gravely serious though kidnapping is, its commission strikes directly at only a few, and in most cases involves comparatively small sums--even though they seem large to the ordinary man. But bribing a judge--and in the Manton case far more than any known kidnap ransom was at stake--strikes at a very broad public and, indeed, at the foundations of social institutions in general. It is subversive in the deepest and truest sense.
Emulatory Crime in the Ranks
What is of particular interest is the vast amount of emulatory crime white collar crime inspires among underlings, insiders and outsiders, much of this never reported to the police. Companies, as many reports since World War II show in Fortune, the Wall Street Journal and other business papers, are increasingly subject to constant depredations. Specialty, department and chain stores are subject to a continuous pressure of theft, which led one security officer to state his opinion publicly that 25 per cent of the public is absolutely honest and wouldn't steal under any circumstance, 25 per cent is systematically seeking opportunities to steal and 50 per cent is ready to steal at any time it feels certain of escaping detection.
There is a constant assault on the corporate fortress from the inside as well, by employees who steal from stockrooms and loading platforms and who gave in some cases organized truly gigantic withdrawals of goods. Embezzlement is rife. Only a few years ago some of the police in Chicago and Denver were found to be practicing old- fashioned burglary on a large scale as a supplement to low salaries.
If money is evidence of personal worth, then many persons are out to prove they are as worthy as anyone in Wall Street.
In eight and one-half concentrated pages Sutherland gives a synopsis of crime in the United States. 38 Fraud is extensive in the professions--legal, medical, clergical-- although he rates physicians and surgeons rather favorably on the whole. Bribery of officials, particularly by businesses selling goods to municipalities, counties and states, is common. But within private business itself corruption is internally quite common. He
reports: "Buyers for department stores, hotels, factories, railways, and almost all other concerns which make purchases on a large scale accept and sometimes demand gifts of money payments. " Again, "The police constantly break the laws. The laws of arrest are rigidly limited, but the police exercise their authority with little reference to these limitations and in violation of law. Hopkins refers to illegal arrests as kidnappings, and in this sense, the number of kidnappings by the police is thousands of times as great as the number of kidnappings by burglars and robbers. The courts, similarly, are not immune from criminal contagion, and this is true especially of the lower courts. "
'The United States, the plain unvarnished facts show, is a very criminal society, led in its criminality by its upper socio-economic classes. 39
Contemporary Big Business Crime
Has the ominous outlook altered since Sutherland terminated analysis as of 1944?
It has not changed in the slightest. In the two decades since 1945 the acts cited by Sutherland continued--in many cases with redoubled force; for the penalties imposed by law are obviously not of sufficient weight to deter. One can make large sums of money in business by breaking the law up to the point where one is ordered to stop or is indicted.
In the Federal Trade Commission alone, from January 1, 1945, through fiscal 1965 as given in annual reports, there were 3,991 cease-and-desist orders for violations by enterprises large and small. 40 The largest corporations were conspicuously represented, along with ambitious small fry. The specific violations were: false or misleading advertising, using a misleading trade or corporate name, using false or misleading endorsements, removing or concealing law-required markings, disparaging competitors' products, misrepresentation and deception, false invoicing, misbranding and mislabeling, deceptive pricing, failing to make material disclosures, offering deceptive inducements, obtaining information by subterfuge, using misleading product name or title, shipping for demand-payment goods not ordered, etc. , etc.
In the Food and Drug Administration, which administers the amended Food, Drug and Cosmetic Act of 1938, there were 5,208 criminal prosecutions from 1945 through 1961, an average of 306 per year. 41 Many of these were for distributing poisonous or contaminated products. Fines and jail sentences were usually meted out.
In its 26th annual report, the United States Securities and Exchange Commission, empowered to supervise the issuance, sale and resale of securities, reports that "From 1934, when the Commission was established, until June 30, 1960, 2,777 defendants have been indicted in the United States District Courts in 645 cases developed by the Commission, and 1,385 convictions obtained in 585 cases. The record of convictions obtained and upheld is over 85 per cent for the 26-year life of the Commission. " 42
"During the past fiscal year," says the 1960 report, "53 cases were referred to the Department of Justice for prosecution. This is the highest number of referrals in the past 18 years and the second highest in the Commission's history and is in line with the continuing increase in the number of referrals during the past several years. As a result of these and prior referrals, 43 indictments were returned against 289 defendants during the fiscal year. " 43
The Securities and Exchange Commission, of course, deals with thousands more cases each year in which it issues orders to discontinue illegal practices.
The National Labor Relations Board, which processed only a few more than 1,000 cases in 1936 and now processes more than 25,000 a year, enforces fair labor practices
as defined in the twice-amended National Labor Relations Act of 1935. Most of its rulings on appeal to the courts have been sustained.
Of 2,719 cases subjected to judicial review up to June 30, 1964, the orders of the NLRB were fully affirmed in 57 per cent of the cases and affirmed with modifications in 20 per cent. In only 18 per cent of the cases was the Board completely overruled. In appeals to the Supreme Court, the Board was affirmed in 63 per cent of the cases and affirmed with modifications in 8 per cent. The Supreme Court overruled the Board completely in 17 per cent of the cases. 44
This Board, a quasi-judicial tribunal similar to the Federal Trade Commission, the Securities and Exchange Commission and the Food and Drug Administration, issues injunctions and supervises violators and, according to the National Labor Relations Act, "Any person who shall willfully resist, prevent, impede, or interfere with any member of the Board or any of its agents or agencies in the performance of duties pursuant to this act shall be punished by a fine of not more than $5,000 or by imprisonment for not more than one year or both. " Complaints under this criminal statute are brought by individuals and unions against employers and by employers against unions. 45
Business or white collar crimes are usually thought of as nonviolent, thus placing the culprits in public opinion at least a peg above such unorthodox businessmen as Frank Nitti, Tony Accardo and Frank Costello. But this differentiation is clearly false, as is shown in many cases of record before the National Labor Relations Board. A recent pattern, as brought to light by the McClellan Committee, is for Company X to hire "labor relations adviser" A who in turn enrolls certified thugs T1, T2, and T3, to beat up, bribe, drive away or destroy labor organizer L.
Up to 1945, according to Sutherland, labor relations decisions had been made against 43 of the 70 large corporations, or 60 per cent, with 149 decisions in all. All 43 were "repeaters": 39 used interference, restraint and coercion; 33 discriminated against union members; 34 organized company unions; 13 used labor spies; and 5 used violence. Such violence was largely confined to the steel and automobile industries.
The late Henry Ford was quoted as saying in 1937: "We'll never recognize the United Automobile Workers Union or any other union. " The Ford Motor Company had long maintained a service department under Harry Bennett, a former pugilist, staffed with 600 men equipped with guns and blackjacks. With reference to this service department Frank Murphy, then governor of Michigan, said: "Henry Ford employs some of the worst gangsters in our city.
According to undisputed testimony before the NLRB, in 1937 the United Automobile Workers Union started to organize employees at Ford's River Rouge plant. It was announced that Organizers would distribute literature outside the plant at a specified time, and reporters and photographers were present in force. Said a guard to a reporter: "We are going to throw them to hell out of here. " Upon arrival the organizers went up an overhead ramp to one of the entrances, where they were told they were trespassing. Witnesses said they turned and started away. As they left they were assaulted by service department guards--beaten, knocked down and kicked. Witnesses testified that it was a "terrific beating" and "unbelievably brutal. " Among those severely beaten were Walter Reuther and Richard Frankensteen, officials of the United Automobile Workers Union.
The guards followed out into the street. One man's skull was fractured, another's back broken. Cameras of photographers were seized by guards and the films destroyed. Two reporters were chased by automobile at eighty miles an hour through Detroit streets until they reached the sanctuary of a police station. Later when women organizers attempted to distribute literature outside the plant they were attacked by guards,
knocked down and beaten. City policemen who were present during these events stood by and did not interfere--testimony to the local power of Henry Ford. 46
From fiscal years 1959 through 1965, inclusive, the Antitrust Division of the Department of Justice won 147 formally designated criminal cases against companies and lost 24. It won 206 civil cases and lost 9. 47
Other disciplinary bodies to which one should turn for a more complete picture of such business violations as are judicially decided are the Federal Communications Commission, the Civil Aeronautics Authority, Federal Aviation Agency, Federal Power Commission and the Interstate Commerce Commission.
There is no federal agency that compiles, correlates and makes public the statistics on corporate crimes as the FBI does with diverse police-reported crimes in the Federal Uniform Crime Reports. If there were, there would be shown a much larger volume of corporate crime than reported here. It is well recognized by experts that the enforcement of laws against corporate crimes is at best of a sporadic token character carried on by understaffed and underfinanced agencies.
The Federal Uniform Crime Reports serve a purpose beyond merely informing the public of the incidence of crime, which they do only very lopsidedly and exaggeratedly for these particular crimes. The Reports have the intent, as evidenced in many public expressions by J. Edgar Hoover, the redoubtable G-man, of encouraging greater public support for more repressive police measures and stiffer penalties (against errant members of the lower socio-economic classes, who generally commit these direct- action crimes). Some future reader may assess the sagacity of this writer when he says that after this disparity in reporting lower-class and upper-class crimes has been sharply pointed out there will be no change: No federal agency will make a comprehensive annual statistical report on corporate crimes as such, although Washington is literally crawling with expert statisticians who could whip the figures together in a trice. Nor will the penalties for corporate crimes likely be increased to the point where they realistically deter. The offenders will continue to be treated as though they were somewhat crotchety but beloved maiden aunts who have been inexplicably naughty.
The Great Electrical Industry Conspiracy
While the bulk of the cases cited have involved the uncamouflaged criminal jurisdiction, with the judges properly accoutered with everything except the black cap, there have been many recent thumping reminders that carefully planned crime is an inseparable companion of big business. Three cases involved whole basic industries: the electrical, aluminum and steel industries. None of the protagonists was sponsored by the Mafia. They clearly prove that "the bad old days," thought to be conquered by the New Deal, are still with us.
The Great Electrical Industry Case came to a climax in 1961. It involved forty-five individual blue-ribbon defendants and twenty-nine corporations, including ultra-ultra General Electric Company and Westinghouse Electric Corporation, which together lovingly shared more than 75 per cent of the market. As Fortune remarked, it was the "biggest criminal case in the history of the Sherman Act. "
United States District Judge J. Cullen Ganey heard the case in Philadelphia. The prosecution was by the attorney general of the United States, in full panoply. It was crime, crime, crime all the way, front and back, up and down, back and forth. This needs to be emphasized because Fred F. Loock, president of Allen-Bradley Company, one of the defendants, said: "It is the only way a business can be run. It is free enterprise. "
The charge was specifically the dark one of conspiracy--in this case to fix prices, rig bids and divide markets in a series of secret cartels on electrical equipment valued at 81. 75 billion annually. The leading defendants pleaded guilty to the most serious counts, no contest to the rest. The conspiracies extended over many years, going back prior to World War II and in the opinion of some observers to 1896. Surprisingly, this conspiracy was carried on with all the guilt-conscious cloak-and-dagger techniques known to spies: secret codes, mysterious meetings in hotel rooms, queer notes, guarded telephone calls, concealed records, fictitious names, burned memoranda and the like. No patron of TV or the films, watching the actors, could have failed to recognize that an authentic, vintage conspiracy was afoot. Only sinister music was lacking.
Although operating departmental executives stood in the dock and the top managements of GE and Westinghouse virtuously disclaimed knowledge of the whole affair, Judge Ganey felicitously remarked before sentencing: "One would be most naive indeed to believe that these violations of the law, so long persisted in, affecting so large a segment of the industry and finally involving so many millions upon millions of dollars, were facts unknown to those responsible for the corporation and its conduct. . . . I am not naive enough to believe General Electric didn't know about it and it didn't meet their hearty approbation. " But although the government had gathered monumental evidence it had not been able to connect the very top executives directly to the conspiracy in ways required by law.
Judge Ganey imposed total fines of $1,924,500. General Electric was fined $437,500 and Westinghouse $372,500. Damages of $7,470,000 were also assessed. Upon twenty- four individuals in the case jail sentences were imposed--and suspended owing to their advanced ages. William S. Ginn, vice president of General Electric, was given thirty days in jail and fined $12,500. Six other company officers drew fines of $1,000 to $4,000 and thirty days in jail. And it was the unusualness of sentencing these high- salaried company men to thirty days in jail, the usual police-court sentence for disorderly conduct, that attracted special attention. Corporation executives are rarely sent to jail even for brief sojourns. Indeed, they are far more immune to jail terms than high Russian Communist Party officials.
The Great Electrical Industry Conspiracy emerged in a curious way. The Tennessee Valley Authority one day in the 1950's received identical sealed bids from various suppliers of heavy electrical equipment. The fact came to the attention of Senator Estes Kefauver, who threatened to start his own investigation if the Eisenhower Administration did not act. The Department of justice was alerted and began looking into the case, but at first found it difficult to pick up the threads of wrong-doing. It decided to subpoena various records of the companies and finally obtained an account of conspiracy from the official of a small company. His story implicated General Electric.
Queries to General Electric provoked an internal inquiry by top management, which was truthfully informed by some of the operating vice presidents of what went on. Top management professed to be shocked, put pressures on the men and eventually forced all to resign or fired them. This strong line by GE sent angry insiders and their lawyers scurrying to the government with their stories, and the net of evidence wove itself more tightly. In the other companies men were not removed.
General Electric had for many years had a policy formally calling for strict compliance with the antitrust laws. This policy was implemented by written orders conspicuously sent from time to time to operating executives. Nevertheless, General Electric was an old offender, in the 1940's alone being snared in thirteen antitrust cases.
The convicted executives maintained that they had simply inherited procedures carried on by predecessors and were acting under direct orders from higher ups. One of the men knew that he held his job "under risk" for two years unless he increased profits. There was evidence of men who had held some of the same positions earlier, who had refused to, enter into collusive arrangements with competitors and who had lost their jobs. Top officials denied everything. Judge Ganey clearly did not believe them.
Policy for General Electric was set by Chairman Ralph Cordiner, who, president since 1950, became chairman in 1958; his predecessor, Charles E. Wilson, had left to become chief of national defense mobilization. While Cordiner has been criticized for rudely dumping his men for doing what everybody did in this and in other industries (illegal price-fixing is standard business practice) his theoretical position was much sounder than that of others. Cordiner was an avowed devotee of competition, and public policy avowedly requires competition. There is, however, little competition in the American economy. But if this fact were to be formally admitted or authoritatively asserted the way would be paved for sweeping changes costly to big proprietors.
General Electric in sacrificing its men as it did acted in the style of governments who, having found some diplomat or espionage agent embarrassing, simply disavow him. (Most of these men, happily, were later hired by other companies, some at advanced levels. )
Origins of Anti-Monopoly Doctrine
The anti-monopoly doctrine was originally developed by individual business people in Europe who struggled against Crown monopolies in late medieval times. The earliest reported case in England was Darcy v. Allen in 1602 (11 Coke 84). In 1623 Parliament passed the Statute of Monopolies, abolishing nearly all existing monopolies as unlawful (St. 21 James 1, c. III). Englishmen from early times were always opposed to voluntary self-restraints of tradesmen by contract, and English courts refused to uphold such agreements (William Howard Taft, J. , Addyston Pipe case, 85 Fed. 271). The "business revolutions" of 1688 in England and 1789 in France were in part directed against such monopolies. Trade was to be free and open; and the public, in return for granting the trading privilege, would benefit from the resultant low prices wrought by competition. This, too, was the American idea.
In time, particularly in the United States, small businesses grew into large quasi- sovereign businesses and the large businesses found they had become (usually through illegal behavior) large monopolies such as the Aluminum Company, the Standard Oil Trust and many others. Broken up by government action or evolving in separate units, the various industries found in time that two to five or six companies did 75 to 90 per cent of the business and many small companies--tokens of competition--the remainder. This pattern is what economists call oligopoly or rule by a few. Prices are usually set by one company, the "price leader," and others follow the leader. When the few tacitly agree so to "follow the leader," as they usually do, there is in effect a general subtly maintained monopoly.
But if monopolies are indeed tolerated in the American system, if enterprises are not competing so that buyers get the lowest possible prices, what is the constitutional warrant? How does the situation constitute equal protection under the law? There is, in fact, no constitutional warrant. Monopoly is fundamentally illegal, with or without the Sherman Act, which refers to it as a "high misdemeanor. " Why should a select few have the public market as a private plaything?
But, having broken up the electrical and various other clearly proved monopolies, can we not say that the government is keeping the market open to free competition? While many would so argue, concentration and monopoly grow steadily. In view of the steady
denunciations, official and unofficial, and of specific laws against monopoly, how can this be?
Issues and Solutions
The mystery, if such it ever was, is neatly dispelled by judge Thurman Arnold in his The Folklore of Capitalism. Arnold was from 1938 to 1943 in charge of the antitrust division of the Department of Justice, and knew whereof he spoke. The operative function of the Sherman Act, Arnold holds, is to make possible from time to time ceremonial observances of the American belief in competition. These ceremonial observances take the form of criminal prosecutions, so that a concerned fraction of the public may believe the competitive situation is being defended. Meanwhile concentration and monopoly advance in rapid strides from decade to decade as in Europe. Those convicted do not alter their behavior.
And now we come to the basic issue, which the General Electric upper moguls perhaps had in mind in talking and acting as virtuously as they did for the record. If these industries are indeed monopolies that continually strengthen their position and do not give the public the advantages of competition, then they should be subject to regulation at least as strict as that accorded the public utilities in their "natural" monopolies. But it is just this sort of cartel regulation that the corporations fear. They would particularly abhor effective regulation even with stabilized prices. For at what level would the prices be set? At the other extreme from regulation there would be outright government ownership, with profits beyond the recovery of costs going, a la Russe, into the general government operating fund.
No accepted politician in the United States takes either of these positions. All profess themselves in favor of the present situation, which implies only that they fundamentally line up with the big proprietors who find the present situation precisely to their taste: monopoly with ceremonial overtones of pseudo-competition.
A third course might be to break some of the big companies into their constituent parts. General Electric under Cordiner, for example, was found to be organized into twenty-seven autonomous divisions consisting of 110 small companies. Each of these latter was run as if it were a single enterprise, with the boss of each making up his own budget. But there was constant pressure from the top executive suite on the boss of each unit for greater profitability.
This particular course of action, too, would be distasteful to the big companies, most of which are cannibalistic agglomerations, although their physical productivity would not be adversely affected by it. Indeed, it might be enhanced. One consequence of such action would be to produce more top executive jobs, which should be of interest to ambitious middle-class people.
The behavior of corporate man shows that he entertains certain unconscious beliefs, which he never expresses: that it is "his" market, filled with vassals in the form of "his" customers and "his" employees, and that government officials are "his" officials. While in legal theory the corporation exists to serve society, in the unconscious and correct belief of corporate man, society and government operationally now exist to serve the corporationthe be-all and end-all of everything.
In the electrical industry both the men and the companies came in for somewhat rougher treatment than is usually the case. As heavy equipment was involved, the companies were deluged by lawsuits from public utility companies, municipalities and government agencies. In 1965 a judgment was turned in against GE, Westinghouse and some others for $16,863,203 on behalf of a group of midwestern power and light companies. In all, 1,912 civil antitrust suits were filed against the companies, costing
GE a reported $225 million, Westinghouse about $110 million and Allis-Chalmers $45 million. Most were settled out of court for undisclosed sums but, all in all, the moneys involved were considerable even if they came short of erasing illegal profits.
The Prevalence of Price-Fixing
Has price-fixing been terminated by the electrical industry case? The reader can supply the answer for himself by checking competing products in his various stores. Somehow they are all priced about the same--soap, sugar, milk, salt, cereals, automobiles, appliances, cigarettes, etc. By regions the same grades of gasoline have the same prices under various brand names, except for an occasional "price war. " But a "price war," which is ordinary competition for business, is rare, as everyone knows. Established business considers price wars pathological and will do anything to avoid them. For while business believes in free enterprise--freedom to do whatever it desires-- it abhors free competition, whatever it may say to the contrary. The government for its part, while condemning price-fixing, itself supports agricultural prices.
T. K. Quinn, a former vice president of General Electric, has recorded his belief that a third of the American economy--automobiles, steel, cigarettes, cement, oil products, chemicals, roofing material and machinery--is price-stabilized through agreements of the leading companies. But corporation men, precisely like members of the underworld, have their own peculiar definitions for every situation. Thus, Roger Blough, president of United States Steel, has said "a price that matches another price is a competitive price," with which doctrine few nonbusiness people would agree. If every baseball game ended in a tie most fans would begin to suspect that the outcome was "fixed. "
Westinghouse stockholders, when called upon to pass on the conduct of their management, voted overwhelmingly to endorse it. General Electric stockholders simply shouted down any attempt to question the management and approved it by 98 per cent.
Yet this elaborate charade about monopoly, in which many people (including the judge in the case) seriously believe, is played at a price: The big companies, backbone of the American economic system, are formally stigmatized as criminals.
In this respect General Electric (along with many other companies) is what Professor Sutherland calls a "repeater. " Attorney General Robert Kennedy in what was perhaps a grandstand flourish after the trial suggested that an injunction he brought against General Electric, which had twenty-nine adjudicated convictions on its record, to keep it from repeating its conduct under the threat of more severe penalties; this was much as though a lawbreaking ex-convict should be enjoined from breaking the law. To implement this directive the Justice Department in December, 1961, sought a court order to make General Electric subject to unlimited fines if it ever again violated any requirement of the antitrust laws. In support of its action the Justice Department cited 39 antitrust actions against GE, 36 filed since 1941, including here the 29 convictions as well as seven consent decrees and three "adverse findings" by the Federal Trade Commission. Such a record, the Justice Department said, revealed "General Electric's proclivity for persistent and frequent involvement in antitrust violations" in all branches of production. The record of Westinghouse was hardly less immodest. 48
"Has the industry learned any lessons? " asked Fortune. "'One thing I've learned out of all this,' said one executive, 'is to talk to only one other person, not to go to meetings where there are lots of other people. ' Many of the defendants . . . looked on themselves as the fall guys of U. S. business. They protested that they should no more be held up to blame than many another business man, for conspiracy is just as much 'a way of life' in other fields as it was in electrical equipment. 'Why pick on us? ' was the attitude. 'Look at some of those other fellows. '"
In so saying these men showed they did not understand the ceremonial uses of sacrifice. The high Indian civilizations of South and Central America had the custom each year of sacrificing to the gods, by burning or other violence, the most beautiful maidens of the city. By destroying what was manifestly so desirable, the men of the nation showed piety. By stigmatizing with criminal convictions these high-salaried executives, paragons of the mass media, the United States similarly testified to its pious belief in competition even as competition approaches the vanishing point.
As an immediate aftermath to the case, President Robert Paxton of General Electric at the age of fifty-nine, with six years still to go before his compulsory retirement, resigned "because of ill health. " 49
Of a pending series of seven criminal indictments of the steel industry, in the summer of 1965 the companies were first found guilty in two highly significant decisions.
In the first case eight companies were found guilty in federal court of conspiracy to fix prices on carbon sheet steel, which makes up an annual market of $3. 6 billion--far larger than the electrical industry haul--and enters into a wide range of consumer products from automobile bodies and kitchen cabinets to refrigerators, washing machines and office furniture. The companies were fined $50,000 each, the maximum under the applicable section of the law; and sentencing of two principal officers was deferred.
The guilty companies composed most of the steel industry--the United States Steel Corporation, the Bethlehem Steel Company, the National Steel Corporation, the Great Lakes Steel Corporation, the Jones and Laughlin Steel Corporation, the Armco Steel Corporation, the Republic Steel Corporation and the Wheeling Steel Corporation. Named as co-conspirators in the indictment but not as defendants were the Youngstown Sheet and Tube Company, the Granite City Steel Company and the Pittsburgh Steel Company. The companies had felt emboldened to commit the sinister offenses complained of between 1955 and 1961, when a Republican Administration had briefly returned to power.
A curious comment at the time the indictments were handed up was made by Edmund F. Martin, vice chairman of Bethlehem Steel: "Even assuming that the matters charged were true, the Department of Justice is seeking not to correct any illegal or improper present-day situation, but only to harass the industry for practices which, even under the allegations of the indictment, have been abandoned. " This is much as though a man charged with a three-year-old burglary were to claim that authorities were not dealing with current crime but were harassing him, since he had been "going straight" ever since. 50
A few days later another federal judge fined four leading makers of steel forgings and a steel trade association a total of $150,000 after finding them criminally guilty of price fixing and bid rigging in the sale of open die steel forgings to the Army and Navy as well as to private companies from 1948 to 1961, an interval that embraced the Korean War. Bethlehem Steel, second in the industry, was fined $40,000; United States Steel, $35,000; the Midvale-Heppenstall Company of Philadelphia, $35,000; the Erie Forge and Steel Corporation, $25,000; and the Open Die Forging Institute, Inc. , $15,000. The defendants did an estimated $100-million business a year in this line.
While ship shafts for the Navy and cannon for the Army were involved in the forgings, an interesting sidelight was that the defendants were found to have illegally set identical prices for rotors and generator shafts sold to General Electric, Westinghouse and Allis-Chalmers, the top defendants in The Great Electrical Industry Conspiracy. The difference in the size of fines in the steel and electrical cases stemmed from the number of indictments on each charge. The Sherman Act as amended permits a
maximum fine of $50,000 on each charge. In the electrical case there were twenty charges in all, although every company did not fall under each charge.
Asked by the Times whether they intended to start civil suits for treble damages against the steel companies, General Electric said nothing had been decided and Allis- Chalmers said it had no comment; but Westinghouse valiantly reported: "So far as we know, we have received full value for our purchase of steel which we believe to have been made at competitive prices. "
In this case five executives of the companies were fined an aggregate of $44,000 on October 25, 1962, on the same criminal indictment, which they did not contest. 51
The fines in these cases, in relation to the amount of illegal business done, were obviously of the order of a $5 slap on the wrist for grand larceny.
The number of big recent cases-in oil, asphalt, milk, steel, electrical goods and the like--is too great to detail here. No fewer than ninety-two antitrust suits, a record, were begun in 1960 under the Republicans, although enforcement actually eased off sharply under President Kennedy and came to a virtual halt under President Johnson. 52 The Johnson Administration has practically given Big Business the green light on mergers and regulation in general, in return for which the presidential Business Advisory Council, composed of about 100 chairmen and presidents of the biggest corporations, appears to have given its full endorsement of Mr. Johnson's personally engineered disastrous Vietnam war. 53
In these upper reaches of power everything is strictly on a quid pro quo basis. The New Higher Politics
Let us look at all this lawbreaking from another point of view. Perhaps the statutes are somehow misbegotten, as many corporation heads freely assert, even though they are simple expressions of the common law upon which the entire Anglo-American legal system rests. But possibly this legal system, too, is misbegotten and should be scrapped or radically overhauled.
In his devotional biography of John D. Rockefeller I, Professor Allan Nevins, the Columbia historian, suggests that the common view of Rockefeller as the epitome of ruthless Pecuniary Man, freely breaking the law in quest of profits in any and every accessible field, is entirely mistaken. Professor Nevins in his summation (which may be taken as applying just as well to any industrial tycoon) indirectly suggests that Rockefeller is representative in his way of Political Man--that is, a person planning and providing for the entire community even if in ways not readily understood by lesser mortals. This is evident, for example, when Professor Nevins says: "Behind this organizing genius, which has analogies with Richelieu's or Bismarck's, lay a combination of traits not less interesting because of their simplicity, conspicuity, and harmony. " And Rockefeller's single-mindedness, says Professor Nevins, "reminds us of Cecil Rhodes. " 54 In brief, Rockefeller reminds Nevins of commanding political leaders.
Had Professor Nevins chosen for comparison political personalities from nearer home, readers might more readily have detected the untenability of offering Rockefeller as an example of Political Man, acting according to some conception of the general welfare of society rather than milking society for personal gain through the most effective monopoly of all time. Rockefeller in his heyday in fact stood adverse to the common interest and this was formally found to be so by United States courts.
Professor Nevins has generalized beyond Rockefeller: "The architects of our material progress [if such they ever were--F. L. ]--the men like Whitney, McCormick, Westinghouse, Rockefeller, Carnegie, Hill and Ford--will yet stand forth in their true
stature as builders [if indeed they ever were--F. L. ] of a strength which civilization found indispensable. "
In this connection Professor Nevins went on to contend grotesquely that these and other men like them "saved the world" in World War I and later helped the world meet "a succession of world crises. " He thereupon called for a revision of history, at which historians so far look with deep reserve, to give these unjustly evaluated men their proper due as builders and saviors of civilization.
mostly by the propertied and wealthy in the course of managing their property include embezzlement; most big fraud; restraint of trade; misrepresentation in advertising and in the sale of securities; infringements of patents, trademarks and copyrights; industrial espionage; illegal labor practices; violations of war regulations; violation of trust; secret rebates and kickbacks; commercial and political bribery; wash sales; misleading balance sheets; false claims; dilution of products; prohibited forms of monopoly; income-tax falsification; adulteration of food and drugs; padding of expense accounts; use of substandard materials; rigging markets; price-fixing; mislabeling; false weights and measurements; internal corporate manipulation, etc. , etc. Except for tax fraud the ordinary man is never in a position to commit these crimes.
A distinction between most white collar crime and most ordinary crime is that the white collar criminal does not usually make use of violence; he depends chiefly on stealth, deceit or conspiracy. In the case of illegal labor practices, however, he does often through agents employ violence leading to death of workers. And there may be violent, even fatal, reactions to some of its nonviolent forms, such as the consequence of adulteration or improper preparation of foods and drugs.
The "white collar criminals, however, are by far the most dangerous to society of any type of criminals from the point of view of effects on private property and social institutions. " 29 For their predations gradually tend to undermine public morale and spread social disorganization. 30 Large-scale stock swindles, bank manipulations and
food and drug adulteration administer particularly convulsive shocks to broad segments of the populace. The volume of total violations, much of it officially unchallenged, leads to a spreading mood of public cynicism and more and more rank-and-file lawbreaking. It is finally echoed in the statement: "There's one law for the rich and another law for the poor. " Government itself stands impugned. The stage is set for anarchy, sometimes emerging in riots.
An equally grave consequence, which Sutherland does not notice but upon which I shall later touch, is that the attempt to gloss over, conceal, minimize and apologize for white collar crime in general and in specific cases trammels the channels of public communication, undermines the terms of public debate and clouds the critical faculties even of many scholars.
The laws relating to white collar crime, as Sutherland remarks, tend to "conceal the
criminality of the behavior" and thus do not reinforce the public mores as do other laws. 31
Sutherland surveyed the laws and took note of those instances in which white collar crime is explicitly stated to be crime and those where it is only implicitly indicated. White collar crimes are committed by individuals and by corporations, mostly the latter as the transmission mechanisms of widespread illegal planning. They are committed against a small number of persons in a particular occupation or against the general public; it is rarely a case of individual versus individual. Individuals only commit such white collar crimes as embezzlement and fraud, and when they do they come under statutes clearly labeled criminal.
But there are many newer statutes, developed incident to the emergence of machine technology and the modern corporation.
There are, first, the antitrust laws--the Sherman Act, the amendment thereto establishing the Federal Trade Commission, the Clayton Act and other amendments. The Sherman Act is explicitly stated to be criminal law, and various of its amendments explicitly define violations as crimes. The amendments are largely under the jurisdiction of the Federal Trade Commission, which may issue cease-and-desist orders or enter into stipulations for the termination of some behavior. If a stipulation is violated there may be issued a cease-and-desist order, and if this is violated there may be issued a court injunction, the violation of which is punishable as contempt of court, provided for in the original Act. If the interim procedures (similar to probation in the ordinary courts) are not effective, fines and imprisonment may be imposed for contempt. An unlawful act, as Sutherland remarks, is not legally defined as criminal by the fact that it is punished but by the fact that it is punishable. It follows from these and other considerations that "all the decisions made under the amendments to the antitrust law are decisions that the corporations committed crimes. " 32
Laws against false advertising, designed to protect competitors and consumers, and the National Labor Relations Law, designed to protect employees against coercion and the public from interference with commerce, are adaptations of the common law to modern conditions. Laws against false advertising relate to common-law fraud. There are, too, laws against infringement of patents, which relate to the common-law prohibitions of restrictions on freedom in the form of assault, false imprisonment and extortion. Prior to the enactment of these and other laws the basic common law already expressed itself against restraint of trade, monopoly and unfair competition.
False labeling, a variant of false advertising, is defined as crime in the Pure Food and Drug Act. False advertising in the Federal Trade Commission Act is defined as unfair competition, and comes under the same criminal procedure as its other violations. It is fraud.
As to the National Labor Relations Act, "all of the decisions under this law, which is enforceable by penal sanctions, are decisions that crimes were committed. " 33
Most white collar criminal statutes are relatively nonstigmatic--that is, they don't arouse an automatic reaction of reprehension in the broad public. That someone has been convicted of using the mails to defraud, or has restrained trade, does not sound as heinous as if he had been convicted of robbing post boxes even though in the first cases very large sums may have been illegally taken from millions of people and in the latter case perhaps only a Social Security check from a single individual.
The crimes of the lower socio-economic classes, however--most of them embalmed in the Federal Uniform Crime Reports-- do carry with them deep social stigmas, They are, in part owing to newspaper emphasis, socially disgraceful. They exclude one from respectable society and curtail one's civil privileges.
In the case of most crimes in the white collar area, too, the penalties are notably lighter than for crimes reportable to the police. Few of these crimes, even when they individually involve sums greatly exceeding all the burglaries and bank holdups in a year, call for prison sentences. Most call for nominal fines, and some require that the defendant merely not repeat the crime. In a few the action is broken off with the defendant signing a consent decree agreeing to terminate a lucrative course of illegal action.
There would be difficulty in imposing jail sentences or executions in many of these cases, because the defendants are usually corporations. While the courts have decreed in their wisdom that corporations are "persons" and are entitled to all the protections of persons, it is a fact that one can't jail or execute a corporation. And officers of a corporation, being quite different persons, cannot, it seems, justly be held responsible by a careful Congress for the acts of the corporation. Even where the acts of the corporation have netted millions in illicit gain, the fines prescribed by a benevolent Congress are trivial compared with the gains. It is true that the legislation establishing the Sherman Act and the Federal Trade Commission did provide for prosecution of officers of offending corporations; but such prosecutions have rarely been launched by business-minded public officials. And prosecutions under the Sherman Act are wholly at the discretion of the Attorney General. They are not mandatory, hence are subject to political juggling.
Corporate Crime
Sutherland centered his study on the behavior of corporations, the instruments of much steadily continuing crime. 34
He took the seventy largest nonfinancial corporations as given on two lists, that of Berle and Means in The Modern Corporation and Private Property (1933) and that of the Senate Temporary National Economic Committee (1938). He then excluded from these lists public utility corporations (he examined fifteen power and light companies separately) and the corporations in one other industry. Left with sixty-eight corporations, he added two that appeared on the list of 1938 and not on the list of 1929. It was a list representative of the cream of corporate society, the elite. 35
The average life of these corporations was forty-five years. Their criminal histories were traced through official records, which Sutherland names.
He found a total of 980 decisions against these corporations, with a maximum of 50 for one and an average per corporation of 14. 0. No fewer than 60 (or almost all) had decisions against them for restraining trade, 53 for infringements, 44 for unfair labor practices, 43 for a variety of offenses, 28 for misrepresentation in advertising and 26 for rebates. In all there were 307 adverse decisions on restraining trade, 97 on
misrepresentation, 222 on infringement, 158 on unfair labor practices, 66 on rebates and 130 on other cases.
One hundred and fifty-eight of these decisions were entered in criminal court, 296 were in civil court, 129 were in equity court, 361 were by commission order, 25 were by commission confiscation and 11 were by commission settlement.
Even if the analysis had been limited to explicit criminal jurisdiction, 60 per cent of the corporations (or 42), with an average of four convictions each, had experienced that particularly stigmatic jurisdiction. As Sutherland points out, in many states persons with four convictions are defined as habitual criminals or "repeaters. " Applying this concept to corporations, on the average at least 60 per cent of the leading corporations are habitual criminals.
Few cases initiated after 1944 are included in the Sutherland study, and the author warns that his work does not include all violations that have taken place because not all administrations were vigorous in enforcing the law and not all cases were systematically recorded. In general, there was lax enforcement under Republican Administrations-- only 40 per cent of the cases from 1900 to 1944 date from prior to 1934--and more alert enforcement under Democratic Administrations. The most serious attempts at enforcement occurred under the New Deal, although the bulk of the laws had been on the books for many decades. One gets some insight here into reasons for the pre- Johnsonian enthusiasm of the corporate world for the foot-dragging Republican Party as well as some understanding of the quid pro quo for heavy national campaign contributions.
Of these seventy corporations, Sutherland found, thirty were either illegitimate in origin or began illegal activities immediately thereafter. Eight others, he found, were "probably" illegal in origin or in beginning policies. The finding of original illegitimacy was made with respect to twenty-one corporations in formal court decisions, by "other historical evidence" in the other cases.
Sutherland does not attempt any estimate of the total loot (all depressing to the common living standard) produced by these and unadjudicated violations, But, as many violations continued for long periods of time, it must run into large sums that make the work of Mafias, Cosa Nostras, and spurious labor unions look like extremely petty operations. One cannot, of course, attribute the entire income of these corporations to criminal behavior although a part of net income was the consequence of criminal activity. In the case only of the twenty-nine that were born in crime--to which Balzac's phrase would certainly apply--could one attribute all the subsequent earnings to criminal behavior. But the total criminal haul, throwing a garish light on the maxim "Crime doesn't pay," ran into billions upon billions of dollars for these seventy corporations alone. Crime, carefully planned and executed, is demonstrably the royal highroad to pecuniary success in the United States.
Corporate crime is, indeed, crime in the grand manner. But it isn't part of the pattern of crime as presented by the newspapers. Why the newspapers aren't fully alert to this sort of wrongdoing apart from ineptitude, why they don't include it in the standard pattern of crime, is not difficult to decide. Nearly all the advertising revenues of the newspapers and mass magazines, as well as of radio and television stations and networks, come from these same corporations and their smaller counterparts. Although reporting individual large cases as they arise (not always prominently or fully) the newspapers have never despite recent sociological revelations ventured statistical summaries of the situation as they regularly do with lower-class, police-reported crimes--a marked case of class bias. Even the large individual cases are only reported
fully in a few leading metropolitan papers. They tend to be ignored by the many hundreds of others.
Not only are acts of commission unreported or diminished in significance, but those who commit these acts with the corporations as pliant tools are in their general modus operandi held up to public view as the cream and bulwark of society, the very pillars of the nation. Such a strange state of mind is inculcated in the public that a correct statement of the facts inevitably seems bizarre, overdrawn, tendentious and even perversely subversive.
The leading stockholders in these corporations--80 per cent of all stock being held by 1. 6 per cent of all adults--consist of the wealthiest property owners in the country. The leading company executives are the most highly paid group in the country, drawing remuneration astronomically exceeding that of skilled professional people. 36
Corporations as Ideal Delinquents
Sutherland compares the behavior of corporations and their officers with that of the professional thief, "the ideal delinquent, of which he made a special almost classical study. 37 Both are "repeaters," persistent operators; illegal behavior of both is more extensive than complaints and prosecutions show; neither loses status with associates but may instead be admired; each customarily orally expresses contempt for law, government and governmental personnel; and the crimes of both are not only deliberate but organized. They are, however, different in their self-conceptions. The professional thief recognizes himself as a criminal and is so regarded by the public; the corporate man thinks of himself as respectable and is generally so regarded by the public.
But white collar criminals often, as Sutherland points out, admit to being "law violators," a distinction without a substantial difference. Another difference is that the crime of the professional thief is plainly visible whereas the crime of the corporation is camouflaged, hard to detect. Corporate men, unlike professional thieves, rationalize their acts by semantic substitutions. Fraudulent representation is excused as merely puffing one's wares, and so on. Extravagant or insistent claims are called "the hard sell," conspiracy in restraint of trade is "a gentleman's agreement," price fixing is "stabilizing the market," monopolistic practices are suggested as laudatory evidence of "a hard competitor. " Yet both the professional thief and the corporation use aliases, the latter by forming subterfuge subsidiaries, dummy companies, inventing new brand names for the same product to escape new regulations or developing "fighting" brands. In public defense both employ "mouthpieces. " The professional thief usually has only a lawyer, but the corporation and the corporate man have lawyers, advertising agents and public relations counselors. These latter influence lawmaking and law enforcement as they relate to the corporation as well as defend the company in court and before the public. The object is the same in both cases: to get the client off scot free.
But although different from the professional thief in that it is directed by a group and thus invokes for itself the maximum of rationality, the corporation is similar, says Sutherland, in that it selects crimes risking the least danger of detection and identification and against which victims are least likely to struggle. It selects crimes that are difficult to prove and it engages in the wholesale "fixing" of cases. The corporations when they encounter officials they cannot "fix" have gone as high as the president of the United States to remove them. In general, says Sutherland, the "fixing" of white collar criminals is much more extensive than that of professional thieves. It is also much more costly, and he cites the case of the bribe of $750,000 by four insurance companies that sent Boss Pendergast of Missouri to jail, later to be pardoned by President Truman (who originally belonged to the Pendergast organization). It was almost ten years before the
insurance companies were convicted. Then they were only fined; no insurance executives went to jail.
There was, too, the case of Federal judge Martin Manton who was convicted of accepting a bribe of $250,000 from agents of the defendant when he presided over a case charging exorbitant salaries were improperly paid to officers of the American Tobacco Company. While the attorney for the company was disbarred from the federal courts, the assistant to the company president (who made the arrangements) was soon thereafter promoted to vice president: a good boy.
In the case of white collar crimes of corporations, if any individual is punished (usually none is) it is only one or a very few. The authorities do not dig pertinaciously with a view to ferreting out every last person who had anything to do with the case. But, as Sutherland points out, it is different with crimes of the lower classes. In kidnapping, for example, the FBI, in addition to seizing the kidnappers, flushes to the surface anyone who (1) rented them quarters to conceal the kidnapped person or to hide out in; (2) acted as unwitting agents for them in conveying messages or collecting ransom; (3) transported them; (4) in any way innocently gave them aid and assistance; or (5) was a witness to any of these separate acts. The government men do such a splendid job that almost everyone except the obstetricians who brought the various parties into the world are brought before the bar, where the aroused judge "breaks the book over their heads" in the course of sentencing. Sovereignty, it turns out after all, is not to be trifled with.
It may be argued that kidnapping, which resorts to violence, is a more serious crime than bribing a judge. With this I would disagree. Gravely serious though kidnapping is, its commission strikes directly at only a few, and in most cases involves comparatively small sums--even though they seem large to the ordinary man. But bribing a judge--and in the Manton case far more than any known kidnap ransom was at stake--strikes at a very broad public and, indeed, at the foundations of social institutions in general. It is subversive in the deepest and truest sense.
Emulatory Crime in the Ranks
What is of particular interest is the vast amount of emulatory crime white collar crime inspires among underlings, insiders and outsiders, much of this never reported to the police. Companies, as many reports since World War II show in Fortune, the Wall Street Journal and other business papers, are increasingly subject to constant depredations. Specialty, department and chain stores are subject to a continuous pressure of theft, which led one security officer to state his opinion publicly that 25 per cent of the public is absolutely honest and wouldn't steal under any circumstance, 25 per cent is systematically seeking opportunities to steal and 50 per cent is ready to steal at any time it feels certain of escaping detection.
There is a constant assault on the corporate fortress from the inside as well, by employees who steal from stockrooms and loading platforms and who gave in some cases organized truly gigantic withdrawals of goods. Embezzlement is rife. Only a few years ago some of the police in Chicago and Denver were found to be practicing old- fashioned burglary on a large scale as a supplement to low salaries.
If money is evidence of personal worth, then many persons are out to prove they are as worthy as anyone in Wall Street.
In eight and one-half concentrated pages Sutherland gives a synopsis of crime in the United States. 38 Fraud is extensive in the professions--legal, medical, clergical-- although he rates physicians and surgeons rather favorably on the whole. Bribery of officials, particularly by businesses selling goods to municipalities, counties and states, is common. But within private business itself corruption is internally quite common. He
reports: "Buyers for department stores, hotels, factories, railways, and almost all other concerns which make purchases on a large scale accept and sometimes demand gifts of money payments. " Again, "The police constantly break the laws. The laws of arrest are rigidly limited, but the police exercise their authority with little reference to these limitations and in violation of law. Hopkins refers to illegal arrests as kidnappings, and in this sense, the number of kidnappings by the police is thousands of times as great as the number of kidnappings by burglars and robbers. The courts, similarly, are not immune from criminal contagion, and this is true especially of the lower courts. "
'The United States, the plain unvarnished facts show, is a very criminal society, led in its criminality by its upper socio-economic classes. 39
Contemporary Big Business Crime
Has the ominous outlook altered since Sutherland terminated analysis as of 1944?
It has not changed in the slightest. In the two decades since 1945 the acts cited by Sutherland continued--in many cases with redoubled force; for the penalties imposed by law are obviously not of sufficient weight to deter. One can make large sums of money in business by breaking the law up to the point where one is ordered to stop or is indicted.
In the Federal Trade Commission alone, from January 1, 1945, through fiscal 1965 as given in annual reports, there were 3,991 cease-and-desist orders for violations by enterprises large and small. 40 The largest corporations were conspicuously represented, along with ambitious small fry. The specific violations were: false or misleading advertising, using a misleading trade or corporate name, using false or misleading endorsements, removing or concealing law-required markings, disparaging competitors' products, misrepresentation and deception, false invoicing, misbranding and mislabeling, deceptive pricing, failing to make material disclosures, offering deceptive inducements, obtaining information by subterfuge, using misleading product name or title, shipping for demand-payment goods not ordered, etc. , etc.
In the Food and Drug Administration, which administers the amended Food, Drug and Cosmetic Act of 1938, there were 5,208 criminal prosecutions from 1945 through 1961, an average of 306 per year. 41 Many of these were for distributing poisonous or contaminated products. Fines and jail sentences were usually meted out.
In its 26th annual report, the United States Securities and Exchange Commission, empowered to supervise the issuance, sale and resale of securities, reports that "From 1934, when the Commission was established, until June 30, 1960, 2,777 defendants have been indicted in the United States District Courts in 645 cases developed by the Commission, and 1,385 convictions obtained in 585 cases. The record of convictions obtained and upheld is over 85 per cent for the 26-year life of the Commission. " 42
"During the past fiscal year," says the 1960 report, "53 cases were referred to the Department of Justice for prosecution. This is the highest number of referrals in the past 18 years and the second highest in the Commission's history and is in line with the continuing increase in the number of referrals during the past several years. As a result of these and prior referrals, 43 indictments were returned against 289 defendants during the fiscal year. " 43
The Securities and Exchange Commission, of course, deals with thousands more cases each year in which it issues orders to discontinue illegal practices.
The National Labor Relations Board, which processed only a few more than 1,000 cases in 1936 and now processes more than 25,000 a year, enforces fair labor practices
as defined in the twice-amended National Labor Relations Act of 1935. Most of its rulings on appeal to the courts have been sustained.
Of 2,719 cases subjected to judicial review up to June 30, 1964, the orders of the NLRB were fully affirmed in 57 per cent of the cases and affirmed with modifications in 20 per cent. In only 18 per cent of the cases was the Board completely overruled. In appeals to the Supreme Court, the Board was affirmed in 63 per cent of the cases and affirmed with modifications in 8 per cent. The Supreme Court overruled the Board completely in 17 per cent of the cases. 44
This Board, a quasi-judicial tribunal similar to the Federal Trade Commission, the Securities and Exchange Commission and the Food and Drug Administration, issues injunctions and supervises violators and, according to the National Labor Relations Act, "Any person who shall willfully resist, prevent, impede, or interfere with any member of the Board or any of its agents or agencies in the performance of duties pursuant to this act shall be punished by a fine of not more than $5,000 or by imprisonment for not more than one year or both. " Complaints under this criminal statute are brought by individuals and unions against employers and by employers against unions. 45
Business or white collar crimes are usually thought of as nonviolent, thus placing the culprits in public opinion at least a peg above such unorthodox businessmen as Frank Nitti, Tony Accardo and Frank Costello. But this differentiation is clearly false, as is shown in many cases of record before the National Labor Relations Board. A recent pattern, as brought to light by the McClellan Committee, is for Company X to hire "labor relations adviser" A who in turn enrolls certified thugs T1, T2, and T3, to beat up, bribe, drive away or destroy labor organizer L.
Up to 1945, according to Sutherland, labor relations decisions had been made against 43 of the 70 large corporations, or 60 per cent, with 149 decisions in all. All 43 were "repeaters": 39 used interference, restraint and coercion; 33 discriminated against union members; 34 organized company unions; 13 used labor spies; and 5 used violence. Such violence was largely confined to the steel and automobile industries.
The late Henry Ford was quoted as saying in 1937: "We'll never recognize the United Automobile Workers Union or any other union. " The Ford Motor Company had long maintained a service department under Harry Bennett, a former pugilist, staffed with 600 men equipped with guns and blackjacks. With reference to this service department Frank Murphy, then governor of Michigan, said: "Henry Ford employs some of the worst gangsters in our city.
According to undisputed testimony before the NLRB, in 1937 the United Automobile Workers Union started to organize employees at Ford's River Rouge plant. It was announced that Organizers would distribute literature outside the plant at a specified time, and reporters and photographers were present in force. Said a guard to a reporter: "We are going to throw them to hell out of here. " Upon arrival the organizers went up an overhead ramp to one of the entrances, where they were told they were trespassing. Witnesses said they turned and started away. As they left they were assaulted by service department guards--beaten, knocked down and kicked. Witnesses testified that it was a "terrific beating" and "unbelievably brutal. " Among those severely beaten were Walter Reuther and Richard Frankensteen, officials of the United Automobile Workers Union.
The guards followed out into the street. One man's skull was fractured, another's back broken. Cameras of photographers were seized by guards and the films destroyed. Two reporters were chased by automobile at eighty miles an hour through Detroit streets until they reached the sanctuary of a police station. Later when women organizers attempted to distribute literature outside the plant they were attacked by guards,
knocked down and beaten. City policemen who were present during these events stood by and did not interfere--testimony to the local power of Henry Ford. 46
From fiscal years 1959 through 1965, inclusive, the Antitrust Division of the Department of Justice won 147 formally designated criminal cases against companies and lost 24. It won 206 civil cases and lost 9. 47
Other disciplinary bodies to which one should turn for a more complete picture of such business violations as are judicially decided are the Federal Communications Commission, the Civil Aeronautics Authority, Federal Aviation Agency, Federal Power Commission and the Interstate Commerce Commission.
There is no federal agency that compiles, correlates and makes public the statistics on corporate crimes as the FBI does with diverse police-reported crimes in the Federal Uniform Crime Reports. If there were, there would be shown a much larger volume of corporate crime than reported here. It is well recognized by experts that the enforcement of laws against corporate crimes is at best of a sporadic token character carried on by understaffed and underfinanced agencies.
The Federal Uniform Crime Reports serve a purpose beyond merely informing the public of the incidence of crime, which they do only very lopsidedly and exaggeratedly for these particular crimes. The Reports have the intent, as evidenced in many public expressions by J. Edgar Hoover, the redoubtable G-man, of encouraging greater public support for more repressive police measures and stiffer penalties (against errant members of the lower socio-economic classes, who generally commit these direct- action crimes). Some future reader may assess the sagacity of this writer when he says that after this disparity in reporting lower-class and upper-class crimes has been sharply pointed out there will be no change: No federal agency will make a comprehensive annual statistical report on corporate crimes as such, although Washington is literally crawling with expert statisticians who could whip the figures together in a trice. Nor will the penalties for corporate crimes likely be increased to the point where they realistically deter. The offenders will continue to be treated as though they were somewhat crotchety but beloved maiden aunts who have been inexplicably naughty.
The Great Electrical Industry Conspiracy
While the bulk of the cases cited have involved the uncamouflaged criminal jurisdiction, with the judges properly accoutered with everything except the black cap, there have been many recent thumping reminders that carefully planned crime is an inseparable companion of big business. Three cases involved whole basic industries: the electrical, aluminum and steel industries. None of the protagonists was sponsored by the Mafia. They clearly prove that "the bad old days," thought to be conquered by the New Deal, are still with us.
The Great Electrical Industry Case came to a climax in 1961. It involved forty-five individual blue-ribbon defendants and twenty-nine corporations, including ultra-ultra General Electric Company and Westinghouse Electric Corporation, which together lovingly shared more than 75 per cent of the market. As Fortune remarked, it was the "biggest criminal case in the history of the Sherman Act. "
United States District Judge J. Cullen Ganey heard the case in Philadelphia. The prosecution was by the attorney general of the United States, in full panoply. It was crime, crime, crime all the way, front and back, up and down, back and forth. This needs to be emphasized because Fred F. Loock, president of Allen-Bradley Company, one of the defendants, said: "It is the only way a business can be run. It is free enterprise. "
The charge was specifically the dark one of conspiracy--in this case to fix prices, rig bids and divide markets in a series of secret cartels on electrical equipment valued at 81. 75 billion annually. The leading defendants pleaded guilty to the most serious counts, no contest to the rest. The conspiracies extended over many years, going back prior to World War II and in the opinion of some observers to 1896. Surprisingly, this conspiracy was carried on with all the guilt-conscious cloak-and-dagger techniques known to spies: secret codes, mysterious meetings in hotel rooms, queer notes, guarded telephone calls, concealed records, fictitious names, burned memoranda and the like. No patron of TV or the films, watching the actors, could have failed to recognize that an authentic, vintage conspiracy was afoot. Only sinister music was lacking.
Although operating departmental executives stood in the dock and the top managements of GE and Westinghouse virtuously disclaimed knowledge of the whole affair, Judge Ganey felicitously remarked before sentencing: "One would be most naive indeed to believe that these violations of the law, so long persisted in, affecting so large a segment of the industry and finally involving so many millions upon millions of dollars, were facts unknown to those responsible for the corporation and its conduct. . . . I am not naive enough to believe General Electric didn't know about it and it didn't meet their hearty approbation. " But although the government had gathered monumental evidence it had not been able to connect the very top executives directly to the conspiracy in ways required by law.
Judge Ganey imposed total fines of $1,924,500. General Electric was fined $437,500 and Westinghouse $372,500. Damages of $7,470,000 were also assessed. Upon twenty- four individuals in the case jail sentences were imposed--and suspended owing to their advanced ages. William S. Ginn, vice president of General Electric, was given thirty days in jail and fined $12,500. Six other company officers drew fines of $1,000 to $4,000 and thirty days in jail. And it was the unusualness of sentencing these high- salaried company men to thirty days in jail, the usual police-court sentence for disorderly conduct, that attracted special attention. Corporation executives are rarely sent to jail even for brief sojourns. Indeed, they are far more immune to jail terms than high Russian Communist Party officials.
The Great Electrical Industry Conspiracy emerged in a curious way. The Tennessee Valley Authority one day in the 1950's received identical sealed bids from various suppliers of heavy electrical equipment. The fact came to the attention of Senator Estes Kefauver, who threatened to start his own investigation if the Eisenhower Administration did not act. The Department of justice was alerted and began looking into the case, but at first found it difficult to pick up the threads of wrong-doing. It decided to subpoena various records of the companies and finally obtained an account of conspiracy from the official of a small company. His story implicated General Electric.
Queries to General Electric provoked an internal inquiry by top management, which was truthfully informed by some of the operating vice presidents of what went on. Top management professed to be shocked, put pressures on the men and eventually forced all to resign or fired them. This strong line by GE sent angry insiders and their lawyers scurrying to the government with their stories, and the net of evidence wove itself more tightly. In the other companies men were not removed.
General Electric had for many years had a policy formally calling for strict compliance with the antitrust laws. This policy was implemented by written orders conspicuously sent from time to time to operating executives. Nevertheless, General Electric was an old offender, in the 1940's alone being snared in thirteen antitrust cases.
The convicted executives maintained that they had simply inherited procedures carried on by predecessors and were acting under direct orders from higher ups. One of the men knew that he held his job "under risk" for two years unless he increased profits. There was evidence of men who had held some of the same positions earlier, who had refused to, enter into collusive arrangements with competitors and who had lost their jobs. Top officials denied everything. Judge Ganey clearly did not believe them.
Policy for General Electric was set by Chairman Ralph Cordiner, who, president since 1950, became chairman in 1958; his predecessor, Charles E. Wilson, had left to become chief of national defense mobilization. While Cordiner has been criticized for rudely dumping his men for doing what everybody did in this and in other industries (illegal price-fixing is standard business practice) his theoretical position was much sounder than that of others. Cordiner was an avowed devotee of competition, and public policy avowedly requires competition. There is, however, little competition in the American economy. But if this fact were to be formally admitted or authoritatively asserted the way would be paved for sweeping changes costly to big proprietors.
General Electric in sacrificing its men as it did acted in the style of governments who, having found some diplomat or espionage agent embarrassing, simply disavow him. (Most of these men, happily, were later hired by other companies, some at advanced levels. )
Origins of Anti-Monopoly Doctrine
The anti-monopoly doctrine was originally developed by individual business people in Europe who struggled against Crown monopolies in late medieval times. The earliest reported case in England was Darcy v. Allen in 1602 (11 Coke 84). In 1623 Parliament passed the Statute of Monopolies, abolishing nearly all existing monopolies as unlawful (St. 21 James 1, c. III). Englishmen from early times were always opposed to voluntary self-restraints of tradesmen by contract, and English courts refused to uphold such agreements (William Howard Taft, J. , Addyston Pipe case, 85 Fed. 271). The "business revolutions" of 1688 in England and 1789 in France were in part directed against such monopolies. Trade was to be free and open; and the public, in return for granting the trading privilege, would benefit from the resultant low prices wrought by competition. This, too, was the American idea.
In time, particularly in the United States, small businesses grew into large quasi- sovereign businesses and the large businesses found they had become (usually through illegal behavior) large monopolies such as the Aluminum Company, the Standard Oil Trust and many others. Broken up by government action or evolving in separate units, the various industries found in time that two to five or six companies did 75 to 90 per cent of the business and many small companies--tokens of competition--the remainder. This pattern is what economists call oligopoly or rule by a few. Prices are usually set by one company, the "price leader," and others follow the leader. When the few tacitly agree so to "follow the leader," as they usually do, there is in effect a general subtly maintained monopoly.
But if monopolies are indeed tolerated in the American system, if enterprises are not competing so that buyers get the lowest possible prices, what is the constitutional warrant? How does the situation constitute equal protection under the law? There is, in fact, no constitutional warrant. Monopoly is fundamentally illegal, with or without the Sherman Act, which refers to it as a "high misdemeanor. " Why should a select few have the public market as a private plaything?
But, having broken up the electrical and various other clearly proved monopolies, can we not say that the government is keeping the market open to free competition? While many would so argue, concentration and monopoly grow steadily. In view of the steady
denunciations, official and unofficial, and of specific laws against monopoly, how can this be?
Issues and Solutions
The mystery, if such it ever was, is neatly dispelled by judge Thurman Arnold in his The Folklore of Capitalism. Arnold was from 1938 to 1943 in charge of the antitrust division of the Department of Justice, and knew whereof he spoke. The operative function of the Sherman Act, Arnold holds, is to make possible from time to time ceremonial observances of the American belief in competition. These ceremonial observances take the form of criminal prosecutions, so that a concerned fraction of the public may believe the competitive situation is being defended. Meanwhile concentration and monopoly advance in rapid strides from decade to decade as in Europe. Those convicted do not alter their behavior.
And now we come to the basic issue, which the General Electric upper moguls perhaps had in mind in talking and acting as virtuously as they did for the record. If these industries are indeed monopolies that continually strengthen their position and do not give the public the advantages of competition, then they should be subject to regulation at least as strict as that accorded the public utilities in their "natural" monopolies. But it is just this sort of cartel regulation that the corporations fear. They would particularly abhor effective regulation even with stabilized prices. For at what level would the prices be set? At the other extreme from regulation there would be outright government ownership, with profits beyond the recovery of costs going, a la Russe, into the general government operating fund.
No accepted politician in the United States takes either of these positions. All profess themselves in favor of the present situation, which implies only that they fundamentally line up with the big proprietors who find the present situation precisely to their taste: monopoly with ceremonial overtones of pseudo-competition.
A third course might be to break some of the big companies into their constituent parts. General Electric under Cordiner, for example, was found to be organized into twenty-seven autonomous divisions consisting of 110 small companies. Each of these latter was run as if it were a single enterprise, with the boss of each making up his own budget. But there was constant pressure from the top executive suite on the boss of each unit for greater profitability.
This particular course of action, too, would be distasteful to the big companies, most of which are cannibalistic agglomerations, although their physical productivity would not be adversely affected by it. Indeed, it might be enhanced. One consequence of such action would be to produce more top executive jobs, which should be of interest to ambitious middle-class people.
The behavior of corporate man shows that he entertains certain unconscious beliefs, which he never expresses: that it is "his" market, filled with vassals in the form of "his" customers and "his" employees, and that government officials are "his" officials. While in legal theory the corporation exists to serve society, in the unconscious and correct belief of corporate man, society and government operationally now exist to serve the corporationthe be-all and end-all of everything.
In the electrical industry both the men and the companies came in for somewhat rougher treatment than is usually the case. As heavy equipment was involved, the companies were deluged by lawsuits from public utility companies, municipalities and government agencies. In 1965 a judgment was turned in against GE, Westinghouse and some others for $16,863,203 on behalf of a group of midwestern power and light companies. In all, 1,912 civil antitrust suits were filed against the companies, costing
GE a reported $225 million, Westinghouse about $110 million and Allis-Chalmers $45 million. Most were settled out of court for undisclosed sums but, all in all, the moneys involved were considerable even if they came short of erasing illegal profits.
The Prevalence of Price-Fixing
Has price-fixing been terminated by the electrical industry case? The reader can supply the answer for himself by checking competing products in his various stores. Somehow they are all priced about the same--soap, sugar, milk, salt, cereals, automobiles, appliances, cigarettes, etc. By regions the same grades of gasoline have the same prices under various brand names, except for an occasional "price war. " But a "price war," which is ordinary competition for business, is rare, as everyone knows. Established business considers price wars pathological and will do anything to avoid them. For while business believes in free enterprise--freedom to do whatever it desires-- it abhors free competition, whatever it may say to the contrary. The government for its part, while condemning price-fixing, itself supports agricultural prices.
T. K. Quinn, a former vice president of General Electric, has recorded his belief that a third of the American economy--automobiles, steel, cigarettes, cement, oil products, chemicals, roofing material and machinery--is price-stabilized through agreements of the leading companies. But corporation men, precisely like members of the underworld, have their own peculiar definitions for every situation. Thus, Roger Blough, president of United States Steel, has said "a price that matches another price is a competitive price," with which doctrine few nonbusiness people would agree. If every baseball game ended in a tie most fans would begin to suspect that the outcome was "fixed. "
Westinghouse stockholders, when called upon to pass on the conduct of their management, voted overwhelmingly to endorse it. General Electric stockholders simply shouted down any attempt to question the management and approved it by 98 per cent.
Yet this elaborate charade about monopoly, in which many people (including the judge in the case) seriously believe, is played at a price: The big companies, backbone of the American economic system, are formally stigmatized as criminals.
In this respect General Electric (along with many other companies) is what Professor Sutherland calls a "repeater. " Attorney General Robert Kennedy in what was perhaps a grandstand flourish after the trial suggested that an injunction he brought against General Electric, which had twenty-nine adjudicated convictions on its record, to keep it from repeating its conduct under the threat of more severe penalties; this was much as though a lawbreaking ex-convict should be enjoined from breaking the law. To implement this directive the Justice Department in December, 1961, sought a court order to make General Electric subject to unlimited fines if it ever again violated any requirement of the antitrust laws. In support of its action the Justice Department cited 39 antitrust actions against GE, 36 filed since 1941, including here the 29 convictions as well as seven consent decrees and three "adverse findings" by the Federal Trade Commission. Such a record, the Justice Department said, revealed "General Electric's proclivity for persistent and frequent involvement in antitrust violations" in all branches of production. The record of Westinghouse was hardly less immodest. 48
"Has the industry learned any lessons? " asked Fortune. "'One thing I've learned out of all this,' said one executive, 'is to talk to only one other person, not to go to meetings where there are lots of other people. ' Many of the defendants . . . looked on themselves as the fall guys of U. S. business. They protested that they should no more be held up to blame than many another business man, for conspiracy is just as much 'a way of life' in other fields as it was in electrical equipment. 'Why pick on us? ' was the attitude. 'Look at some of those other fellows. '"
In so saying these men showed they did not understand the ceremonial uses of sacrifice. The high Indian civilizations of South and Central America had the custom each year of sacrificing to the gods, by burning or other violence, the most beautiful maidens of the city. By destroying what was manifestly so desirable, the men of the nation showed piety. By stigmatizing with criminal convictions these high-salaried executives, paragons of the mass media, the United States similarly testified to its pious belief in competition even as competition approaches the vanishing point.
As an immediate aftermath to the case, President Robert Paxton of General Electric at the age of fifty-nine, with six years still to go before his compulsory retirement, resigned "because of ill health. " 49
Of a pending series of seven criminal indictments of the steel industry, in the summer of 1965 the companies were first found guilty in two highly significant decisions.
In the first case eight companies were found guilty in federal court of conspiracy to fix prices on carbon sheet steel, which makes up an annual market of $3. 6 billion--far larger than the electrical industry haul--and enters into a wide range of consumer products from automobile bodies and kitchen cabinets to refrigerators, washing machines and office furniture. The companies were fined $50,000 each, the maximum under the applicable section of the law; and sentencing of two principal officers was deferred.
The guilty companies composed most of the steel industry--the United States Steel Corporation, the Bethlehem Steel Company, the National Steel Corporation, the Great Lakes Steel Corporation, the Jones and Laughlin Steel Corporation, the Armco Steel Corporation, the Republic Steel Corporation and the Wheeling Steel Corporation. Named as co-conspirators in the indictment but not as defendants were the Youngstown Sheet and Tube Company, the Granite City Steel Company and the Pittsburgh Steel Company. The companies had felt emboldened to commit the sinister offenses complained of between 1955 and 1961, when a Republican Administration had briefly returned to power.
A curious comment at the time the indictments were handed up was made by Edmund F. Martin, vice chairman of Bethlehem Steel: "Even assuming that the matters charged were true, the Department of Justice is seeking not to correct any illegal or improper present-day situation, but only to harass the industry for practices which, even under the allegations of the indictment, have been abandoned. " This is much as though a man charged with a three-year-old burglary were to claim that authorities were not dealing with current crime but were harassing him, since he had been "going straight" ever since. 50
A few days later another federal judge fined four leading makers of steel forgings and a steel trade association a total of $150,000 after finding them criminally guilty of price fixing and bid rigging in the sale of open die steel forgings to the Army and Navy as well as to private companies from 1948 to 1961, an interval that embraced the Korean War. Bethlehem Steel, second in the industry, was fined $40,000; United States Steel, $35,000; the Midvale-Heppenstall Company of Philadelphia, $35,000; the Erie Forge and Steel Corporation, $25,000; and the Open Die Forging Institute, Inc. , $15,000. The defendants did an estimated $100-million business a year in this line.
While ship shafts for the Navy and cannon for the Army were involved in the forgings, an interesting sidelight was that the defendants were found to have illegally set identical prices for rotors and generator shafts sold to General Electric, Westinghouse and Allis-Chalmers, the top defendants in The Great Electrical Industry Conspiracy. The difference in the size of fines in the steel and electrical cases stemmed from the number of indictments on each charge. The Sherman Act as amended permits a
maximum fine of $50,000 on each charge. In the electrical case there were twenty charges in all, although every company did not fall under each charge.
Asked by the Times whether they intended to start civil suits for treble damages against the steel companies, General Electric said nothing had been decided and Allis- Chalmers said it had no comment; but Westinghouse valiantly reported: "So far as we know, we have received full value for our purchase of steel which we believe to have been made at competitive prices. "
In this case five executives of the companies were fined an aggregate of $44,000 on October 25, 1962, on the same criminal indictment, which they did not contest. 51
The fines in these cases, in relation to the amount of illegal business done, were obviously of the order of a $5 slap on the wrist for grand larceny.
The number of big recent cases-in oil, asphalt, milk, steel, electrical goods and the like--is too great to detail here. No fewer than ninety-two antitrust suits, a record, were begun in 1960 under the Republicans, although enforcement actually eased off sharply under President Kennedy and came to a virtual halt under President Johnson. 52 The Johnson Administration has practically given Big Business the green light on mergers and regulation in general, in return for which the presidential Business Advisory Council, composed of about 100 chairmen and presidents of the biggest corporations, appears to have given its full endorsement of Mr. Johnson's personally engineered disastrous Vietnam war. 53
In these upper reaches of power everything is strictly on a quid pro quo basis. The New Higher Politics
Let us look at all this lawbreaking from another point of view. Perhaps the statutes are somehow misbegotten, as many corporation heads freely assert, even though they are simple expressions of the common law upon which the entire Anglo-American legal system rests. But possibly this legal system, too, is misbegotten and should be scrapped or radically overhauled.
In his devotional biography of John D. Rockefeller I, Professor Allan Nevins, the Columbia historian, suggests that the common view of Rockefeller as the epitome of ruthless Pecuniary Man, freely breaking the law in quest of profits in any and every accessible field, is entirely mistaken. Professor Nevins in his summation (which may be taken as applying just as well to any industrial tycoon) indirectly suggests that Rockefeller is representative in his way of Political Man--that is, a person planning and providing for the entire community even if in ways not readily understood by lesser mortals. This is evident, for example, when Professor Nevins says: "Behind this organizing genius, which has analogies with Richelieu's or Bismarck's, lay a combination of traits not less interesting because of their simplicity, conspicuity, and harmony. " And Rockefeller's single-mindedness, says Professor Nevins, "reminds us of Cecil Rhodes. " 54 In brief, Rockefeller reminds Nevins of commanding political leaders.
Had Professor Nevins chosen for comparison political personalities from nearer home, readers might more readily have detected the untenability of offering Rockefeller as an example of Political Man, acting according to some conception of the general welfare of society rather than milking society for personal gain through the most effective monopoly of all time. Rockefeller in his heyday in fact stood adverse to the common interest and this was formally found to be so by United States courts.
Professor Nevins has generalized beyond Rockefeller: "The architects of our material progress [if such they ever were--F. L. ]--the men like Whitney, McCormick, Westinghouse, Rockefeller, Carnegie, Hill and Ford--will yet stand forth in their true
stature as builders [if indeed they ever were--F. L. ] of a strength which civilization found indispensable. "
In this connection Professor Nevins went on to contend grotesquely that these and other men like them "saved the world" in World War I and later helped the world meet "a succession of world crises. " He thereupon called for a revision of history, at which historians so far look with deep reserve, to give these unjustly evaluated men their proper due as builders and saviors of civilization.
