It was my intent to stop railing about corporate wrongdoing. Although I find it therapeutic voicing my concerns and often fantasize about launching The Daily Journal of Corporate Sleaze, I’ve come to the painful realization that most Americans just don’t care. My posts about ethically challenged corporations are among the least read, understandably so.
“There goes Eric again,” I imagine readers think to themselves.
I was at peace moving on and mistakenly believed that nothing could provoke me to write yet another column hoping to inspire at least one person to share my outrage about despicable corporate behavior. Seemingly on cue, some Wall Street Journal and Reuters journalists took up the challenge and proved my outrage wasn’t fully tapped out. I took the bait.
And so here we are again.
On Wednesday evening the Journal posted this exclusive about a group of hedge funds devising a plan to divert about $1 billion meant to help victims of opioid addiction and keep the money themselves. The funds concocted a strategy whereby Mallinckrodt, one of America’s largest manufacturers of opioids, would file for bankruptcy and write off about $1 billion from what it still owes to addiction victims and state and local governments, while making a one-time payment of roughly $250 million.
Mallinckrodt last year agreed to pay $1.7 billion to resolve thousands of lawsuits brought by state and local governments and opioid-addicted individuals, who accused the company of helping cause a public-health crisis. The settlement funds, to be paid through 2030, were meant to help state health departments buy lifesaving overdose reversal drugs like Narcan and pay treatment costs for people who took prescription opioids.
Most of America’s hedge funds and private equity firms are ruthless vultures, but their typical MO is to loot corporations, fleece shareholders, and occasionally shake down some governments. Diverting money intended to help victims of America’s opioid crisis is a new low for the parasitic industry, whose greed knows no bounds.
America’s opioid crisis is among corporate America’s many great disgraces. While the pharmaceutical companies that sold the opioids deserve much of the blame, they were abetted by McKinsey, a major repository for freshly minted MBAs from Ivy League business schools.
The New York Times in June of last year posted this story revealing that McKinsey had its consulting tentacles in all aspects of pharmaceutical narcotics sales, ranging from the harvesting of the raw materials to devising sophisticated marketing strategies on how to enlist doctors to become narcotics prescribers.
As the opioid crisis progressed, McKinsey also advised U.S. agencies on how to mitigate the fallout, while simultaneously advising its pharmaceutical clients on how best to deal with those agencies.
McKinsey got off with a $573 million settlement, a pittance for a firm with $10.5 billion in revenues.
The Journal named three hedge funds as being part of the opioid settlement diversion scheme, Silver Point Capital, Bracebridge Capital, and Alta Fundamental Advisers. It’s disappointing the Journal opted not to highlight the persons running these firms and their backgrounds. Hedge funds are run by people, and they derive their sources of funds from institutional holders and wealthy individuals.
The Journal should have written profiles of the firms’ managements and posted photos alongside them.
A quick search confirmed a hunch. Silver Point was co-founded in 2002 by Edward A. Mulé and Robert J. O’Shea, who not surprisingly previously worked at Goldman Sachs.
Enough said.
Even before I could fully digest the Journal’s story, Reuters pounded me with this story about Tesla, which serves as yet another reminder that Elon Musk didn’t become one of the world’s richest persons because of his integrity.
As reported by Reuters, Musk was the executive responsible for Tesla’s decision to exaggerate the real-world range of its vehicles. Range anxiety is the biggest concern of consumers mulling a purchase of electric vehicles, so obviously posting the most optimistic range numbers can help electrify sales.
Tesla software is programmed to give accurate range numbers after their batteries lose about 50% percent of their juice, so naturally many owners thought something was wrong with their batteries when they suddenly appeared to experience a dramatic loss of range, prompting them to make service repair appointments.
Tesla’s service repair capabilities are stretched to begin, with and given there was nothing wrong with the batteries of its vehicles, the company needed to convince customers to cancel their service appointments, which Musk told employees cost the company $l,000 per visit. To deal with the matter, Tesla set up a “Diversion Team” in Las Vegas trained to convince customers all was well with their batteries.
Tesla’s Diversion Team embraced being part of Musk’s deception. Some employees celebrated canceling service appointments by putting their phones on mute and striking a metal xylophone, triggering applause from coworkers who sometimes stood on desks. Reuters reported the team often closed hundreds of cases a week and staffers were tracked on their average number of diverted appointments per day.
The Reuters story isn’t the only incidence of questionable and often despicable behavior involving Musk or companies he controls.
The German newspaper Handelsblatt in May published a report based on leaked internal documents that Tesla developed a program for suppressing reported incidents of crashes and other mishaps involving its Autopilot technology.
Handelsblatt obtained 3,000 entries about customers’ safety concerns and descriptions of more than 1,000 crashes. The complaints covered Teslas manufactured from 2015 to March 2022. There were more than 2,400 gripes about sudden acceleration and more than 1,500 complaints about braking problems, including unintentional emergency braking and so-called “phantom stops,” when the car suddenly brakes for no apparent reason.
Employees were instructed that unless lawyers were involved, not to send written versions of their reviews but pass them on “VERBALLY to the customer.”
In my mind, when companies advise employees to avoid putting facts in writing, that’s a flaming red flag.
A former Tesla executive previously disclosed that Musk personally oversaw the deceptive staging of a 2016 video featuring the company’s self-driving technology, known as Autopilot.
Musk repeatedly said Autopilot reduced crashes by 40%, when a study subsequently revealed it may have increased crashes by 59%.
In yet another indication of Musk’s lack of character, Mashable reported that in wake of Twitter changing its name to X, the company expropriated without explanation or compensation the @X Twitter handle of Gene X. Hwang, who registered it 16 years ago.
Another company allegedly worthy of induction into the corporate sleaze Hall of Fame is FedEx, which has been sued for “systematically and surreptitiously” replacing odometers on thousands of used diesel fleet delivery vehicles. The lawsuit alleges FedEx sold its used vehicles to “unsuspecting small business owners” without disclosing that their mileage readings were inaccurate.
I’ve always perceived FedEx as one of America’s more standup companies, particularly given that the code of ethics posted on the company’s website states, “What guides team members toward trustworthy behaviors is the FedEx Code of Conduct. It shows us how to act lawfully and ethically at all times, even if it costs us business or profits in the short term.”
FedEx obviously doesn’t pay too much attention to its code of ethics because it is signed by Frederick Smith, whose title is listed as CEO despite him having stepped down from the position more than a year. I proudly note that one of the law firms listed on the FedEx lawsuit is Stark & Stark, which claims to be one of the oldest law firm practices in New Jersey.
Stark + Stark = Starkman.
I’ve written extensively about wrongdoing in the healthcare industry, but I continue to be taken about by the industry’s competitiveness. This week’s Starkman Approved healthcare gold star of shame goes to Cigna, which was sued for using an algorithm to automatically deny claims in bulk instead of individually reviewing each case, putting patients on the hook for bills the health insurer otherwise would have paid.
The lawsuit appears to be based on this ProPublica story published earlier this year, which also made my blood boil. For sanity’s sake, it’s best I avoid reading ProPublica stories as it’s one of the few news outlets that reports on pervasive corporate wrongdoing and humanizes its stories by identifying the persons responsible.
I’m not suggesting there was once the “good ’ol days” when U.S. corporations were run by choir boys and altar girls. The auto industry’s dishonesty and disregard for safety dates back decades, but when it was exposed Americans once cared and demanded government action.
When Ralph Nader published Unsafe at Any Speed more than a half century ago about the auto industry’s failure to make vehicles as safe as possible, it was a best seller and forced a reluctant Congress to create the National Highway Traffic Safety Administration — an agency whose stated mission is to save lives, prevent injuries and reduce crashes.
The media once was forced to cover the NHTSA like a glove because the agency was overseen by formidable civil servants who took their mandates seriously and refused to be bullied by the deep pocketed automakers. I still immediately associate the NHTSA with the leadership of Joan Claybrook, an attorney who was a celebrity when she oversaw the agency in the 70s and early 80s because of her unrelenting crusade to make vehicles safer.
Americans’ apathy about corporate wrongdoing is costing them. The nation’s healthcare is the most expensive and inefficient among developed countries, and the life span of Americans is declining while residents of other developed countries are living longer. In previous years, corporations trembled when faced with bad publicity. Many no longer care, which is why Chase refused to make whole victims who were scammed and lost their savings because of the bank’s failure to safeguard customer money from fraudsters.
A Gallup poll revealed that Americans are down on morality, family, and patriotism. That’s great news for America’s overpaid CEOs, who can continue getting away fostering ethically challenging behavior, working employees harder, and kowtowing to China.
As for the hedge funds looking to divert opioid settlement money, if someone knows of some orphanages with some meaningful cash on hand, I’m sure they’d be interested.