Broken Windows…

The “Broken Window” theory of criminology espouses that we pay particular attention to even the most minor of infractions. In so doing we project an atmosphere of order and lawfulness ergo preventing larger crimes from happening. Many have said that what happened in Ferguson and Staten Island are emblematic of that. I don’t have any quarrel with the theory no matter how tragic the outcome.

Davita is a medical technology firm here in Denver. For years they  have specialized in dialysis treatment which has been a comfort to millions. Like any red blooded profit driven company they wanted to ensure their flow of patients. (No play on words). So they opened dialysis centers and then at artificially low prices sold those clinics to renal specialist docs. Then after the appropriate wait time bought them back at a substantial profit to the aforementioned sawbones on the condition they refer all future patients to the facility. Caught red handed as it were Davita paid $389 million in fines. Clink.

Not used to being in the headlines the oncologist industry came to the fore a few weeks ago under the watchful eye of 60 Minutes. The gist was that a new cancer drug that cost twice as much as an older competitor was adjudged by Sloan Kettering to be no more effective. After such unwanted publicity Sanofi lowered the price of the new drug by 50%. Fair enough.

The plot thickens as the price decrease was not necessarily passed on to the patient or in this case Medicare. You see the oncologist as in MD sold the life saving drug directly to his patients. Under the guise of being more convenient for his clients the practice now became more profitable by providing both care and the medicine in one stop shopping. Most did not lower the price. Medicare has to pay the going rate no matter what because Congress said they couldn’t negotiate. Which drug do you think gets prescribed? Clink.

Enter Supreme Food Service. This erstwhile friend of the armed forces had a contract to provide food and water to our troops in the Middle East. In the warlord tradition of the Middle East, Supreme buried a whole series of overcharges to the point where they were selling water at ten to twelve times the going rate. They settled with the Defense Department for somewhere in the neighborhood of $450 million. Clink.

Over the past few months the auto industry has issued recalls for more than 50 million cars. Since we sold about 13 million vehicles in 2013 that is close to a four year inventory of new cars. They ranged from auto ignition switches to air bags to bad brakes. All life threatening without any exaggeration. Takata the maker of the airbags is resisting a further recall. See the malaise is international. Clink.

Last but not least are our friends from the securities industry. Their malfeasance has ranged from selling mortgage backed securities in which they knew full well there were flaws to rigging LIBOR. In the first instance they will tell you pressure from Washington (as in the devil) made them do it. Barney and Bill wanted every American to have a home whether or not they could afford it. They had no other choice. They did pay many billions of dollars in fines but that was without admitting any guilt. Clink.

The bigger piece was the LIBOR rate fixing. This is the governing factor in interest rates for over $5 trillion a DAY worldwide. Now the boys on various trading desks got together everyday and fixed this to their own advantage. It wasn’t one firm but a bunch of dealer and dealer banks that openly colluded. Damn regulators. We can police ourselves.Billions to settle. Clink.Clink.Clink.

When you get into all of these you realize that it was not just one rogue trader or VP although we can always find one fall guy to take one for the team. It is many times a staff or department or an entire organization that commits the felony. People of all sorts big and small knew what was going on and either looked the other way or were complicit in the caper.

These were the big guys. Everyday all over America there are thousands of instances of theft, corruption, payoffs and dirty tricks. I am not trying to play moralist because indeed it is a fact of life. Yes it has gone on for centuries. There are good guys and bad guys. I just wonder if the scales are tipping so far we glibly accept the status quo as necessary to do business or that great panacea,”These are really victimless crimes” ?

A nation or body politic is defined by its mores. It is who we are. But it must be consistent. If we are gong to nail a guy for stealing cigars or selling “indie” cigarettes the same rule of law has to be meted throughout. Is there a big difference between beating a guy senseless in the ghetto or putting a competitor our of business through illegal pressure? I dunno. But sure as hell if we are going to get indignant and demand we fix broken windows in one section of the world we better be ready to do it in all.

As always
Ted The Great

Factoids:

Medicare Part D or the prescription benefit section prohibits Medicare from securing drugs at cut rate prices. Essentially they have to pay the going rate without any negotiation. The VA on the other can bargain and pays about 50% less. This was all engineered by Louisiana Representative Billy Tauzin(Cajun of the Capitol) who after passage quit Congress the following week to become the head of lobbying for the pharmaceutical industry.

The massive fines paid by banks, docs etc are a tax deductible time. So a $100 million fine actually becomes $65 million after tax. It is one case where they love the high corporate tax rate.

The In the U.S. unreported income is estimated to be $2 trillion resulting in a “tax gap” of $450–$500billion. This is the result of being paid cash or under the table for goods and services.

Illegal income is derived from drugs, prostitution, embezzlement, etc. Imagine a typical weekend in New York City. Experts estimate that at least one percent of the population – 80,000 plus – spends $200 on illicit drugs. That alone would amount to $16 million dollars a week or $832 million a year. That is just drugs and that’s just New York.

2 thoughts on “Broken Windows…

  1. Wow….what a read to start my day….so true! You are an incredible writer….not to mention thought provoke in your discussions. ..love it

    Sonya Neumann Executive Director Sent from my phone

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