Multinationals, Nations, Nonprofits and Dark Matter

A paper for the club by Will Parish

April 1, 2024

Good Evening. There are a few things I’m going to say this evening that are really personal, and, well, completely private. I totally trust the high level of discretion in how club members talk with others about the evenings we share. Julie doesn’t know what you are about to learn, but I know she’ll have to, soon. So here we go.

Julie and I were visiting her brother and our sister-in-law, Julia Louis-Dreyfus, a month ago. Julia screened the early release of a movie in their home theater. I’m sure you’ll all watch it for its detailed look at San Francisco history. The movie is “Carol Doda, Topless at the Condor.”

I had been happily researching my topic for this paper, but when I saw the movie, I knew I had to make a change. Carol Doda started the sexual revolution when I was only fourteen, but it hit me hard. Little did I realize then, how big the impact would become. The movie shocked me, not the eroticism, but how she profited from exploitation and enjoyed it. What an empire she created! Her sexual franchise! Adult stores selling her patented toys like the Double Dip, and My Little Pony! But it was her invention of adding power to the toys that made her a multi-millionaire. Her vibrators flew off the shelves.

All my life, I’ve carefully crafted my story of being the descendant of a pharmaceutical multinational corporation. But now the movie is out, and I am forced by my conscience to reveal my truth. And tonight, I’ll read my real origin story.

It starts with my father, who was not a decorated Marine Vet, but a door-to door Bible salesman. On his first trip to San Francisco, he discovered Broadway Street, met Carol Doda after her show and got invited upstairs. She completely fell for his biblical proportions. The next morning, he headed straight for the nearest priest in town and confessed his lustful night in tears. Nine months later, Carol gave birth to the love child that stands before you tonight. Yes, Carol Doda was my mother. Happy April Fools!

All right now where were we? Oh yes. A story of discovery of Machiavellian proportions. Multinationals, Dark Matter, and a demise of Democracy. My story begins not in a North Beach Strip Club’s private room, but in a snow-covered cabin on the frozen shores of Donner Lake, deep in dinner conversation with new friends. It was a fateful night in February, 1981. I thoroughly embarrassed myself and nearly lost my fiance. Our hosts were liberal-leaning wonderful people with whom we had a lot in common. Greg (discretion prevents me from revealing his real name) had recently become ED of a foundation to fight against social injustices including working conditions for corporate employees.

After he openly shared his leftist pro-labor views which struck me as overblown and frankly over the top, I innocently commented that unions were not needed except in the case of corporations which don’t pay their employees respect or fair wages.

The room suddenly fell silent and my pro-corporate management words echoed off the walls. Julie gave me a blank stare of disbelief. Our host asked me why I was so “anti- union.” I felt pushed into a corner. No one, besides Julie, knew I was a descendant of

W.E. Upjohn, the founder of the Upjohn Company, a multinational pharmaceutical corporation which I regarded as having exemplary management practices. I knew if I wanted to save face with my liberal bride-to-be, I would have to reveal my real origin story, which unsurprisingly, has nothing to do with Ms. Doda.

Growing up in Kalamazoo, Michigan in the 1950s and 60s, I lived in a fantasy bubble of my belief in which all corporations provided great jobs and working conditions. In 1886, my mother’s grandfather founded the Upjohn company, and he believed strongly in the friendly and mutually beneficial win-win relationship between corporate management, employee, and community. My dad lived by this philosophy when he became Upjohn’s head of personnel. He took pride in telling me how every year, when the union made their offer to the employees, these workers did not accept it because they said management gave them a better deal. Dr Upjohn embraced the Kalamazoo community. During the Depression, for example, my great-grandfather allowed homeless people to live for free on land owned by the company. He helped alleviate hunger by establishing community soup kitchens and food distribution programs.

I grew up naively assuming that the company’s innate responsibility to employees and the community was baked into the moral and ethical values of not just my family’s company, but into most if not all corporations.

In that cozy cabin, I hoped the reasons for my pro-corporate management views would redeem me and save my engagement. I’m sure the following two days of good skiing and lighthearted conversation helped in my redemption because the friendship endures to this day, and Julie married me. Little did I know then, how my confidence in corporate beneficence would soon be destroyed in my second year of being an attorney and also by becoming a philanthropist.

In the summer of 1981, I had completed my first year as a newly minted attorney with Bronson, Bronson, McKinnon here in San Francisco. I was assigned to the lead partner working on what was to become one of the largest tort liability cases in American history. The Dalkon Shield was a very profitable intrauterine contraceptive device manufactured by the A. H. Robins company. Over time, though, a growing number of women discovered serious dangers using the IUD. Eventually 300,000 women filed a class action lawsuit against the company, alleging the Dalkon Shield caused septic abortion, pelvic inflammatory disease, infertility, miscarriage, and death.

The lead partner put me to work reviewing briefs and researching any legal precedents to help limit Robins’ financial liability. I had no trouble finding hundreds of cases where American multinational corporations manipulated the legal system to reduce their liability for deadly business practices.

My work formed the cornerstone in the lead partner’s arguments to protect Robins. I saw how she drew analogies to the cases I had supplied. I watched her in depositions relentlessly badger women with deeply personal questions about their sexual practices. She was happiest when she made them cry, and watched them tell their lawyer they could no longer bear the thought of testifying in court. The more witnesses she could intimidate, the better she was doing her job, she told me.

Working on the Dalkon Shield case crushed any naïve notion I had about all corporations caring as much for their employees and customers as their profits. There were clearly some which didn’t.

A few years later, I became a philanthropist which further opened my eyes to how maybe Upjohn’s behavior was the exception rather than the rule. One of the first nonprofits which Julie and I considered for funding was the Rainforest Action Network (RAN). They had joined forces with indigenous tribes in El Salvador to stop multinational corporations from exploiting the lands of indigenous peoples for oil, gold and timber. The logging companies were clear-cutting huge swaths through rainforests for roads and pipelines used in exploiting the natural resources. Mining operations were allegedly polluting ancestral lands, contaminating drinking water, and poisoning thousands of women and children with heavy metal and petroleum product runoff.

According to RAN, the profit-driven corporations cared not a whit about the ancestral homes and waters of Central American native people.

Julie and I found the evidence RAN showed us to be convincing and were eager to help the nonprofit’s efforts to hold these companies accountable for the damage they were causing. We wrote them a check when they got us believing they’d be able to make the plundering stop. How disappointed we’ve become realizing that decades later, they and countless other nonprofits are still fighting the same fight. All over the world there are examples of multinational corporations causing local damage. Despite the noble efforts of nonprofits to force those corporations to protect indigenous peoples’ land and water, much remains to be done.

Why has it been so hard? I have long wondered whether there was some sort of invincible, invisible force operating like Dark Matter, protecting the corporate pursuit of profit at the expense of local inhabitants. Writing a paper for the club is giving me the opportunity to find out.

Dark Matter seems like an apt analogy. In 1933, astrophysicist, Dr. Fritz Zwicky sought to solve the mystery of how galaxies could exist in so many sizes and shapes like spiral, elliptical, lenticular, and round like a donut. The mass visible through telescopes simply could not explain such variety in the shapes and movements he observed. He deduced the existence of other matter with inconceivable gravitational forces, completely invisible to astronomical instruments, as responsible for such wondrous behavior in the heavens. He coined the term “dunkle Materiel”, German for Dark Matter. To this day, Dark Matter continues to dominate the rationale for galaxy behavior throughout the universe.

With this analogy in mind, I started my journey of discovery. It took me back to 1919 after the Central Powers were defeated by the Imperialist Alliance of France, Great Britain, US, and Belgium. With the end of the war to end all wars, an influential group of European capitalists met in Vienna to strategize how they could get back to the big business of expanding their colonial empires. In the following years, obstacles mounted. Anti-imperialist aggressions worked against them. A global depression took hold. Fascism strengthened, and ultimately another world war broke out.

In July 1944, when it was clear the Allied Forces of the US and Europe would defeat the Axis Powers, forty-four nations convened in Bretton Woods, New Hampshire. Their lofty goal was to establish a new global system for international monetary cooperation. The delegates put together plans for what would become the World Bank and its subsidiary organizations. I do not doubt the original intentions of these delegates were constructive and trustworthy. They faced the enormous challenge of restructuring a broken global economy, overcome by the devastation of depression and war, into a vibrant, lasting, fair, predictable economic system with world-wide reach.

The World Bank opened for business in 1946 and began entering into lending agreements with countries around the world. It was a noble cause, yes, but pulling it off was easier said than done, and distracting disputes made for rough going. Take for example the time in the early 1950s when the Iranian government nationalized the British-owned Anglo-Iranian oil company causing an eruption between Iran and the UK. The British dispatched the Navy to punish Iran by blockading her ports. War was imminent. Diplomats desperately scurried between Baghdad and London, trying to save the Britons' investment. Iran’s nationalization could not be undone, and ultimately, the British stockholders lost their entire investment. There were many other such contentious disputes between corporations and their host nations over who owns the extracted resources like oil and minerals.

Iran, like all nations back then, held the sovereign right to nationalize foreign corporations operating within their borders. That power is what constantly threatened the multinationals’ ability to make investments in resource rich emerging nations which had ambitious development goals. A global contractual arrangement with an enforceable dispute resolution system had to be established if there ever was to be global economic growth and stability.

In 1963 the World Bank’s president, George Wood, proposed a way forward with a new approach to a world economic system based on contractual arrangements, known as Bilateral Investment Treaties. They established the legal framework needed to protect foreign investment and provide a mechanism for resolving disputes. The World Bank mounted a marketing campaign to bring developing countries on board. It was hugely successful, and over 150 developing countries joined from all over the world. They were persuaded to join the global economic “club” even though it meant surrendering their own sovereignty in a dispute, in order to reap the benefits of foreign investments, be rescued from poverty, and graduate from being a developing country to becoming a developed country.

American and European lawyers drafted these treaties to include such pro-corporate terms as: 1) Guaranteeing the host nation will not nationalize foreign investments; 2) Prohibiting the host nation from imposing “aggressive taxation”; 3) Forcing the host nation to allow foreign corporations to bring in outside labor and materials. This clause was particularly onerous by denying badly needed local employment opportunities. And finally number 4) Agreeing to resolve disputes at an international tribunal.

This little known international tribunal is called the International Centre for Settlement of Investment Disputes (ICSID, pronounced “ick-sid”) which the World Bank established in 1966. It is the hidden marionette master that can make or break the struggling economies of developing nations. Its decisions and legal machinations, like a swarm of tiny bark beetles, can lay waste to entire economic ecosystems.

Here is a scenario how multinational goliaths work often hand in glove with ICSID. In 1964, Texaco struck oil in the Lago Agrio region in northern Ecuador’s rainforest.

Texaco drilled and processed oil there for twenty-eight years, until 1992. A few years later, 30,000 plaintiffs came together in a class action lawsuit against Texaco claiming their oil extraction operations created huge amounts of toxic waste to seep into local bodies of water, causing cancer and other diseases which ravaged the region’s indigenous peoples. In addition, Texaco’s operations allegedly destroyed thousands of acres of rainforest, ruining indigenous ways of life. The local court decided in favor of the plaintiff and ordered Texaco to clean up its mess. Texaco appealed, and appealed, and appealed all the way up to the Ecuadorian Supreme Court. In 2012, the Supreme Court upheld the lower court’s decision and ordered Chevron, which had bought Texaco in 2001, to pay the plaintiffs $18.5 billion. Not surprisingly, Chevron refused.

The case seemed clear cut to me. You have a sovereign nation’s supreme court ordering a corporation to pay a fine, albeit a gigantic one, to compensate people it had harmed while conducting business in the host nation. And yet, that’s not what happened, despite the protests organized by the Rainforest Action Network.

Later that year, Chevron pulled on the string in the Bilateral Investment Treaty to invoke ICSID to arbitrate the disagreement. Chevron asked the tribunal to excuse it from having to pay the gargantuan fine of $18 billion arguing Ecuador was in breach of the Bilateral Investment Treaty, the Ecuadorian officials had acted fraudulently, and the proceedings were tainted by legal and procedural errors.

After six years of waiting, ICSID heard the case in 2018 and ruled in favor of Chevron holding that Ecuador had indeed violated its obligations under the Bilateral Investment Treaty. The ICSID ruling overruled Ecuador’s Supreme Court, and made a mockery out of the protests by Rain Forest Action Network and many other nonprofits. The case was an example of corporate sovereignty superseding national sovereignty and left a small nation with a per capita annual income of less than $5,000 with no funding to clean up after the mess Chevron had been making since 1964.

In another scenario, a Canadian mining company, Pacific Rim LLC, sued El Salvador for a $300 million breach of contract. Pac Rim accused El Salvador of acting in a deceptive manner to lure Pac Rim to conduct expensive exploratory mining operations, investing tens of millions of dollars between 2002 and 2008. Pac Rim argued it had every right to expect El Salvador to fully allow exploitation of the minerals after the exploratory phase. But, in 2008, El Salvador’s new President abruptly announced a total ban on metallic mining, and repealed the rules and regulations Pac Rim had been relying on.

Pac Rim argued El Salvador deprived Pac Rim of any chance to recover its costs and make a profit.

The El Salvadorian supreme court held that El Salvador owed Pac Rim nothing, since Pac Rim had failed to obtain mining concessions from the land owners as required by El Salvador’s Mining Law. Pac Rim took El Salvador to the ICSID hoping it would force El Salvador to reimburse Pac Rim all of its exploration costs plus $300 million in “lost profits”. Pac Rim got quite a surprise when ICSID denied Pac Rim and decided in El Salvador’s favor! ICSID found Pac Rim had not shown sufficient evidence to counter the government's claims. The sovereignty of a nation was still on trial, as in every ICSID case, but this time ICSID did not overthrow the nation’s sovereignty. So while the Bilateral Investment Treaties contained terms more favorable to the corporation than to the nation state, it was not always a foregone conclusion that corporate sovereignty would reign in all cases. Just most.

Here ends my first journey into Bilateral Investment Treaties with their multinational corporate protective terms and dispute resolution mechanisms. They do seem akin to Dark Matter. They are the hidden forces operating out of the media limelight, offering stiff resistance to nonprofits trying to bring accountability to multinational corporations operating in foreign countries.

So today, more than four decades after the evening in a cabin on the shores of Donner Lake, I no longer have my blind belief in corporate beneficence. Perhaps donations by Julie and me could be better spent funding organizations advising sovereign nations on how best to negotiate their Bilateral Investment Treaties. I think the ever-growing umbrella of corporate sovereignty overruling the sovereignty of nation states threatens democracy, a topic for another day. I’m eager to continue learning, traveling up the steep learning curve on finding the best balancing of corporate investor interests, a predictable global economy, and democracy, while shining a light on Dark Matter.

We will need global corporate and political leaders who are brave and willing to trailblaze a new era of corporate conscience, preserving profits for sure, while also preserving indigenous cultures and environments. We will need leaders who are not afraid to break away from the pack and lead the way, a quality of character exemplified by Carol Doda.