Corporate financial crimes can take many forms. Reporting is the essence of accountability, another key concept and responsibility in the work of the manager. The federal government’s regulation of civil aviation began in 1926 with the passage of the Air Commerce Act, the intent of which was to help the infant airline industry reach its full commercial potential through increased safety standards enforced by a federal regulatory agency. The training of pilots, air traffic rules and regulations, certification of aircraft, and the establishment of airways were all among the first responsibilities addressed by this act and were given to the Secretary of Commerce. In 1966 President Lyndon B. Johnson created the Department of Transportation (DOT), which combined all federal transportation responsibilities in order to integrate and facilitate national interests in the distribution and transportation of goods. The DOT would become the agency under which the FAA was placed. However, Civil Aeronautics Board’s (CAB) accident investigation responsibilities were placed under the auspices of the newly formed National Transportation Safety Board (NTSB). The NTSB was given the responsibility of investigating accidents and making recommendations to the FAA, and the FAA, as a branch of the DOT, was given the responsibility of enforcing federal regulations within the airline industry. Congress passed the Airline Deregulation Act of 1978 (ADA of 1978) which…placed oversight of the FAA on the shoulders of the NTSB…The ADA of 1978 also changed the entire airline industry. For example, the ADA of 1978 introduced fare and route competition, and permitted unrestricted entry into domestic carrier marketplace. #RandolphHarris 1 of 19
While the ADA of 1978 was grounded in laissez-faire economics, with the intention of reducing consumer costs through supply and demand pressures, it is also important in the history of regulatory law in that it was a radical departure from previous approaches to fixing perceived shortcomings. The legislation represents a dramatic change in the thrust of regulatory reform. Until 1978, statutory reforms served only to build upon the basic regulatory framework established by the Civil Aeronautics Act of 1938. The 1978 legislation reflected a shift from an incremental to a decremental approach to regulatory reform in that it prescribed relaxation and eventual termination of classical regulatory controls. Unlike previous reform efforts, deregulation was seriously considered as a policy alternative and significantly affected the substance of airline regulatory reform. Within this context, then, the FAA attempted to promote the growth of start-ups like ValuJet while also overseeing their compliance with Federal Aviation Regulations. While success rates for most start-ups were low, ValuJet seemed to be the exception to the rule. In many ways, ValuJet justified the laissez-faire philosophy of the ADA of 1978, and was touted as a model startup company in the age of deregulation. Given that only three of the over 250 airline companies had survived since 1978, the success of ValuJet was important to the FAA (particularly in its capacity of promoting the economic success of the airline industry in the wake of deregulation) and to the several political administrations that supported it (id est, every presidential administration from Carter to Trump). #RandolphHarris 2 of 19
In terms of safety, the FAA had attempted to coax ValuJet into federal compliance rather than imposing stiff penalties. The FAA has inspected ValuJet planes nearly 5,000 times in the three years it was in operation, and had never reported any significant problems or concerns. It has become clear that since the FAA had a vested interest in the economic success of the airline industry as a whole, and ValuJet in particular in the wake of deregulation, they did not adequality pursue ValuJet’s violations. Flight is at the core of a powerful, wealthy industry of companies worth billions of dollars. These corporate giants employ tens of thousands of people and support the economies of entire cities, buy products and supplies from thousands of smaller businesses and important untold foreign money into the U.S.A. Their research labs keep the U.S.A. on the cutting edge of aviation, space and military technology. Their marketers satisfy millions of customers every day, racing to meet the increased demand for air travel. Some FAA inspectors, however, had serious concerns about ValuJet, even though the administration of the FAA did not. Internal reports and memos indicate that there were increasing problems that should have been addressed with regard to ValuJet’s rapid growth, enormous profitability, and subsequently atrocious safety records. However, the FAA did not know what to do with ValuJet. The airline’s safety record had deteriorated almost in direct proportion to its growth. ValuJet pilots made fifteen emergency landings in 1994, then were forced down fifty-seven times in 1995….but record would be surpassed within months with fifty-nine emergency landings from February through May of 1996…an unscheduled landing almost every day. #RandolphHarris 3 of 19
Also, the Department of Defense (DOD) had conducted its own review of ValuJet in consideration of a contract to transport military personnel. The DOD report on ValuJet was comprehensive and empathic: ValuJet was so replete with safety problems that the DOD would not give ValuJet a contract to transport government employees. Among the problems cited in the DOD report of ValuJet was its practice of using temporary solutions to deal with major problems like breakdowns, malfunctions, and accidents. On May 2, just nine days before the ValuJet crash, the FAA produced a nine-page report on the safety records of the various new airlines. Ordered by Anthony Broderick, who was then the FAA’s associate administrator of regulation and certification, the report was prepared by Bob Matthews, an analyst with the FAA’s office of Accident Investigation. Mr. Matthews had two sets of data, one with SouthWest included in the new airline starts, and one without. Contrary to their claims, ValuJet’s safety record was far from exceeding FAA standards. While the other start-ups had one accident annually, ValuJet’s average five. To make matters worse, ValuJet’s accident rate was 14 times the major air carriers, and its serious accident rate was 32 times higher. Additionally, other incidents uncovered by the FAA before the crash of flight 592 included planes skidding off runways, plans landing with nearly empty fuel tanks, oil and fuel leaks that were left unfixed for long periods of time, and inexperienced pilots making errors of judgement. In an internal FAA report on ValuJet, there were nearly 100 safety-related problems. However, the FAA did not officially recommend closing ValuJet down until after the crash of flight 592. #RandolphHarris 4 of 19
While ValuJet’s failure to comply with safety regulations and the FAA’s unwillingness or inability to enforce them are troubling enough, it is evident that the NTSB had made safety recommendations to the FAA long before the crash of flight 592 that could have prevented the accident. To further highlight this illustration, in 1991 the NTSB had recommended that the FAA reevaluate the classification of class D cargo holds. The first recommendation (A-81-012) from the NTSB was that the FAA reevaluate the class D certification of the Lockheed L-1011, with the suggestion that it be changed to class C, which requires extinguishing equipment or changing the liner material to insure fire containment. The second recommendation (A-81-013) was to reevaluate class D cargo holds over 500 cubic feet to ensure that any fires would die from oxygen starvation and that the rest of the plane was properly protected. This recommendation came after a plane operated by Saudi Arabian Airlines in 1980 caught fire shortly after departure. The plane landed successfully, but all 301 occupants died. The fire on the Saudi Arabian Airlines plane started in the class D cargo hold. The FAA responded by stating that the NTSB recommendation should be addressed by making sure that class D cargo liners be made of fire-resistant materials better than ones that were being used at the time. In 1998 American Airlines flight 132 experienced a fire in its class D cargo hold en route to Nashville Metropolitan Airport. After investigating this accident, the NTSB urged the FAA to evaluate the possibility of prohibiting the transportation of oxidizers in cargo compartment without smoke detectors or extinguishing systems. #RandolphHarris 5 of 19
After several exchanges of correspondence, the FAA extinguished systems. After several exchanges of correspondence, the FAA informed the NTSB that its cost/benefit analysis revealed the $350 million price tag attached to this recommendation was not feasible. The FAA took the position that it was not going to force the airline industry to make thee improvements because it felt they were not cost effective in terms of the amount of money required to possibly prevent a small number of accidents. The deaths of 110 people in the crash of ValuJet flight 592 were caused by a number of factors on the individual, institutional, and structural levels of analysis. The proximal cause of the crash was the failure of SabreTech and ValuJet employees to follow safety procedures regarding the preparation, identification, and storage of potentially hazardous materials. Indeed, had these workers correctly capped the oxygen generators, flight 592 might have landed safely in Atlanta. One might also say that the deaths could have been avoided if the FAA had followed the NTSB’s recommendation to equip class D cargo holds with smoke detectors and fire suppression equipment. However, to stop the analysis of the crash here would be a serious error, because, like mot organizational crimes, a complicated nexus of relationships enveloped the actions and omissions that facilitated the crash. Understanding what we term “normal accidents” requires attention to the interaction of multiple failures within and between systems and organizations. #RandolphHarris 6 of 19
Organizational crime theorist have relied on three basic concepts to explain the crimes committed by corporations and governments: organization motivation or goals, opportunity, and social control. The significance of these concepts to a structural-level explanation of state-corporate crime can be encapsulated in the proposition that organizational crime results from a coincidence of pressure for goal attainment, availability and perceived attractive of illegitimate means, and an absence or weakness of social control mechanisms. While each of these three core concepts can be examined on the micro and meso levels of analysis, our theoretical interpretation focuses more on how structural relationships affect organizational practice and policy. Following both state-corporate crime theory and the systems or “normal accidents” theory, we will examine the interaction of the technical, organizational, and structural dimensions of the crash. The goal of capital accumulation can be a highly criminogenic force for organizations. Oftentimes, it is posited, the motivation to secure profit can direct organizational practices and policies in a fashion injurious to consumer and employee safety. As profit-seeking organization, ValuJet and SabreTech employed a number of questionable techniques to maximize profit. ValuJet’s radical cost-cutting procedures included using older planes in various stages of disrepair, outsourcing all its maintenance, and providing very low wages and benefit to employees. #RandolphHarris 7 of 19
SabreTech was also experiencing a high degree of pressure for capital accumulation at the time directly preceding the crash by agreeing to complete their work on the oxygen generators quickly or incur a loss of $2,500 per day. The other organization involved in the crash, the FAA, was not a direct profit-seeking entity, but one designed to both regulate and facilitate the accumulation of capital for airline companies. The FAA’s refusal (on economic grounds) to institute specific safeguards that could have prevented the catastrophe of flight 592 illustrates that injurious consequences that can result not only from pursuing capital, but also from state encouragement of capital accumulation. A major U.S.A. state has been to promote capital accumulation, and the state’s regulatory function must not be so severe as to diminish substantially the contribution of large corporations to growth in output and employments. To further highlight this illustration, while state regulatory agencies have been created to help protect workers (Occupational Safety and Health Administration), the environment (Environmental Protection Agency), and consumers (Consumer Product Safety Commission), these agencies generally do not undermine an industry’s fundamental contributions to the functional requirements of the economy. In like manner, the FAA would not be expected to seriously compromise the contributions that the airline industry makes to local, community, and national economies. The difference, however, between the FAA and other regulatory agencies is its expressly stated dual mandate of both regulating their airline industry and promoting its economic success. #RandolphHarris 8 of 19
The three organizations involved in the ValuJet disaster, while distinct in many ways, interacted in such a way as to produce a great social injury. Like other instances of state-facilitated state-corporate crime, the pursuit of profit was critical in the formulation of the FAA, SabreTech, and ValuJet organizational policy and practice. While organizations that restrain from crime might also have a strong interest in capital accumulation, there was a very distinct set of organizational relationships which led to the crash of flight 592. This particular context was characterized by little social control over the actors and organizations and ample opportunity to commit crimes, which together helped shape organizational definitions of acceptable risk. A basic tenant of organizational crime theory is that low levels of externa social control provide opportunities for organizations to engage in crime. Not only a competitive environment shapes organizational behavior, but also the regulatory environment (autonomy and interdependence), which is affected by the relationship between regulators and the organizations they regulate. The symbolic relationship between those who regulate and those being regulated may vary in both depth and breadth, but ValuJet coupling resulted in an “interactive complexity” conducive to catastrophe. Deregulation and the contradictory role of the FAA as regulator and promoter of the airline industry provides the larger background for ValuJet’s organizational genesis and persistence. We have described the deficiencies and contradictions in the structural control of the airline industry brought about by deregulation, and have argued that this is related to the FAA’s organizational disregard for the unsafe nature of many of ValuJet’s planes and practices. #RandolphHarris 9 of 19
Instead of aggressively mandating the ValuJet place it fleet into compliance with applicable regulations, the FAA held up ValuJet as the poster child of deregulation—a victor among many losers in the market of air travel in the post-deregulation era. In this sense, the FAA’s failure to practice its mandate to make air travel safe for consumers through the vigorous inspection of airline companies and their planes facilitated the crash of flight 592. Following this line of theoretical reasoning, had the FAA enforced federal airline safety regulations (id est, had it exerted formal control over ValuJet and SabreTech), the companies may not have been so indifferent to the quality and safety of their activities and commodities. Such oversight would have created an environment where both SabreTech and ValuJet would be more likely to communicate to their employees that productivity and safety are important and rewardable. In other words, the “normalization” of the deviance that produced the ValuJet “accident” would not have gone unnoticed or unchecked. The series of oversights and confusion regarding the content and condition of the boxed holding the oxygen generators are related to how SabreTech and ValuJet rewarded the behavior of employees that contributed to productivity and efficiency, but not behaviour that contributed to safety. Following this line of reasoning and the available data, then, the unspent and uncapped oxygen containers made it into the airplane because employees of SabreTech and ValuJet were not adequately trained, rewarded, or encouraged to conduct careful and complete inspections of materials to be transported by air. #RandolphHarris 10 of 19
This explanation is consistent with the findings of a number of studies that illustrate the power of organizational culture over the individual and collective actions of employees in such diverse settings as the Holocaust, police violence, and U.S.A. human radiation experiments. Our interpretation is also consistent with the notion of “the normalization of deviance,” a condition in which deviations from technical protocols gradually and routinely become defined as normative. The normalization of rule breaking is applicable to the manner in which the oxygen canisters were processed, but it is institutionally situated as well. Risky practices, which can be an outcome of or a precursor to the normalization of deviance, became defined as acceptable for capital accumulation (ValuJet) and capital facilitation (FAA). While the crash was an undesirable outcome for all the organizations involved, a number of matters related to the cause of the crash were defined as acceptable risks in light of social phenomenon, the sociology of mistake. As we found with the Challenger explosion, the ValuJet crash can also be interpreted as an event related to how environmental and organizational contingencies create operational forces that shape World view, normalizing signals of potential danger, resulting in mistakes with harmful human consequences. Let us return to an extreme conceptual situation that is the true realm of Lawlessness and Economics, namely an economy lacking any government-provided legal institutions or organizations for protection of property rights and enforcement of contracts. #RandolphHarris 11 of 19
Protection of property rights raises some issues. Violation of property rights is a unilateral action taken by the predator; this differs from contractual relationships, which are based on voluntary consent of both or all parties. Indeed, the owner of a property may not even know the identity of the potential thief or extortionist. Then the potential victim must take unilateral steps to deter the potential invader, and to detect and punish one if deterrence fails. The property owner may try to do this directly, diverting resources from other productive uses into protection, or one may hire a specialized protector—a private guard or, again, organized crime. In some countries and at some times the government or its agents may be the thieves who try to extract as much as they can from the citizens for their own consumption. The citizens cannot hope to resist the government’s coercive power with force, but may attempt to hide their assets. Also, the prospect that the fruit of one’s efforts will be taken by the government will be distinctive. Anecdotal evidence suggests that the various alternative institutions of governance can be very effective. Only a handful of documents contain[ing] allegations of misconduct in the archives of the correspondence among Maghribi traders. In the numerous transactions that occur every year among the 2000 members of the New York Diamond Dealers’ Club and the numerous non-members who trade there, only 30-40 trades result in a judgment from the arbitration system of the club. Exact figures are not available for the total number of transactions or the number of cases where the defendant refuses to pay the judgment, but a safe guess is that the former is in the hundreds of thousands and the latter in single digits. #RandolphHarris 12 of 19
Some may regard this as evidence for fundamental goodness of human nature. However, the record of failures of other less-well-designed institutions of governance suggest otherwise. Less developed countries with poor property-right and contract-enforcement systems fail to attract foreign investment and sustain growth. Thus we should conclude that institutions can be effective deterrents to opportunism, but that in their absence, beneficial economic activity is likely to be hindered by a well-grounded fear of being cheated. While land, labour, raw materials and capital were the main factors of production in the Second Wave economy of the past, knowledge—broadly defined here to include data, information, images, symbols, culture, ideology and values—is now the central resource of the Third Wave economy. As we have seen, the appropriate data, information and/or knowledge make it possible to reduce all the other inputs used to create wealth. However, the concept of knowledge as the “ultimate substitute” is still not widely grasped. Most economists and accountants are mystified and put off by this idea because it is hard to quantify. What makes the Third Wave economy revolutionary is the fact that while land, labour, raw materials and perhaps even capital can be regarded as finite resources, knowledge is for all intents inexhaustible. Unlike a single blast furnace or assembly line, knowledge can be used by two companies at the same time. And they can use it to generate still more knowledge. Thus, Second Wave economic theories based on finite, exhaustible inputs are inapplicable to Third Wave economies. #RandolphHarris 13 of 19
While the vale of a Second Wave company might be measured in terms of its hard assets like buildings, machines, stocks, and inventory, the vale of successful Third Wave firms increasingly lies in their capacity for acquiring, generating, distributing and applying knowledge strategically and operationally. The real value of companies like Compaq or Kodak, Hitachi or Siemens, depends more on the ideas, insights and information in the heads of their employees and in the data banks and patents these companies control than on the trucks, assembly lines and other physical assets they may have. Thus capital itself is not increasingly based on intangibles. UN Framework Convention on Climate Change (UNFCCC) has a goal of cutting the emissions of carbon dioxide in order to keep the global temperate increase within at least two degrees Celsius compared to the preindustrial period. However, there is still no clear and internationally accepted scientific evidence that emissions of CO2 is the major factor of global warming—on the contrary, we hear a lot of arguments against this assumption. Even some prominent champions of the fight with C)2, beginning with Al Gore, have openly admitted that it may not be so. The data published by experts including James Hansen, director of NASA’s Goddard Institute for Space Studies and “the grandfather of the global warming theory,” shows that gases other than CO2 are responsible for most—and currently maybe even for all—of the global warming, and that major greenhouse has is methane. Furthermore, there is a lot of skepticism about global warming. #RandolphHarris 14 of 19
The negotiations framework based on shaky presumptions is doubtful by definition. At least it would be safe to say that, to draw a sound conclusion on whether the road has been chosen is right or not, much more preliminary scientific work has to be done. However, not surprisingly, once the UN talk machine has started, it cannot be stopped. Currently, the goal is to reduce global carbon dioxide emission by 45 percent by 2023 from 2010 levels, and reach net-zero emission by 2050. Many countries will argue, however, that they cannot accept binding obligations because they have the right to develop and that, as the problem itself was caused by the industrial development of the West, it is exactly the West tht has to take the major responsibility for the emission cuts. These reductions are associated with unacceptable sacrifices in terms of growth and development. Other countries may not even be willing to compromise and go along with this scheme. However, developed countries will have to reduce their emission in absolute terms on a mandatory basis. Developing countries will make reductions on a voluntary basis, mostly targeting the levels of emissions per unit of GDP. The West will have to support those reductions financially and technically—by the way, allocating a lot of funds in times when its own finances are in disarray. This is it—a very asymmetrical deal. A more favorable combination for the West is hardly feasible. As this scheme is being launched, the West knows it is getting ready to bear the heaviest environmental burden in terms of both reductional levels and financing. #RandolphHarris 15 of 19
Directories of family agencies of all types are testimony to the variety of ways in which interested people attack what they conceive to be the problems of the family. While proposals are heard from time to time that these many family agencies ought to be co-ordinated, such proposals have to be carefully scrutinized before the can be properly evaluated. On the one hand, it could mean subordination to some authoritatively ordained set of ends; on the other hand, it could mean further freeing the channels of communication among agencies, so that experience could be more fully shared and consensus widened, with decisions involving all arrived at through compromise or synthesis of recognized, conflicting interests. The adoption of the annual budget of a community chest or council of social agencies is an excellent model of such decision-making. It involves politics, strife, compromise, and restless revision of goals and means, but it does create a kind of working unity—even the common understanding of respected differences—which is faithfully believed by Americans to be superior to the superficial appearance of harmony found in an organization dominated by a supreme value and a ruling elite which professes to embody it. Whether it is the society that moulds the family, or whether it is the other way around, there is much evidence for supposing the same correlation between the democratic family and democratic society as between the authoritarian family and authoritarian society. Full and free participation by wife and children—to the limits of their capabilities—in the discussion and decisions affecting the whole family makes the family members willing to dissent and prepare them to respect dissent in others. Sympathetic consensus and agreement to disagree are essential to our characteristic voluntary associations. #RandolphHarris 16 of 19
There are also other functions of the family: status placement and cultural continuity. By this, we mean identification of the person through one’s family with the social class into which one was born or hopes to rise, and indoctrination in the subculture of that class. To accept such concepts seems to imply acceptance of the family as a permanent device for insuring that advantageous and disadvantages will be passed on from one generation to the next. That families have so behaved is manifest; to assume that such behavior is inevitable and necessary is neither manifest nor helpful analytically. Rules against nepotism are broken, but they are also kept, and social mobility is almost demanded of next generation. True confessions of conduct disorder should come from deep conviction and not compulsion. It should be made only to God, if the conduct disorder is one only known by God; to a man personally, and in private, when the conduct disorder is against a man; and to the public only when the conduct disorder is against the public. Confession should never me made under the impulse of a compelling emotion but should be a deliberate act of the volition—choosing the right and then putting things right, according to the will of God. That psychopathological offender’s kingdom gains by public confession are evident from the devices the enemy uses to push men into them. Psychopathological offenders drive a believer into conduct disorder which they forced one to commit—contrary to one’s true character—in order to make the conduct disorder which they forced one into a stigma upon on for the remainder of one’s life. #RandolphHarris 17 of 19
Ofttimes the “conduct disorder” confessed have its rise in the believer from the insertion by wicked spirits of feelings as consciously abhorrent and loathsome as were the former “conscious” feelings of Heavenly purity and love one was experiencing when one declared that one knew of “no conduct disorder to confess to God,” or “no rising of a psychopathological impulse” whatever—which had led one to believe in the complete elimination of all conduct disorder from one’s being. The counterfeit manifestations of the divine presence in the body in agreeable and Heavenly feelings can be followed by counterfeit feelings of sinful things wholly repugnant to the volition and central purity of the believer—who is as faithful to God now in his hatred to conduct disorder as in the days when he revelled in the sense of purity given consciously to his bodily frame. The ground of being is closely conducted with the depth-dimension. As a symbol, the ground of being points to the mother-quality of giving birth, carrying, and embracing, and, at the same time, of calling back, resisting independence of created, and swallowing it. “Ground,” therefore, evokes the image of the Earth, that upon which we stand, which underlies and sustains us. Everything that is rests upon being-itself as its ground, for, in order to be, a being must share in being-itself, must receive its being from the infinite source of being. Immediately one is tempted to conceive the ground being as cause or substance. #RandolphHarris 18 of 19
However, if God is called the cause of being, He is enmeshed in an endless but finite chain-reaction of causes and effects, for effects drag causes down to their own level. If God is termed the substance of being, it means that He is imprisoned in accidental beings, and they, in turn, forfeit their independence and freedom. We must accept a symbolic sense for cause and substance which is free from the finiteness of the literal sense and which relates beings to God without diminishing His infinity. Symbolically, God is prima causa and ultima substantia in the sense that God is the cause of the entire series of causes and effects, He is the substance underlying the whole process of becoming. As symbols, cause and substance amount to the same thing—the “underlying,” the ground of being. Ground, therefore, oscillates between cause and substance and transcends both of them. The notion of ground leads to the notion of abyss as naturally as the image “mountain” conjures up the image “valley.” From the viewpoint of finite being, the ground of being as the source and power of being is creative, positive, and the mysterium fascinosum. However, by its very inexhaustibility and the unlimited force of its power, the ground of being infinitely surpasses finite being. In this sense, it is negative; it is tremendum. For finite being is lost, swallowed up in the bottomless depths of the ground of being. The ground becomes the abyss. #RandolpHarris 19 of 19
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Randolph Harris II International 