by Jay Eisenhofer
Co-founder and managing director of the law firm Grant & Eisenhofer

In the past few years, hedge funds have moved into the mainstream of the U.S. economy. Once restricted to a small number of super-wealthy “sophisticated investors,” they now receive hundreds of billions of dollars from public and private pension plans acting as fiduciaries for school teachers, truck drivers, construction workers, first responders and others whom we have lately come to call “the 99 percent,” who share little in common with fund managers stocking the Forbes 400 list. Surfing upon this incoming tide of money, some individual funds now manage enough assets to exert significant influence in the markets.

But the widespread acceptance of hedge funds among institutional investors has not been matched by commensurate improvements in their level of transparency, accountability and corporate governance. In recent months, we’ve witnessed the dismal result: a parade of inside-trading scandals evoking the fraud-riddled implosions of Worldcom, Tyco, Enron and Global Crossing that rocked corporate America a decade ago. It’s time for hedge funds to be brought into the 21st century and reflect their new broader role and fiduciary responsibilities. This means the legal regime that sets the rules for hedge funds must change.

Without question, the profile of the average hedge fund investor has changed in the past few years. Battered by the financial crisis that erased billions of dollars in stock market value just a few years before the first baby boomers were scheduled to retire, many pension funds started investing with hedge funds in the hope of making up lost ground by taking advantage of their customized, often quant-driven investing strategies and promises of “absolute returns” regardless of the markets’ direction.

Consequently, hedge funds — which now number more than 7,000 and manage some $2 trillion in assets — increasingly are dealing with fiduciaries managing other people’s money, rather than investing for their own account or on behalf of wealthy individuals. Cliffwater, a consulting firm that tracks the industry, reported that more than half of the 96 state pension plans it surveyed had invested a total of $63 billion with hedge funds by the end of fiscal 2010 — more than double the amount invested only four years previously. The California Public Employees’ Retirement System, the country’s largest public pension fund, had a reported $5.2 billion invested in hedge funds by the end of last year.

Corporate pension plans, which control $1 trillion in assets, are also following suit. Hedge fund investing has been democratized, albeit indirectly.

Last year the hedge fund industry recorded one of its best years ever. Institutional investors poured an estimated $40 billion of new cash into funds during the first 10 months of 2011, a 24% increase from the year before, according to Pensions & Investments; it was the second-highest amount recorded since P&I started tracking hedge funds inflows in 2004. And that figure represents only deals that were publicly announced; many institutional investors prefer no publicity when striking a deal to invest in a fund (P&I, Nov. 14).

Commanding enormous pools of capital, hedge funds have amassed significant economic clout. Combined, the top 10 U.S. hedge funds control financial assets valued at $325.5 billion, according to Bloomberg. The country’s top hedge fund, Westport, Conn.-based Bridgewater Associates, controls assets of $120 billion.

And yet it is increasingly clear there is a serious ethics lapse hitting a portion of the hedge fund sector. In the past two years, there have been nearly 60 convictions or guilty pleas by hedge fund executives and consultants. Chief among them: Raj Rajaratnam, the billionaire manager of Galleon Group, who was sentenced last November to more than 11 years in prison and fined $10 million for masterminding a trading scheme that netted almost $54 million in illegal profits; the Securities and Exchange Commission ordered Mr. Rajaratnam to pay $93 million in a related civil case. Joseph Skowron III, former manager of FrontPoint Partners, was given a five-year sentence for conspiracy to commit securities fraud and obstruct an SEC investigation after he admitted trading on non-public information.

More revelations are certain. The SEC has disclosed that it is considering securities fraud charges against Harbinger Capital Partners and its manager, Philip Falcone, regarding allegations it gave preferential treatment to some blue-chip clients, including Goldman Sachs, at the expense of other investors. The SEC also is reportedly investigating SAC Capital Advisors, the $15 billion hedge fund run by Steven Cohen, after two of his former managers pleaded guilty to insider trading and agreed to cooperate with federal prosecutors. Diamondback Capital Management, which manages $2.5 billion in assets, was recently ordered to pay $9 million in fines and penalties stemming from a government investigation into its insider trading activities. And in late January, prominent hedge fund manager David Einhorn, head of Greenlight Capital, was hit with a fine of $11.2 million by British regulators for “market abuse” by dumping shares of leading U.K.-based pub operator Punch Taverns ahead of a stock offering.

Some institutional investors have begun to show their mettle. Three Louisiana public pension funds, fed up with their inability to redeem $100 million invested with New York-based hedge fund Fletcher Asset Management, recently filed a petition seeking to force a liquidation of Fletcher, which is under regulatory investigation for possible securities fraud. Stay tuned for more developments.

There’s no single fix to cleaning up the hedge fund industry. But here’s a good place to start: Strengthen the laws under which most funds operate so their fiduciary duties are explicit, irrevocable and publicly recognized. Remarkably, that is not the case at present. Most U.S. hedge funds are incorporated as limited partnerships in Delaware. Under Delaware’s Revised Uniform Limited Partnership Act, which took effect in 2004, a partnership’s general partners are legally permitted to void the fiduciary duties they owe to their limited partners — their investors. They can also disclaim all liability when they take action in reliance on the opinion of an investment banker. Considering how many instances there have been of bankers and third-party consultants covering up or facilitating wrongdoing, this provision is an invitation to fraud and abuse.

In fact, some law firms are now marketing their ability to draft general partner agreements that leave hedge fund limited partners unprotected and managers secure from accountability. Broad indemnification provisions are just one of a list of other one-sided protections being written into these agreements.

These types of limitations and agreements might make sense when a partnership is a small entity with a group of persons who know each other. They make no sense in the context of a $2 trillion industry with $120 billion behemoths. How would shareholders of Exxon Mobil, Wal-Mart or General Electric respond if their managements said they had no fiduciary obligation to their millions of investors? The uproar would rattle Wall Street to its foundation.

Pension fund and other fiduciary investors need to become more activist regarding their hedge fund holdings. They should add their voice to those calling for greater transparency among managers, refusing to accept one-sided provisions that restrict their limited partners. And they should call on lawmakers to provide a legal regime that protects minority investors who are, in fact, fiduciaries for the American majority.

Jay Eisenhofer is co-founder and managing director of the law firm Grant & Eisenhofer P.A.  He has been counsel in more multi-hundred million dollar cases than any other securities litigator, including the $3.2 billion settlement in the Tyco case, the $895 million United Healthcare settlement, the $450 million settlement in the Global Crossing case, the historic $450 million pan-European settlement in the Shell case, as well as a $400 million settlement with Marsh & McLennan, a $303 million settlement with General Motors and a $300 million settlement with DaimlerChrysler. Mr. Eisenhofer was also the lead attorney in the seminal cases of American Federation of State, County & Municipal Employees, Employees Pension Plan v. American International Group, Inc., where the U.S. Court of Appeals required shareholder proxy access reversing years of SEC no-action letters, and Carmody v. Toll Brothers, wherein the Delaware Court of Chancery first ruled that so-called “dead-hand” poison pills violated Delaware law. 

Mr. Eisenhofer has served as litigation counsel to many public and private institutional investors, including, among others, California Public Employees Retirement System, Colorado Public Employees Retirement Association, the Florida State Board of Administration, Louisiana State Employees Retirement System, the Teachers’ Retirement System of Louisiana, Ohio Public Employee Retirement Systems, State of Wisconsin Investment Board, American Federation of State, County & Municipal Employees, Service Employees International Union, Amalgamated Bank, Lens Investment Management, Inc. and Franklin Advisers, Inc.

This article was first published on the Harvard Law School Forum on Corporate Governance and Financial Regulation and is re-published with the author's permission.

As the U.S. Senate Finance Committee launched an investigation Tuesday into makers of narcotic painkillers and groups that champion them, a leading pain advocacy organization said it was dissolving "due to irreparable economic circumstances."

The American Pain Foundation, which described itself as the nation's largest organization for pain patients, was the focus of a December investigation by ProPublica in The Washington Post that detailed its close ties to drugmakers.

The group received 90 percent of its $5 million in funding in 2010 from the drug and medical-device industry, ProPublica found, and its guides for patients, journalists and policymakers had played down the risks associated with opioid painkillers while exaggerating the benefits.

It is unclear whether the group's announcement Tuesday evening 2014 that it would "cease to exist, effective immediately" 2014 was related to letters sent earlier in the day from Sens. Max Baucus, D-Mont., the finance panel chairman, and Charles Grassley, R-Iowa, to the foundation, drug companies and others.

In the letters, the senators cited an "an epidemic of accidental deaths and addiction resulting from the increased sale and use of powerful narcotic painkillers," including popular brand names like Oxycontin, Vicodin and Opana.

Growing evidence, they wrote, suggests that drug companies "may be responsible, at least in part, for this epidemic by promoting misleading information about the drugs' safety and effectiveness."

The American Pain Foundation's website carried a statement Tuesday night saying its board had voted May 3 to dissolve the organization because it couldn't stay "operational." The foundation did not respond to requests for comment Tuesday.

The senators are targeting a who's who of the pain industry, seeking extensive records and correspondence documenting the links, financial and otherwise, between them and the makers of the top-prescribed narcotic painkillers.

Letters went to three pharmaceutical companies, Purdue Pharma, Endo Pharmaceuticals and Johnson & Johnson, as well as five groups that support pain patients, physicians or research: the American Pain Foundation, American Academy of Pain Medicine, American Pain Society, Wisconsin Pain & Policy Studies Group, and the Center for Practical Bioethics.

The Federation of State Medical Boards, the trade group for agencies that license doctors, received a letter, as did The Joint Commission, an independent nonprofit that accredits hospitals nationwide and made pain management a national priority in 2001.

A report by the U.S. Government Accountability Office in 2003 noted that the commission partnered with Purdue Pharma, the maker of Oxycontin, to distribute pain educational materials nationwide. The committee's letter to Purdue noted that the company pleaded guilty in 2007 to federal criminal charges that it misled regulators, physicians and consumers about Oxycontin's risk of addiction.

The senators requested payment information since 1997 to 10 groups and eight people, including two doctors featured in ProPublica's December report. They asked about any influence the companies had on a 2004 pain guide for physicians that was distributed by the Federation of State Medical Boards; on the American Pain Society's guidelines; and on the American Pain Foundation's Military/Veterans Pain Initiative.

In addition to citing ProPublica's work, the letters also mention the reporting of the Milwaukee Journal Sentinel and MedPage Today.

Patients in serious pain need access to opioids, the senators wrote, but drugmakers and health-care groups "must distribute accurate information about these drugs in order to prevent improper use and diversion to drug abusers."

"The problem of opioid abuse is bad and getting worse," Sen. Grassley said in a statement. "Something has to change."

"When it comes to these highly addictive painkillers, improper relationships between pharmaceutical companies and the organizations that promote their drugs can put lives at risk," Baucus said in a prepared statement.

Dr. Andrew Kolodny, chairman of psychiatry at Maimonides Medical Center in Brooklyn, N.Y., and president of Physicians for Responsible Opioid Prescribing, applauded the investigation.

"These groups, these pain organizations 2026 helped usher in an epidemic that's killed 100,000 people by promoting aggressive use of opioids," Kolodny said. "What makes this especially disturbing is that despite overwhelming evidence that their effort created a public health crisis, they're continuing to minimize the risk of addiction."

Concerns about the overuse and abuse of painkillers have intensified in recent years. As sales of the powerful drugs have boomed 2014 rising 300 percent since 1999 2014 so, too, have overdose deaths. Opioids were involved in 14,800 overdose deaths in 2008, more than cocaine and heroin combined, according to the U.S. Centers for Disease Control and Prevention.

In 2009, the use and misuse of the drugs were cited in more than 475,000 emergency department visits, nearly doubling the 2004 number, the CDC said.

Pain doctors and patient groups say that while drug overdoses are a legitimate concern, only a small percentage of deaths involves patients who receive them from their doctors. Most deaths involve illicitly obtained drugs, statistics show.

The groups also say that patients' risk is low if they do not have addictive personalities, and that any restrictions should not punish patients who suffer from serious pain.

In recent weeks, two articles in medical journals have documented different aspects of abuse.

According to a paper published online this week by the Archives of Pediatrics & Adolescent Medicine, one of every eight high school seniors surveyed said they had used prescription opioids for nonmedical reasons.

A paper released last month by The Journal of the American Medical Association found that the rate of newborns diagnosed with drug withdrawal jumped threefold from 2000 to 2009. And the rate of mothers using opioids at the time of delivery was five times higher in 2009. (Not all babies born to mothers using the drugs exhibit signs of withdrawal.)

Janssen Pharmaceuticals, a Johnson & Johnson subsidiary that makes the painkiller Nucynta, said in a statement that it "is committed to the responsible prescribing and appropriate use of opioid pain medications" and has supported educational websites about safe use.

The company is reviewing the senators' letter and "will work with them to fulfill their request for information," spokesman Mark Wolfe said via email.

Purdue Pharma acknowledged in a statement that it had received the letter, was reviewing it and looked forward to "cooperating with the committee on this matter."

Endo did not return a request for comment. A spokeswoman for The Joint Commission said the group had just received the senators' letter and had no comment yet. The Federation of State Medical Boards responded but did not offer immediate comment.

ProPublica is an independent, non-profit newsroom that produces investigative journalism in the public interest.   This article is republished with permission under a Creative Commons license.

Dear EarthTalk: What is the “Fair Trade Your Supermarket” campaign? -- Brian Howley, Washington, DC

A project of the non-profit Green America, the “Fair Trade Your Supermarket” campaign aims to empower consumers to advocate for more “Fair Trade” products on store shelves at their local supermarkets. Fair trade is a system of exchange that honors producers, communities and the environment by ensuring that farmers and artisans throughout the developing world are paid fair prices for their work and have direct involvement in the marketplace. The goal of the wider Fair Trade movement, according to Green America, is to build real and lasting relationships between producers in developing countries and businesses and consumers around the world.

And that’s where your neighborhood grocer comes in. “While the Fair Trade movement is gaining steam nationwide, most of our supermarkets still carry few–if any–Fair Trade products on their shelves,” reports Green America. “Together, we can put Fair Trade products within reach for millions of Americans.”

And just how does Green America expect us to do this? “First, take stock of Fair Trade products in your supermarket—look for coffee, tea, chocolate, rice, sugar, honey, wine, fresh fruit, and olive oil.” Scan the relevant aisles for third-party certifier Fair Trade USA’s distinctive black-and-white “Fair Trade Certified” label, which is only attached to imported goods where the producers receive fair prices for their products and where strict socio-economic and environmental criteria are met during production. Alternatively, look for the logos of other third-party certifiers such as “Fair for Life” or “Fair Trade Federation” on product labels if you think fair trade versions may be available in a given product line.

“Then, you can encourage the store to stock more Fair Trade products by talking to the store manager as a loyal customer,” adds Green America. They suggest using comment cards, which can be key to getting a store with no Fair Trade items to start carrying them. “Every time you go grocery shopping, drop a comment card in the box asking your manager to stock Fair Trade items.” Of course, talking to a store manager in person may be even more effective, especially if you are armed with a pile of your receipts from the store from the previous month or two to show how much spending power you alone would be able to allocate toward Fair Trade versions of the items you are buying there.

Another creative way to spread the Fair Trade gospel would be by volunteering to hand out free samples of Fair Trade products that the store already sells in order to raise awareness and build consumer demand. “Stores sell more of a product when a sampling table is set out, and if you, your friends and family are working the table, the labor is free for the store too.”

But why stop with your local market? If there is a chain supermarket outlet in your area, take it to the top by writing an e-mail, letter or postcard to corporate headquarters informing them of your desire to buy Fair Trade items in all of their stores. Check out the Fair Trade Your Supermarket website for more tips on how to make your next shopping trip fairer to the planet and its people.

EarthTalk® is written and edited by Roddy Scheer and Doug Moss and is a registered trademark of E - The Environmental Magazine (www.emagazine.com). Send questions to: earthtalk@emagazine.com. Subscribe: www.emagazine.com/subscribe. Free Trial Issue: www.emagazine.com/trial.

When we think of bullying, school kids come to mind, fueled by the powerful, recently-released film Bully, and tragic headlines of teen suicide.  More than 13 million school kids and teens in the United States will be targets of bullies this year, according to the film.

Bullying is also a growing problem in the workplace -- in the U.S, and globally.

More than 54 million people will be bullied in U.S. workplaces this year, estimates Dr. Gary Namie, Director of the Workplace Bullying Institute. It is a problem Dr. Namie and others have turned to state legislatures to address. So far this year, 13 states have introduced a Healthy Workplace Bill, which includes bullying in the definition of an abusive work environment. Since 2003, legislation has been introduced in 21 states, none enacted.

Many countries have turned to legal remedies: Turkey and parts of Australia have enacted provisions against workplace bullying; Serbia is one of nine European countries banning it; and the United Kingdom, France, and Japan have enacted new laws or expanded existing statutes.

A recent poll of adults in Britain (conducted for the Institute of Business Ethics) ranked harassment and bullying in the workplace 6^th out of a list of 15 top concerns.

Intentional vs. Unintentional Bullying

The implications of workplace bullying are far reaching. At a minimum, it affects safety, engagement, productivity, trust, and the workplace culture. It poses the question to leaders, just how important is a healthy work culture to business and long-term success?

No culture is ideal – there are always issues that need attention – but fundamentally, what is tolerated, reinforced, or routed out in pursuit of business success creates the reality of the culture.

Bullying in the U.S. isn’t illegal unless the bullying addresses an already protected area of discrimination like race, gender, national origin, disability, or sexual orientation.

Absent no universally accepted way of defining it, bullying is defined here as including intimidation through power, position, influence, tone, language, or height, where people feel threatened, mistreated, disrespected, humiliated, undermined, or sabotaged; and where undue stress and anxiety are created that impact emotional well being, health, or work product.

In talking about workplace bullying with ethics and compliance officers and consultants at a recent Southern California Business Ethics Roundtable meeting, one colleague shared a story about how a company had fumbled on the bullying issue. An internal candidate with a history of documented bullying had been promoted to vice president. The reason? The VP of Human Resources, involved in the promotion, hadn’t been made aware of his own team’s knowledge of the candidate’s history, and the team hadn’t known that individual was being considered for promotion.

This wouldn’t have been the case if the documented issues had been sexual harassment.

There are parallels between workplace attitudes to sexual harassment nearly 20 years ago and workplace bullying now. Do we need more awareness, research, reporting up, or legislation to curtail incidents of workplace bullying, the way those factors (plus class action suits) changed how sexual harassment prevention is handled?

Bullying is complex. While there are mean and abrasive characters in the workplace preying on others’ vulnerabilities, often bullying can be unintentional. It can stem from a lack of self awareness and poor EQ, (emotional intelligence) or be the result of over used strengths of passion, aggressive style, or forceful expression. Peers, managers, and bosses can cross over into bullying, particularly when problems surface.

“People don’t always hear how they sound to other people” points out Joel Katz, Chief Ethics and Compliance Officer at CA Technologies.

“I’ve known good managers who are passionate about what they do, and over the course of their careers sometimes their coaching or counseling comes across as confronting or angry.” says Katz whose training was employment law. “They are truly stunned,” when you share the feedback that they handled a situation poorly or raised their voice, he says.

Where there is a repeated pattern of someone acting in a way that isn’t consistent with our values, Katz says,” we will try coaching; if it doesn’t work out, the person needs to be taken out of the management role.”

CA Technologies has four core values, Katz says. “First is respect for people. If you allow things like bullying and harassment to go on in the workplace, it creates such a toxic environment that it really undermines anything you are trying to accomplish from a business perspective.”

CA, earning a reputation for engaging ethics and compliance training, recently added to its series a video dealing with profanity and abusive treatment, which posted on YouTube last month.

The question regarding workplace bullying is whether respect, a commonly used value to describe how people treat each other, can in reality be important enough to leaders that it is expected, coached, required, and reinforced?

Impact on Corporate Value

Apple, a phenomenally profitable company, has been successful in spite of Steve Jobs’ intolerant, harsh and sometimes cruel management style.

That raises another question: does being perceived a winner and paying people well trump all? Or merely self-select the people who endure environments like that? And if so, what is lost by the exodus of others that could drive future success?

We know that ways to reinforce a culture of respect involve tone at the top, leading by example, policies, training, reinforcement, reporting, coaching, and consequences when bullying behavior doesn’t change.

It starts with tone at the top: I asked Philip Green, a Meggitt  director and president of Meggitt-USA about bullying recently after a speech he’d given. “I am not prepared to tolerate it, neither is executive management,” he replied. “It destroys value if you don’t deal with it quickly.”

However, the bigger picture impacting culture is how companies, while fulfilling their responsibilities, can also involve all parts of their organization so that a healthy work culture engages the ongoing vigilance of everyone.

One approach is to look at the lessons gained from movements providing effective tools to help people take a stand in constructive ways when what matters to them is challenged.

Giving Voice to Values  is a curriculum in undergraduate and graduate education that encourages students to practice ways to voice their values. The premise is that as values conflicts are part of life,  practice using a variety of tools makes it easier to respond effectively in difficult situations, speaking up for oneself and others.

The Bully Project,  an outgrowth of the film, demonstrates how students and parents can take a stand against bullying. The issues  in the film are supported by Facing History and Ourselves  which wrote the study guide to facilitate classroom discussions about behavior, empathy, and taking action against bullying in their community.

The actions leaders and organizations take in response to workplace bullying depend on how important a healthy work culture is to business and long-term success.

Gael O’Brien is a Business Ethics Magazine columnist. Gael is a consultant, executive coach, and presenter focused on building leadership, trust, and reputation. She publishes the The Week in Ethics

Dear EarthTalk: Why is Greenpeace upset with some leading tech companies for so-called “dirty cloud computing?” Can you explain? -- Jeremy Wilkins, Waco, TX

Leading tech companies like Google, Apple and Microsoft are now offering unprecedented amounts of data storage and access to “apps” on huge Internet-connected servers, saving consumers and businesses the hassle of installing and running programs and storing information on their own local computers.

This emerging trend, dubbed “cloud computing,” means that these providers have had to scale up their power consumption considerably, as they are increasingly responsible for providing more and more of the computing horsepower required by the world’s two billion Internet users. No doubt, sharing such resources on centralized servers is more efficient than every individual and business running their own versions separately. In fact, the research firm Verdantix estimates that companies off-loading data and services to cloud servers could save $12 billion off their energy bills and reduce greenhouse gas emissions by 85 million metric tons within the next decade. But for the greenhouse gas savings to be realized, the companies offering cloud computing services need to make the right energy choices.

Greenpeace has been tracking sustainability among tech companies for over a decade, and recently released a report, “How Green is Your Cloud?” assessing the green footprint of the move to cloud computing. According to the analysis, some of the major players (Google, Facebook and Yahoo) have gone to great lengths to ensure that significant amounts of the power they need come from clean, green sources like wind and solar. But Greenpeace chastises others (Apple, Amazon and Microsoft) for relying on so-called “dirtier” sources of power, such as coal and nuclear, to run their huge data centers.

“When people around the world share their music or photos on the cloud, they want to know that the cloud is powered by clean, safe energy,” says Gary Cook, a Senior Policy Analyst with Greenpeace. “Yet highly innovative and profitable companies like Apple, Amazon and Microsoft are building data centers powered by coal and acting like their customers won’t know or won't care. They’re wrong.”

Greenpeace’s report evaluates 14 major tech firms and the electricity supply chains in use across more than 80 different data centers that power cloud-based services. Some of the largest data centers are in buildings so big they are visible from space and use as much power as 250,000 European homes. If the cloud were its own country, says Greenpeace, it would rank 5th in the world in electricity consumption.

“Companies like Google, Yahoo and Facebook are beginning to lead the sector down a clean energy pathway through innovations in energy efficiency, prioritizing renewable energy access when siting their data centers, and demanding better energy options from utilities and government decision-makers,” reports Greenpeace. But unfortunately the majority of the industry is not marching in step. As such, Greenpeace is calling on all tech companies with cloud services to develop siting policies based on access to clean energy sources, invest in or directly purchase renewable energy, be transparent about their energy usage, share innovative solutions so the sector as a whole can improve, and demand that governments and utilities increase the percentage of clean, green power available on the grid.

Photo: Wichary, Flickr

EarthTalk® is written and edited by Roddy Scheer and Doug Moss and is a registered trademark of E - The Environmental Magazine ( www.emagazine.com). Send questions to: earthtalk@emagazine.com. Subscribe: www.emagazine.com/subscribe. Free Trial Issue: www.emagazine.com/trial.

Dear EarthTalk: I understand there is to be another Earth Summit in Rio de Janeiro, Brazil in June 2012, 20 years since the last one was held in the same city. What’s on the agenda this time? -- Janet Grayson, Albuquerque, NM

According to the United Nations, the so-called “Rio+20 Conference”—officially the UN Conference on Sustainable Development—is a new attempt in a new millennium to “lay the foundations of a world of prosperity, peace and sustainability.” The event will take place June 20-22, the 20th anniversary of 1992’s United Nations Conference on Sustainable Development (UNCSD)—the “Rio Earth Summit”—and the 10th anniversary of the 2002 World Summit on Sustainable Development in Johannesburg.

The main agenda items will be reviewing the progress and difficulties associated with moving towards sustainability, assessing responses to the newly emerging challenges faced by our societies, and strengthening political commitments to sustainable development. Underlying themes include finding ways to leverage the green economy to foster sustainable development and poverty eradication, and setting up an effective institutional framework for future global sustainable development initiatives. Delegates from the 200+ nations and thousands of private and nonprofit sector attendees will focus on sustainable cities, decent jobs, food security and sustainable agriculture, energy, oceans, and disaster readiness.

To the World Resources Institute (WRI), a Washington, DC-based think tank devoted to sustainability issues, Rio+20 is important as it forces the world’s nations to “review progress on and reaffirm a global commitment to the policies designed to foster economic growth that is both inclusive and respects the planet’s limited carrying capacity.” WRI adds that amid a global recession, a widening gap between rich and poor and heightened competition for energy, food and other natural resources, the conference couldn’t be timelier but “unfortunately, no clear vision for Rio+20 has emerged, and expectations...remain low.”

But conference participants are busy preparing. The Stakeholder Forum for a Sustainable Future (SFSF), a network of non-governmental participants, is busy developing the Global Transition 2012 Initiative, which will lay out specific recommendations culled from organizations and thought leaders around the world.

“A goal of the initiative is to achieve an outcome from Rio+20 that catalyses a ‘Global Transition’ to an economy that maximizes well-being, operates within environmental limits and is capable of coping and adapting to global environmental change,” reports the SFSF. “The Global Transition 2012 initiative will propose focused and accessible goals, targets and policy interventions that will chart a clear route towards the greening of the global economy, and the achievement of social and economic justice.”

Rio+20 participants hope this event will be remembered as an historic occasion when nations of the world aligned behind the cause of staving off global environmental catastrophe. But the more likely outcome is a few non-binding agreements that will soon be forgotten by constituents, the media and even many of the participating countries. Not since 1987’s Montreal Protocol to phase out ozone-depleting chemicals have nations of the world been able to come together in a significant way to address specific environmental ills. And without any binding agreements already on the table, Rio+20 doesn’t look to dazzle either.

Photo: Artyom Sharbatyan

EarthTalk® is written and edited by Roddy Scheer and Doug Moss and is a registered trademark of E - The Environmental Magazine ( www.emagazine.com). Send questions to: earthtalk@emagazine.com. Subscribe: www.emagazine.com/subscribe. Free Trial Issue: www.emagazine.com/trial

Two years after oil from a BP well began gushing into the Gulf of Mexico, the U.S. Department of Justice has filed criminal charges alleging that a former BP employee destroyed critical evidence in the early days of the unfolding disaster.

The charges are the first to be filed in what the Obama administration has called the worst environmental disaster in American history, and they are significant because they target an individual employee for his actions.

According to an affidavit and complaint filed today in a Louisiana court, Kurt Mix, a former drilling and completions engineer, deleted email and text messages he had sent to senior BP managers estimating that the amount of oil spewing into the Gulf was many times greater than the amount stated publicly. Mix was specifically instructed by attorneys contracted by BP to retain his records before he deleted them, the affidavit states.

In a statement released to reporters, U.S. Attorney General Eric Holder indicated that more charges are likely, describing the indictment as "initial charges" in an ongoing investigation, and saying that the Department of Justice "will hold accountable those who violated the law."

More than 200 million gallons of crude oil flowed into the Gulf of Mexico after a blowout caused the explosion of the Deepwater Horizon oil rig and the death of 11 workers on April 20, 2010. The spill continued, unabated, for nearly three months. Analysts have long expected criminal charges against BP or its employees.

A spokeswoman for the agency declined to say when more charges might be expected, or to explain why the case against Mix was the first to be made public.

Mix could not be reached for comment, and we were unable to leave him a message because his voicemail was full.

BP issued a statement saying that the company was cooperating with federal investigators and that "BP had clear policies requiring preservation of evidence in this case and has undertaken substantial and ongoing efforts to preserve evidence."

According to an FBI affidavit submitted to the court along with the indictment, Mix, who worked for BP until January 2012, was directly involved in BP's efforts to understand how much oil was flowing out of the broken Macondo well. On April 21, 2010, Mix estimated that between 68,000 and 138,000 barrels of oil were leaking each day 2014 far more than the 5,000 barrels that were estimated publicly at the time.

On April 22, Mix received the first of six legal notices instructing him to retain his electronic records.

Yet, according to the affidavit, in early October, Mix allegedly deleted a string of more than 200 text messages on his iPhone that he had sent to a supervisor. The deleted texts, which the Department of Justice said were recovered forensically, included sensitive 2014 and pessimistic 2014 internal BP information sent while the company was attempting what it called a "Top Kill" effort to stop the gushing oil on May 26, 2010.

Mix wrote that the effort 2014 which he was directly involved in 2014 was unlikely to succeed. "Too much flowrate 2014 over 15,000 and too large an orifice. Pumped over 12,800 bbl of mud today plus 5 separate bridging pills. Tired. Going home and getting ready for round three tomorrow."

At the time, BP said publicly that the measure had a 70 percent chance of success.

Mix, 50, was arrested in Katy, Texas today. If convicted, he faces a maximum penalty of 20 years in prison and a fine of up to $250,000 on each of the two counts he is charged with.

Abrahm Lustgarten, a reporter for Pro Publica, is the author of “Run to Failure: BP and the Making of the Deepwater Horizon Disaster.”

ProPublica is an independent, non-profit newsroom that produces investigative journalism in the public interest.   This article is republished with permission under a Creative Commons license.

In a 7,000-word blockbuster Sunday, The New York Times reported that Walmart allegedly engaged in a vast campaign of bribery to expand the company's Mexico business in the early 2000s, potentially violating U.S. law. The scheme was allegedly overseen by a Walmart executive, Eduardo Castro-Wright, described by The Times as "the driving force behind years of bribery" totaling millions of dollars.

Eduardo Castro-Wright, vice chairman and CEO of Global Ecommerce of Wal-Mart Stores, at the company's 2011 Shareholders Meeting in Fayetteville, Arkansas.

Three years ago, Castro-Wright himself gave an interview to The Times in which he offered a somewhat different picture of his leadership style.

Castro-Wright sat for an interview in 2009 as part of The Times' "Corner Office" series in which top executives talk "about leadership and management." The Times asked Castro-Wright: "What message would you convey in a commencement speech?" He responded:

"Here in the United States, and any of the developed countries, I would tend to provide a speech along the lines of what I said before about what makes great leaders 2014 the fact that there's no leader who can be called one if they don't have personal integrity, or if they don't deliver results, or if they don't care about the people they lead, or if they don't have a passion for winning."

Asked about the "most important leadership lesson" he'd learned in his career, Castro-Wright emphasized trust:

"There's nothing that destroys credibility more than not being able to look someone in the eye and have them know that they can trust you. Leadership is about trust. It's about being able to get people to go to places they never thought they could go. They can't do that if they don't trust you."

The Times interview ran under the headline "In a Word, He Wants Simplicity" about five years after the period in which Castro-Wright had allegedly overseen systematic bribery.

In its front-page story yesterday, The Times quoted former Wal-Mart de Mexico executive Sergio Cicero Zapata alleging how and why Castro-Wright had authorized bribery:

In an interview with The Times, Mr. Cicero said Mr. Castro-Wright had encouraged the payments for a specific strategic purpose. The idea, he said, was to build hundreds of new stores so fast that competitors would not have time to react. Bribes, he explained, accelerated growth. They got zoning maps changed. They made environmental objections vanish. Permits that typically took months to process magically materialized in days. "What we were buying was time," he said.

The meteoric growth of the company's Mexican business translated into promotions for Castro-Wright. In 2005, he was appointed head of Walmart U.S., and in 2008 to his current position as vice chairman of Walmart and CEO of its global ecommerce business.

Walmart announced in September 2011 that Castro-Wright would retire this July. The company's bio page that shows up as the second hit for Castro-Wright's name on a Google search is now blank. Company spokeswoman Ashley Hardie told ProPublica that the page had been taken down after the announcement last September. Castro-Wright is also on the boards of insurer MetLife and the charity CARE.

Walmart has posted a statement on the Times piece, saying that it is "working aggressively to determine what happened" and that "if these allegations are true, it is not a reflection of who we are or what we stand for." The company informed the Justice Department of an internal investigation in December after it learned of The Times' reporting, according to the paper.

Photo: Walmart via Flickr

ProPublica is an independent, non-profit newsroom that produces investigative journalism in the public interest.   This article is republished with permission under a Creative Commons license.

News organizations cultivate a reputation for demanding transparency, whether by suing for access to government documents, dispatching camera crews to the doorsteps of recalcitrant politicians, or editorializing in favor of open government.

But now many of the country's biggest media companies - which own dozens of newspapers and TV news operations - are flexing their muscle in Washington in a fight against a government initiative to increase transparency of political spending.

The corporate owners or sister companies of some of the biggest names in journalism - NBC News, ABC News, Fox News, the Washington Post, the Wall Street Journal, USA Today, Politico, the Atlanta Journal-Constitution, and dozens of local TV news outlets - are lobbying against a Federal Communications Commission measure to require broadcasters to post political ad data on the Internet.

As we have recently detailed, political ad data is public by law but is not widely accessible because it is currently kept only in paper files at individual stations. The FCC has proposed fixing that by requiring broadcasters to post on the Internet details of political ad purchases including the identity of the buyer and the price.

(ProPublica has been inviting readers and other journalists to send in the files to be posted as part of our Free the Files project.)

Over the past few months, several major media companies have dispatched top executives or outside lobbyists to the FCC to oppose the proposed rule or to push a watered down version, disclosure filings show. (The FCC is voting on the issue April 27.)

Among them are:

• News Corporation, which owns the Wall Street Journal and Fox News
• Walt Disney, which owns ABC News and ESPN
• NBCUniversal, which is owned by Comcast and includes NBC News
• Allbritton, which owns several TV stations and Politico
• Gannett Broadcasting, a division of Gannett, which owns USA Today
• Post-Newsweek Stations, the broadcast division of the Washington Post Company
• Belo Corp, which owns 20 TV stations
• Cox Media Group, which owns the Atlanta Journal-Constitution, the Austin American-Statesman, and other newspapers and TV stations
• Dispatch Broadcast Group, which owns Ohio and Indiana TV stations
• Barrington Broadcasting Co., which owns several television stations around the country
• The E.W. Scripps Company, which owns TV stations and newspapers including the Commercial Appeal in Memphis
• Hearst Television Inc., which owns 29 TV stations
• Raycom Media, which owns TV stations
• Schurz Communications, which owns TV Stations and newspapers around the country

In a speech this week at the National Association of Broadcasters convention in Las Vegas, FCC Chairman Julius Genachowski excoriated the broadcasters as working "against transparency and against journalism."

The industry's opposition to the transparency proposal has sometimes been heated. In filings submitted to the FCC in January and March, Allbritton Senior Vice President Jerald Fritz raised the specter of "'Soviet-style' standardization" of ad sales if political ad files are required to be put online in a single format.

In a February meeting with the FCC, Walt Disney executives complained about the "logistics and burden" of putting the political ad information online.

That same month, executives from Disney along with NBC and News Corp argued in a meeting with FCC officials that posting the political ad file would allow "competitors in the market and commercial advertisers [to] anonymously glean highly sensitive pricing data."

Television stations must by law must offer political candidates the lowest rates on ads. Broadcasters have argued that by making this information available online and not just at stations, it would hurt their ability to negotiate with other advertisers.

Advocates for the online disclosure rule have countered that the political ad information is already public by law and the measure would simply make the existing disclosure rules relevant for the Internet age. They have also pointed out that keeping paper files in electronic form should actually be more efficient for stations.

Albritton, NBC, and Walt Disney did not respond to requests for comment on the FCC chairman's charge that they have positioned themselves "against transparency and against journalism." News Corp. declined to comment.

Some media companies have also pushed a watered down proposal to post only some of the public political ad data, and to put it up on individual station websites instead of on a central FCC website.

Washington lawyers representing the other companies fighting the rule 2014 Barrington Broadcasting, Belo, Cox, Dispatch, E.W. Scripps, Gannett, Hearst, Meredith Broadcasting, Post-Newsweek Stations, Raycom Media, and Schurz Communications 2014 lobbied FCC officials in February, March, and again this week.

The group suggested that instead of putting the full, itemized political ad data online, stations would post aggregate data once a week.

"What we were saying is, if you want the public to be informed about what's being bought at what price, maybe there's a simpler way to do it,"Mary Jo Manning, an attorney representing the group, told ProPublica. "Transparency is giving people information that is useful."

But when the FCC pressed the group for details on its plan, the stations said they opposed posting even the aggregate data in a single format prescribed by the FCC. They also opposed posting the data on a central FCC website, saying they wanted to post the limited data only on the stations' own websites. If enacted, both of those stances would make it more difficult to get and analyze the data.

Since there is a one-week sunshine period ahead of FCC votes, today is the last day that interested parties will be able to lobby the commission before its public meeting April 27.

ProPublica is an independent, non-profit newsroom that produces investigative journalism in the public interest.   This article is republished with permission under a Creative Commons license.

This story was first published as an op-ed in The New York Times and is republished with permission.

Two years after a series of gambles and ill-advised decisions on a BP drilling project led to the largest accidental oil spill in United States history and the death of 11 workers on the Deepwater Horizon oil rig, no one has been held accountable.

Sure, there have been about $8 billion in payouts and, in early March, the outlines of a civil agreement that will cost BP, the company ultimately responsible, another $7.8 billion in restitution to businesses and residents along the Gulf of Mexico. It's also true the company has paid at least $14 billion more in cleanup and other costs since the accident began on April 20, 2010, bringing the expense of this fiasco to about $30 billion for BP. These are huge numbers. But this is a huge and profitable corporation.

What is missing is the accountability that comes from real consequences: a criminal prosecution that holds responsible the individuals who gambled with the lives of BP's contractors and the ecosystem of the Gulf of Mexico. Only such an outcome can rebuild trust in an oil industry that asks for the public's faith so that it can drill more along the nation's coastlines. And perhaps only such an outcome can keep BP in line and can keep an accident like the Deepwater Horizon disaster from happening again.

BP has already tested the effectiveness of lesser consequences, and its track record proves that the most severe punishments the courts and the United States government have been willing to mete out amount to a slap on the wrist.

Prior to the gulf blowout, which spilled 200 million gallons of oil, BP was convicted of two felony environmental crimes and a misdemeanor: after it failed to report that its contractors were dumping toxic waste in Alaska in 1995; after its refinery in Texas City, Texas, exploded, killing 15, in 2005; and after it spilled more than 200,000 gallons of crude oil from a corroded pipeline onto the Alaskan tundra in 2006. In all, more than 30 people employed directly or indirectly by BP have died in connection with these and other recent accidents.

In at least two of those cases, the company had been warned of human and environmental dangers, deliberated the consequences and then ignored them, according to my reporting.

None of the upper-tier executives who managed BP - John Browne and Tony Hayward among them - were malicious. Their decisions, however, were driven by money. Neither their own sympathies nor the stark risks in their operations - corroding pipelines, dysfunctional safety valves, disarmed fire alarms and so on - could compete with the financial necessities of profit making.

Before the accident in Texas City, BP had declined to spend $150,000 to fix a part of the system that allowed gasoline to spew into the air and blow up. Documents show that the company had calculated the cost of a human life to be $10 million. Shortly before that disaster, a senior plant manager warned BP's London headquarters that the plant was unsafe and a disaster was imminent. A report from early 2005 predicted that BP's refinery would kill someone "within the next 12 to 18 months" unless it changed its practices.

Such explicit flirtation with deadly risk was undertaken as part of Mr. Browne's effort while chief executive to expand BP as quickly as possible. Mr. Browne relentlessly cut costs, including on maintenance and safety. Then he hastily assembled a series of acquisitions and mergers between 1998 and 2001 that added tens of thousands of employees, blurred chains of command and wrought chaos on his operations. His methods - and the demands of Wall Street - became overly dependent on quantitative measures of success at the expense of environmental and human risk.

After each disaster, Mr. Browne pledged to refresh his focus on safety, investment in maintenance and commitment to the environment. His successor, Mr. Hayward, followed suit, saying that BP's culture had to change. But the Deepwater Horizon tragedy - which bears many of the same traits as the company's past accidents - shows how difficult it has been for the company's leaders to shift BP's corporate values and live up to their promises.

The question becomes: did they try hard enough, and did the mechanisms of oversight, regulation and law enforcement work sufficiently to provide a recidivist organization the deterrent that could guarantee its compliance?

After its previous convictions, BP paid unprecedented fines - more than $70 million - and committed to spend at least another $800 million on maintenance to improve safety. The point was to demonstrate that the cost of doing business wrong far outweighs the cost of doing business right. But without personal accountability, the fines become just another cost of doing business, William Miller, a former investigator for the Environmental Protection Agency who was involved in the Texas City case, told me.

The problem then (and perhaps now) is that it is the slow pileup of factors that cause an industrial disaster. Poor decisions are usually made incrementally by a range of people with differing levels of responsibility, and almost always behind a shield of plausible deniability. It makes it almost impossible to pin one clear-cut bad call on a single manager, which is partly why no BP official has ever been held criminally accountable.

Instead, the corporation is held accountable. It isn't clear that charging the company repeatedly with misdemeanors and felonies has accomplished anything.

At more than $30 billion and climbing, the amount BP has paid out so far for reparations, lawsuits and cleanup dwarfs the roughly $8 billion that Exxon had to pay after its 1989 spill in Prince William Sound in Alaska. And BP will likely still pay billions more before this is finished.

And yet it is not enough. Two years after analysts questioned whether the extraordinary cost and loss of confidence might drive BP out of business, it has come roaring back. It collected more than $375 billion in 2011, pocketing $26 billion in profits.

What the gulf spill has taught us is that no matter how bad the disaster (and the environmental impact), the potential consequences have never been large enough to dissuade BP from placing profits ahead of prudence. That might change if a real person was forced to take responsibility - or if the government brought down one of the biggest hammers in its arsenal and banned the company from future federal oil leases and permits altogether. Fines just don't matter.

Abrahm Lustgarten, a reporter for Pro Publica, is the author of “Run to Failure: BP and the Making of the Deepwater Horizon Disaster.”

ProPublica is an independent, non-profit newsroom that produces investigative journalism in the public interest.   This article is republished with permission under a Creative Commons license.