Corporate-Government Settlements as Slush Funds
One of the near-totally untold stories about litigation settlements between governments and businesses is what is all too often done with the money involved.
Here’s one very recent example from California (HT Techdirt):
The California Attorney General’s Office said Thursday that Hewlett-Packard will pay $14.5 million to settle civil charges related to the company’s now infamous spy scandal.As part of the settlement, which was first reported by CNET News.com on Wednesday, HP will “finance a new law enforcement fund to fight violations of privacy and intellectual-property rights,” and adopt corporate governance reforms, the Attorney General’s office said in a statement.
“The Hewlett-Packard incident has helped shine a national spotlight on a major privacy protection problem,” Attorney General Bill Lockyer said in a statement. “With its governance reforms, this settlement should help guide companies across the country as they seek to protect confidential business information without violating corporate ethics or privacy rights.”
Lockyer said the new fund will help ensure that when businesses cross the legal line, they will be held accountable. He also applauded the company.
Oh, horse manure. If the sad events at HP hadn’t occurred, there would be no talk of a “law enforcement fund” and, more importantly, no discussion of a need for it. But now, because of one isolated situation (there is no evidence that it isn’t), there’s this big idea to “fight violations of privacy and intellectual-property rights.” This is typical — Fines paid by companies, regardless of amount, go to the agencies that brought the actions or to some new fund that never existed before and would never have come into existence without the litigation.
That is totally improper, and not what taxpayers have a right to expect. In this case, if the $14.5 million fine is appropriate (and I’ll assume it is because the parties agreed to it), first reimburse the Attorney General’s office for the actual out-of-pocket legal (and perhaps administrative) costs incurred. Then throw the rest into the General Fund, so that the Governor and Legislature can reduce taxes, spend the money, or add it to rainy-day money as they see fit. Can it with the slush funds already.
