Why the world is closing in on the U.S. economy
Foreign investors find the U.S. a very congenial place. They buy firms, play the market, and get tidy tax breaks.
Editor's note: The following story ran Oct. 23, 1991, on Day Four of the nine-day "America: What went wrong?" series published in the Inquirer.
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Want to take advantage of the stew of rules, regulations and laws that govern the U.S. economy and the conduct of business in America? And maybe make a few million dollars and cut your taxes along the way?
Here are a few tips.
- Become a fugitive from justice and set up operations in a foreign country to conduct business, even to deal with government agencies back home.
- Become a citizen of a foreign country, in order to play American stock and bond markets, or even to buy and sell American businesses, at lower tax rates than you'd get staying at home in the United States.
- Form an American subsidiary of a foreign-owned company so you can pay lower taxes than your U.S.-owned competitors.
- Start an American company, and then move your factory, jobs and investment dollars offshore.
Any one of those setups is now to your advantage because of the way the rules that govern business in this country have been written and rewritten over the last 20 years.
Why would the U.S. government rig the game that way?
In part because of the influence exercised by special interests in Congress and in federal agencies. In part because of good intentions gone awry.
One of the consequences: American companies, and companies worldwide, are now conducting a replay on a global scale of a business practice that became common here in the 1960s.
That was the decade that U.S. companies began playing off one region of the United States against another, one state against another, one city against another.
The objective was to locate a new plant or relocate an existing one in whatever area would offer the greatest tax incentives - so the company would have to pay the smallest amount of local and state taxes - and where employee wages and fringe benefits could be held down the most.
Now that practice has gone global, as corporations and financiers play off one country against another, one national tax system against another, one country against its possessions.
President Bush put a glowing light on it in February in his annual report on the state of the economy:
"The benefits of global economic integration and expanded international trade have been enormous, at home and abroad. U. S. firms gain from access to global markets; U. S. workers benefit from foreign investment in America. . . . Competition and innovation have been stimulated, and businesses have increased their efficiency by locating operations around the globe. "
The aptly named Marc Rich quite likely feels the same way.
You may not recognize his name. But you quite likely have used one of his products.
Rich, a member of Forbes magazine's directory of the 400 richest Americans, operates a highly secretive and successful commodities business around the world.
Through a maze of closely controlled companies, he buys and sells billions of dollars worth of oil, copper, nickel, wheat, alumina and other commodities.
What makes this remarkable is the fact that Marc Rich is a fugitive from the U.S. government.
Back in 1983, Rich; two associates, and one of his companies, Clarendon Ltd., were accused by the federal government of failing to pay taxes on profits from rigging the price of crude oil during the 1979-80 energy shortage, then hustling the money out of the country.
In order to continue doing business, Clarendon pleaded guilty to the charges and paid $172 million in taxes and penalties.
Rich fled the country, apparently unwilling to risk the possibility of a trial, conviction and a sentence that could add up to more than 300 years in prison.
Ever since the indictment, Rich has been operating from Zug, Switzerland, where he lives in a multimillion-dollar mansion.
Except, of course, when he is relaxing at his multimillion-dollar estate at Marbella on the coast of Spain. That's the estate, according to published accounts, with the swimming pool carved into a cliff overlooking the Mediterranean.
Whether in Switzerland or Spain, Rich directs the buying and selling of assorted commodities - he virtually controls the aluminum market - in the United States and around the world.
He also has had an impact on the jobs of American aluminum workers.
People like Joseph Gladden of Ravenswood, W. Va., who, along with 1,700 other employees, has been locked out of the aluminum smelting plant that is owned by a company called Ravenswood Aluminum Corp.
Gladden, 41, began working at the plant in 1971, when it was owned by Kaiser Aluminum & Chemical Corp. Those were the days when American business operated in a way that came to seem hopelessly antiquated and naive to the wheeler-dealers who moved in during the 1980s, with the federal government paving every step of the way. The days when a company actually built a plant and ran it for the long term.
For Gladden, those days ended in 1986. That's when the first of a dizzying series of changes ensued. Joseph Gladden was about to meet the global economy.
It began that year when British takeover artist Alan E. Clore seized control of the company. Clore lasted until the stock market crash of October 1987, when he defaulted on bank loans.
The next buyer was an American takeover artist, Charles E. Hurwitz of Houston.
To pay down the debt incurred when he bought Kaiser Aluminum, Hurwitz sold off pieces of the old company, including the Ravenswood plant.
Enter the third set of new owners in three years - bankrolled by a mysterious company with multiple ties to Marc Rich.
How is it possible for a fugitive to conduct business-as-usual in the United States?
The answer, simply, is the government rule book.
As The Inquirer has reported over the last three days, that rule book rewards the sort of dismantling of companies that forces middle-class workers into lower-paying jobs or, in many cases, eliminates their jobs altogether.
As a result, the middle class is shrinking, and its standard of living is falling while, at the same time, ever more jobs are being created in the $100,000 and up income group.
The authors of that rule book, a succession of lawmakers and presidents, regulators and administrators, have chosen to write the rules in favor of special interests - from wealthy individuals such as Marc Rich to influential businesses - rather than create a level economic playing field for everyone.
Nowhere is the imbalance more evident than in the rules - or, more accurately, the absence of rules - relating to foreign investment in the United States, foreign trade, the conduct of U. S. businesses abroad, unrestrained imports, and the global economy.
The transformation of once-American-owned businesses such as the Ravenswood plant into outposts controlled from abroad is part of a larger picture that is unfolding across America.
The blockbuster movie you went to see or rented at the video store, Home Alone, was distributed by Twentieth Century Fox, which is owned by Australia's News Corp., the media conglomerate of Rupert Murdoch.
The television game show that you watch faithfully every evening, Jeopardy, is produced by Columbia Pictures Entertainment, which is owned by Japan's Sony Corp.
The bestseller that you read, Stephen King's The Stand: The Complete and Uncut Edition, was published by Doubleday & Co., owned by Germany's Bertelsmann AG.
Even your favorite fast-food hamburger place, Burger King, is owned by Britain's Grand Metropolitan PLC.
The deep-heating ointment used to ease your aches and pains is made by the Mentholatum Co. Inc., which is owned by Japan's Rohto Pharmaceutical Co.
The Arrow shirts that you buy are made by Cluett Peabody, which is owned by France's Biderman Group.
The Tropicana orange juice on your breakfast table is made by the Tropicana Co., which is owned by Canada's Seagram Co. Ltd.
The Stroehmann bread you like so much is made by Stroehmann Bakeries, which is owned by Canada's George Weston Ltd.
The locks on your doors are made by Yale, which is owned by Britain's Valor PLC.
And your favorite vacation golf course, the Pebble Beach (Calif.) Golf Course, is owned by a Japanese investor, Minoru Isutani.
Once, all were American-owned.
To be sure, foreign-controlled corporations in America are still a comparatively small slice - 7 percent - of total U.S. business receipts.
But from 1979 to 1987, the revenue of foreign-controlled corporations rose from $242 billion to $685 billion - an increase of 183 percent. The revenue of U.S.-owned companies went up only 52 percent.
While the 1987 statistics are the latest available, it is believed, given the large number of foreign acquisitions of U.S. businesses since then, that their annual revenue has reached $1 trillion.
The growing presence of foreign goods and foreign-owned properties in the United Sates has been accompanied by generous tax breaks that Washington has extended to foreign corporations and foreign investors.
Internal Revenue Service data show that companies owned by the Japanese, Germans, British and other foreign interests are claiming far larger deductions on their U. S. tax returns than American companies do.
The oversized writeoffs mean that foreign-owned companies are more likely than American companies to file a tax return showing little or no profit. This allows them to pay little or no U. S. income tax.
In 1987, only 41 percent of foreign-owned companies reported a profit on their U.S. tax returns. By comparison, 55 percent of U. S. companies showed a profit.
Revenue of foreign-controlled companies in the United States rose 50 percent from 1984 to 1987. Their taxes went up 2 percent.
Japanese-controlled companies in this country have done well, both in boosting their sales and avoiding U. S. income taxes.
Their revenue rose 64 percent from 1984 to 1987, going from $113 billion to $185 billion.
Yet the federal income taxes paid by these Japanese-controlled companies went down, rather than up - falling 14 percent, from $1.1 billion in 1984 to $951 million in 1987.
If you enjoyed the same increase in income that the Japanese companies achieved, your annual salary would have gone from, say, $30,000 to $49,200 in those three years. Simultaneously, the federal income taxes you paid would have dropped from $2,729 to $2,347.
Residents of foreign countries who buy and sell stocks, bonds and government securities in this country do even better.
In 1988, residents of Japan collected $8.4 billion from their investments in this country, mostly in interest and dividends. They paid $510.6 million in U. S. income taxes on that money. That is a tax rate of 6.1 percent.
By contrast, American workers with incomes between $40,000 and $50,000 paid taxes at an 11.6 percent rate.
Residents of the United Arab Emirates fared even better. They collected $312.9 million from their American investments. They paid $443,000 in U. S. income taxes.
Their tax rate: One-tenth of 1 percent.
American workers struggling to achieve a middle-class lifestyle, on the other hand, were taxed at 53 times that rate. Individuals and families with incomes between $13,000 and $15,000 paid taxes at a 7.4 percent rate.
But take a closer look at the deal the U.S. government has arranged with the United Arab Emirates and other countries.
In theory, foreigners are taxed lightly on their income in the United States because it is assumed they pay income taxes in their home countries.
That's the theory. Reality is quite different.
The United Arab Emirates, for example, imposes no income taxes on its citizens. It does levy a religious tax. But, as one U.S. tax official explained: "They have no enforcement mechanism. No reporting. You're just supposed to pay it because (of) your conscience. My understanding is it's a rather modest tax in terms of collection. "
Overall, wealthy residents and corporations in foreign countries collected $31.8 billion, mostly in interest and dividends, from their U. S. investments in 1988. They paid $1.7 billion in U. S. income taxes
That's a tax rate of 5.3 percent - less than the 5.8 percent rate paid by Americans who earn $7,000 to $9,000 a year.
Viewed another way: American workers who earned between $30,000 and $40,000 in 1987 paid, on average, $3,708 in income tax.
If they had been taxed at the same rate that Congress granted residents of the United Arab Emirates, their average tax bill would have totaled $35.
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How is all this possible?
There are a number of interwoven reasons, all related to the government rule book:
Enactment of laws and regulations to encourage an uncontrolled global economy. Outdated tax-treaty concepts. The State Department's long practice of catering to special foreign interests. The IRS's inability to commit sufficient resources to audit corporate tax returns in general, and foreign- owned corporations in particular. And the complexity of the Internal Revenue Code.
For some measure of that complexity, consider one aspect of a business that operates globally - the pricing and sale of products among affiliated companies.
Let's say the Global Widget Co. manufactures a part used in making widgets at a factory in a country with a low corporate tax rate, say 10 percent.
It costs Global Widget $5 to make the part, which it sells to its U. S. subsidiary for $50. The U. S. subsidiary, in turn, sells the part to the American public for $55.
The U.S. subsidiary books a profit of $5 on the widget part and pays taxes, after deduction of expenses, at a 34 percent rate.
Global Widget's plant reports a profit of $45 in the low-tax country, where the part is produced, and pays taxes, after deduction of expenses, at a 10 percent rate.
So it is that corporations constantly shift their costs to countries with high tax rates, in order to maximize their deductions, while they shift their profits to low-tax havens to keep tax payments down.
Diverting operations and tax writeoffs to the best possible locale is hardly peculiar to foreign-owned companies.
In fact, it was invented by U. S. companies, with the assistance of members of Congress who rewrote the government rule book in 1976 to encourage the practice.
They did so when they amended the Internal Revenue Code to provide tax credits for U.S. firms that established subsidiaries in U. S. possessions, notably Puerto Rico, where the islanders are U.S. citizens.
In essence, the provision allows subsidiaries to transfer profits from Puerto Rico to their parent companies in the United States - without paying taxes on those profits.
Thus, the U. S. government will provide a tax break to a company if it terminates the jobs, say, of 800 workers in Elkhart, Ind., who earn an average of $13 an hour.
That is, the company will get the tax break if, at least in part, it replaces the $13-an-hour workers in Elkhart with $6-an-hour workers at a plant it builds in Puerto Rico.
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Meet George Skelton. Until April, he was one of 800 production workers at the Whitehall Laboratories plant in Elkhart.
That was the month his job was eliminated. Come Nov. 1, Whitehall Laboratories, a division of American Home Products Corp., will close the Elkhart plant permanently; the last of the 800 still on the job will be out of work.
Some of the products once manufactured there now are being turned out at a new facility in Guayama, Puerto Rico.
As for American Home Products, the Puerto Rican subsidiary already has allowed the company to escape payment of millions of dollars in U. S. income taxes, not to mention saving millions of dollars in salaries.
Said the 52-year-old Skelton:
"All the companies that have moved down there, so far as I know, are good, healthy, rich companies. It's like giving welfare to the rich, the way I'm looking at it. Robbing from the poor and giving it to the rich. "
For that, thank members of Congress and the 1976 Tax Reform Act that amended the tax code.
While provisions in the Internal Revenue Code encouraging investment in Puerto Rico date to 1921, the 1976 law added a twist that led to a corporate stampede to the island.
Under the old law, the subsidiary of a U. S. company operating in Puerto Rico had to pay federal income taxes on its profits earned there when it transferred the profits back to this country.
In other words, a company could accumulate its profits, year after year, on the island, and pay no U.S. income tax. But taxes had to be paid when the subsidiary paid dividends to its parent company.
The new law exempted the dividends - or profits in Puerto Rico - from the U. S. income tax, and allowed the profits to be shipped back to the United States tax-free.
There is no comparable tax provision for individual taxpayers. If there were, it would go something like this:
If you had two jobs, one in Philadelphia and the other in Princeton, N.J., you would pay federal income taxes only on the money you earned in Philadelphia. The money you earned in Princeton would be tax-free.
Since passage of the 1976 tax act, corporations have terminated the jobs of tens of thousands of factory workers in the United States, replaced them with lower-paid workers in the possessions, mostly Puerto Rico, and escaped payment of billions of dollars in federal income and other taxes.
Pharmaceutical companies, in particular, have embraced this provision. So much so that Puerto Rico boasts the world's largest concentration of drug companies.
The effect on U. S. mainland workers may be measured in announcements by pharmaceutical companies over the last few years.
In October 1988, then-SmithKline Beckman Corp. announced that it would transfer production of prescription drugs from a Philadelphia plant to a plant in Puerto Rico - and terminate the jobs of 800 Philadelphia production workers.
In April 1990, Bristol-Myers Squibb Co. announced that it would transfer production of a cardiovascular drug from a plant in New Brunswick, N. J., to Puerto Rico - and terminate the jobs of 500 New Brunswick workers.
Let's look at one company, American Home Products, a New York-based health- care conglomerate that had sales of nearly $7 billion in 1990.
Its Whitehall Laboratories division manufactures non-prescription products with such familiar names as Advil and Anacin-3, Preparation H and Dristan.
In February 1989, American Home Products told stockholders that ''completion of a new facility in Puerto Rico in the fourth quarter of 1988 . . . will enable Whitehall to achieve significant cost efficiencies while maintaining the highest manufacturing standards. "
In October 1990, American Home Products announced that within one year it intended to close the Whitehall plant in Elkhart and transfer some of the work to its new plant in Puerto Rico. Among the products to be manufactured in Puerto Rico: Anacin, Dristan, Denorex and Advil.
The move exacted a heavy toll on the Elkhart workforce, whose average length of service was 15 years.
More than half the production workers were women. A recent survey showed that of 100 employees laid off a year ago, only about half have found other work. In many cases, they have been forced to accept part-time employment. Their average pay today is $6 an hour. Before, it was $13.40.
When they worked at Whitehall, they had good benefits, including company- paid health insurance. By one estimate, 70 percent of the Elkhart workers will have no medical insurance after the plant closes Nov. 1.
George Skelton, who lost his job in April, is among those who can attest to the plummeting wages. It took five months before he found another job, operating an injection-molding machine in a rubber company.
At Whitehall Laboratories, he earned $13.40 an hour. Now he earns $7 an hour.
How many former co-workers does he know who were able to find new jobs that matched their Whitehall salaries?
"Basically," he said, "everybody that's found a job I know of is (making) half or less than what they were making (at Whitehall). "
Mary Soellinger, 57, who worked at Whitehall eight years, is not even doing that well. She hasn't been able to find work since she was laid off earlier this year.
"I suppose I could probably get in at McDonald's," she said, "but I really don't feel that it is fair to push people into minimum-wage jobs, because you can't live on minimum wages. "
But Mary Soellinger and George Skelton's loss - and the loss of the other Elkhart workers - is American Home Products' gain.
Listen to the words of Smith Barney, Harris Upham & Co., a Wall Street investment firm that reported in April 1990 on the tax good-fortunes of American Home Products:
"In 1985, American Home Products initiated tax-sheltered manufacturing in Puerto Rico. . . . As a result, American Home Products' tax rate declined 13.9 percentage points from 1983 to 1988 . . . "
For a personal comparison, if a family with income between $30,000 and $40,000 in 1988 had benefited from a comparable reduction, the taxes they paid would have fallen from $3,708 to $2,558 - a savings of $1,150.
George Skelton, whose annual income has been sliced almost in half, has difficulty understanding the Washington wisdom underlying the tax break:
"Everybody says, 'Well, they're (Puerto Rico) just like a state. ' Well, they're not just like a state. Cause they don't pay taxes. And our states sure in hell don't get those kind of tax breaks.
"In my opinion, either you're in the game or you're out of the game. To me, they ought to be able to become a state, or else, if they're not a state, they ought to be treated like a foreign country. They ought to have tariffs put on them and they should have to pay taxes on their profits and everything.
"We're headed toward a $5 trillion national debt. And $350 billion a year deficits. And yet we're giving tax breaks to corporations like that to take jobs that would be paying toward that debt. It looks like a hell of a situation for our children and our grandchildren. "
How much is the Puerto Rican tax rule costing you?
According to Treasury Department data, companies claiming the possessions tax credit escaped payment of $14 billion in income taxes during the 1980s.
For the U.S. government to make up that lost revenue required every penny in tax paid by all taxpayers in Lancaster and Reading and Wilkes-Barre and Scranton and Harrisburg through the 1980s. And then some.
But what about all the new jobs created in Puerto Rico with that tax money?
Well, in the pharmaceutical industry alone, the lost tax revenue to the U.S. government adds up to $60,000 for every $6-an-hour job created.
Thus, it would be cheaper for the U.S. government - and all American taxpayers - to send annual subsistence checks to those island residents who work for American drug companies - and keep the jobs here.
In other words, Congress is spending $60,000 of taxpayers' money to eliminate one job in the United States that pays $28,000 a year, and to create one job in Puerto Rico that pays $12,000.
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At the same time U.S. companies are exporting ever more jobs, the growing foreign influence in this country is showing up in other, more subtle ways. Take patents, for example.
For American business, the year 1986 represented a first:
The first time a foreign-owned company, Hitachi Ltd., secured more patents from the U.S. Patent Office than an American-owned company. Hitachi retained the number one ranking from 1987 through 1989, the latest year for which statistics were available.
As recently as 1977, of the five corporations that received the largest number of patents, four were American-owned, one foreign-owned. General Electric Co., IBM and Westinghouse Electric Corp. placed first, second and third.
By 1989, that pattern had been reversed. Of the top five that year, four were foreign-owned, only one was American-owned. Hitachi, Toshiba Corp. and Canon Kabushiki Kaisha placed first, second and third.
In 1977, American companies received two of every three patents granted to corporations. By 1989, it was one of every two.
At the same time the Japanese and other foreign interests are churning out patents for new technologies and products, the United States, courtesy of the government rule book, is churning out something else:
Master's of business administration degrees (MBAs).
All through the 1970s and 1980s, American colleges and universities turned out ever larger numbers of MBAs, a process that coincided with the steady erosion of the country's once-dominant manufacturing base.
From 1970 to 1979, MBA graduates outnumbered advanced-engineering graduates 36,600 to 16,100 annually. In the '50s and '60s - periods of middle-class prosperity - the opposite was true; engineering graduates outnumbered MBAs.
In the 1980s, the gap widened further as business schools turned out 64,200 graduates yearly while engineering schools produced only 20,000. And many of the 20,000 were foreign nationals who received their diplomas in this country and returned to their native lands.
By contrast, in 1989, Japanese universities awarded nearly 12,000 advanced degrees in engineering, compared with 1,000 MBAs.
Akio Morita, the chairman of Sony Corp. and one of Japan's most innovative corporate leaders, understands the trend well:
"Americans make money by playing 'money games,' namely, mergers and acquisitions, by simply moving money back and forth . . . instead of creating and producing goods with some actual value."
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For Marc Rich, there are no national loyalties.
He is a member of an army of global moneymen who, with the touch of a computer keyboard, move money, commodities and information around the world at the speed of a blinking eye, erasing traditional boundaries among nations.
More important, Rich and other electronic financiers have insulated themselves from regulation by the U.S. government, have exempted themselves from the official government rule book.
From abroad, they have more opportunities than dealmakers on U.S. soil to escape payment of taxes either by legal or illegal means; engage in business practices that otherwise would be considered harmful to the best interests of American consumers and workers; avoid prosecution for financial crimes, and continue to do business with the U.S. government.
So it is that although Marc Rich most likely has never set foot in Ravenswood, W. Va., he has had a powerful impact on the town of 4,100, now embroiled in a bitter labor dispute.
The trouble dates from 1989, when the town's largest employer, the aluminum plant, was purchased in a leveraged buyout - the third change of ownership in the 1980s.
On Feb. 7, 1989, the plant was acquired by Ravenswood Aluminum Corp., a newly formed company whose stock was owned by Stanwich Partners Inc., a Stamford, Conn.-based investment company.
Under Charles E. Bradley, Stanwich acquired interests in a wide range of companies in the 1980s, from steel distribution to metal fabrication.
But Ravenswood was not a typical leveraged buyout - one financed by junk bonds or bank loans.
The money came from a mysterious source in Switzerland - Ridgeway Commercial AG.
According to loan documents filed in a West Virginia courthouse, Ridgeway provided $260 million in loans for the buyout.
Ridgeway's official address was in Hergiswil, a scenic hamlet of 2,400 people on the shores of Lake Lucerne. Its U.S. address was "Clarendon, Ltd. . . . Stamford, Connecticut. "
Clarendon is the U.S. office of Marc Rich's international trading company, Clarendon Ltd., based in Zug, Switzerland.
The fine print of the loan documents disclosed yet another Rich connection. The preferred stock in Ravenswood Aluminum was held by a Dutch company, Rinoman Investment BV.
Netherlands corporate records list Rinoman's president as Willy R. Strothotte.
Strothotte is one of Marc Rich's closest lieutenants, an executive who has worked for the fugitive financier for years.
Strothotte is president of Clarendon Ltd., and his office is in the same Zug office building at 37 Baarerstrasse where Rich and his companies are housed.
Lastly, another Ravenswood tie to Rich shows up in Delaware corporate records. Ravenswood Aluminum's chairman, R. Emmett Boyle, and Stanwich's Bradley are directors of two other U.S.-based companies with Edward Creswick, who also works for Rich in Zug.
When an Inquirer reporter placed a telephone call to Creswick in Zug to ask about his association - as well as Rich's - with Ravenswood, Creswick responded:
"Where have you got my name from? And my phone number?"
Told that his name appears on corporate records as a director with Boyle and Bradley, he replied:
"I would prefer not to comment on that."
Just months after the Ravenswood plant was sold, Strothotte, the Rich executive, and Boyle acquired a majority of the stock in the company from Stanwich Partners, with Strothotte picking up the larger share.
The ownership change set the stage for a labor dispute that would turn family member against family member in Ravenswood.
In the spring of 1990, months before negotiations were to begin on a new labor contract with the steelworkers union, the Ravenswood company implemented procedures that made a labor showdown seem inevitable.
The plant was encircled with a 10-foot-high fence topped with barbed wire. Security cameras were installed. Office windows were boarded up. An armed security force was employed. Boxcars of food and mobile homes were brought into the plant, and salaried employees were drilled in security procedures. And ads began to appear in out-of-state newspapers for replacement workers.
Not surprisingly, little progress was made toward a new contract that fall, and last Nov. 1, when the agreement expired, employees were turned away when they came to work.
The company called it a strike; the aluminum workers call it a lockout.
The National Labor Relations Board (NLRB) agreed with the union and formally charged Ravenswood Aluminum on July 18, 1991, with refusing to bargain in good faith and for illegally locking out its employees.
The case is now before an administrative law judge. In the meantime, the company has hired 1,100 workers to replace the locked-out workers, a move that has led to scores of incidents of violence.
The shutdown has been a financial disaster for the 1,700 employees of Ravenswood, many of whom, like Toby Johnson, were employed there all their working lives.
The son of a Ravenswood Aluminum retiree, Johnson went to work at the plant 25 years ago straight out of high school. He worked in the finishing department, where aluminum is cut into sheets for cans, automotive components or other products.
Like other Ravenswood workers, Johnson exhausted his unemployment benefits in July. Since then, he and his wife and 13-year-old son have existed largely on $35 a week in food vouchers from the United Steelworkers Union and provisions from the union-run food bank.
"Basically, we eat what they give you instead of going out to the store and buying what you want . . . which you can't afford," Johnson said. "We have had to cut a lot of corners. "
When they need cash, they have dipped into savings or been helped by relatives.
Ravenswood Aluminum hired many replacement workers from the town, meaning neighbors and family members now find themselves on opposite sides of a bitter issue.
"It's put a real strain on the community and individual families," Johnson said. "It's wrecked homes. There is brother out against brother. There is a father who's locked out and the son is working. It has worked on everybody emotionally and physically. "
Johnson said the issue has touched his own family. A niece is married to a replacement worker. He said his father allows the man to visit the home.
"He keeps letting him come to his house, which I disapprove of," said Johnson. "He still comes there so I don't go there to my own parents' house. So it has really messed us up in our relationship. "
As might be expected, officials of Ravenswood Aluminum and Clarendon are reluctant to talk about Marc Rich and his ties to the aluminum company.
When the U. S. office of Rich's Clarendon Ltd. was asked about the source of funds to acquire Ravenswood Aluminum, a spokesman for the company in Stamford declined to answer, referring questions to Ravenswood.
"I think it would be more appropriate from them," the spokesman said.
When Ravenswood officials failed to respond to requests for information, telephone calls also were placed to Willy Strothotte at Rich's Zug headquarters. He, too, failed to return the calls.
While Rich's ties to Ravenswood Aluminum are shrouded in secret Swiss loan agreements and corporate arrangements, his ties to you are quite direct.
Take a look in your pocket. Those pennies? They may have been minted from copper that Rich's Clarendon Ltd. sells to the U.S. Mint.
Or those nickels in your pocket? Yes, indeed. They, too, may have been minted from nickel that Clarendon Ltd. sells to the Mint.
Over the years, the Mint has awarded millions of dollars worth of contracts to Clarendon for metals.
When an Inquirer reporter asked about the U.S. government's business relationship with Clarendon and Rich's association with the company, a spokesman for the Mint said:
"The information that the United States Mint has on Clarendon comes from Clarendon. So what we would prefer you to do is to go to them and inquire. Is that fair? Because we would just be recounting to you what they have told us. "
Let's make the Rich-U.S. government associations perfectly clear:
Rich sells copper to the U.S. Mint, a branch of the Treasury Department, while the Internal Revenue Service, another branch of the Treasury Department, and the Department of Justice, are, in theory, seeking to bring him to trial on tax-evasion charges.
But not seeking too hard.
In fact, Rich, now in his eighth year on the run, seems to have faded from the memories of law enforcement officials.
When an Inquirer reporter called the FBI in Washington to ask if there was a "wanted" poster for Marc Rich, the reporter had the following exchange with a specialist on fugitives:
FBI representative: "I've heard the name before. I don't believe so. Is he wanted in this country?"