Recent Court Decisions Expand Corporate Power
By Jim Cavanaugh, SCFL President
In just the very first month of this new year the courts, at both the state and federal level, have awarded to corporations new tools with which to pillage our economy and our democracy.
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In Wisconsin, the Fourth District Court of Appeals (the step between Circuit Court and Supreme Court) overturned a jury award of $6.5 million against the former owners of Communications Products Corp., a maker of stereo speaker components in Lancaster. The Appeals Court judges weren’t particularly happy with their own decision, but claimed they were hamstrung by a dubious State Supreme Court decision in 2004.
CPC’s former owners, Daniel Virnich and Jack Moores, through exorbitant salaries and various other schemes, milked the company of millions of dollars in less than a decade and a half. Then, when they defaulted on a big loan they had gotten from a local bank, a judge declared the company insolvent and appointed a receiver to go after these guys for “excessive compensation and self-dealing.”
A Grant County jury determined that they had “breached their fiduciary duty to the company” and directed them to pay back $6.5 million, most of it going to the local bank.
This case had two very ironic aspects. First, one of the Judges who felt compelled by the earlier Supreme Court precedent to overturn the jury’s verdict, noted how bad that precedent is. Judge Paul Lundsten said the Supreme Court ruling allows owners “to strip many of the remaining assets of the ‘sinking ship’ without fear of running afoul of a duty to creditors.” This, of course, is exactly what Virnich and Moores did.
Second, two of the state’s largest business organizations, who usually are in league on all matters, found themselves on opposite sides in this case. The Wisconsin Manufacturers and Commerce, which appears to have greed and avarice written into its mission statement, or at least its operating policies, filed a friend-of-the-court brief, on behalf of the looting former owners. The Wisconsin Bankers Association stood on the opposite side with the Grant County bank and noted that this decision will only serve to make tight credit even tighter.
Meanwhile, the CPC workers, who organized into Sheet Metal Workers Local 565 a couple years before Virnich and Moores pulled the plug, saw their wages and benefits held down because of this mismanagement. In the words of Local 565’s Tim Sullivan, “These absentee owners only put $150,000 of their own money into the business and pulled $10.5 million out before they literally bled it dry – that’s exactly what they did.”
And Daniel Virnich? Well, he got himself a mansion in Colorado, which his creditors now can’t touch.
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A week before the Wisconsin Appeals Court ruling, the U.S. Supreme Court issued its infamous “Citizens United” decision in which a narrow 5-4 majority stretched the limits of credulity to give corporations the right to spend unlimited amounts of money in elections.
Plenty has been written about this decision. So I don’t need to rehash it here. Suffice it to say that the court’s reasoning was so tortured that it elicited an unprecedented critique by the President in his State of the Union message and has produced a lengthy list of Congressional proposals to either overturn the decision by constitutional amendment or to pass legislation to ameliorate its effects.
One of my all time favorite movies is Rollerball, which debuted 35 years ago. An online plot summary for this movie begins its description with “In a futuristic society where corporations have replaced countries....” The movie is set in the year 2018. In January 2010, our courts have reminded us that the year 2018 isn’t very far off.