company subsidies

The mining company, ASARCO received a $1.5 million grant in 2012. In 2015, the company agreed to spend more than $150 million in equipment upgrades and fines, after the EPA accused the company of polluting the town of Hayden, Arizona. EPA officials announced Wednesday that ASARCO was penalized for non-compliance with a 2015 settlement for violations of the federal Clean Air Act.

PHOENIX (3TV/CBS 5) - A CBS 5 Investigates examination of records from the Arizona Commerce Authority (ACA), U.S. Department of Justice and federal courts shows that more than a dozen companies that have each received incentives worth more than $1 million from the ACA have been fined or prosecuted for violating federal laws.

[WATCH: Should government pick economic winners and losers?]

On Tuesday, Governor Doug Ducey canceled $1 million in incentives that were part of a package meant to lure Nike to the City of Goodyear. In a series of late-night Tweets, Ducey stated that he was canceling the incentives because of the athletic apparel maker's decision to withdraw its upcoming release of shoes that celebrated the original U.S. flag, which Betsy Ross designed.

[READ MORE: Arizona Gov. Ducey to pull Nike incentives over Betsy Ross Flag shoe controversy]

"NIKE made the decision to halt distribution of the Air Max 1 Quick Strike Fourth of July based on concerns that it could unintentionally offend and detract from the nation’s patriotic holiday," wrote Nike spokesman Greg Rossiter said Tuesday afternoon in an email to KPTV, a sister station of CBS 5 and 3TV.

[PREVIOUS STORY: Nike cancels American flag sneaker after complaint from Colin Kaepernick, report says]

"I actually agree with Doug to see that Nike caving to Colin Kaepernick is a mistake, is a mistake on their part," said Byron Schlomach, who is an economist with the 1889 Institute, which advocates for responsible and limited government.

But Schlomach says he does not agree that the government should be choosing winners and losers in business.

[RELATED: Nike wants to create manufacturing facility in Goodyear]

"The solution is just not to do any of those things at all for anybody, and then you don't get the situation where the governor or the legislature feels like they're in the middle of these sorts of social debates," said Schlomach.

CBS 5 Investigates examined the backgrounds of companies that each received more than $1 million from the ACA, which is the state agency that doles out financial incentives. While not every company had checkered histories, more than 12 did.

For example,

  • The mining company, ASARCO received a $1.5 million grant in 2012. In 2015, the company agreed to spend more than $150 million in equipment upgrades and fines, after the EPA accused the company of polluting the town of Hayden, Arizona.
  • A subsidiary of Caterpillar was fined $25 million in 2017 for dumping train parts in the ocean. That same year, the ACA gave the company a $4 million grant.
  • Bank of the West received a $3 million grant even though its parent company, BNP Paribas, had been prosecuted by the Department of Justice for crimes that included trading with an enemy of the state. BNP Paribas forfeited nearly $9 billion

"I don't know a perfect company, and I've been teaching business ethics for decades," said Marianne Jennings, who is a professor emeritus at ASU's WP Carey School of Business.

Jennings warned that politicians who mix business and political opinions risk falling down a slippery slope.

"When you have an elected official inserting himself and saying, 'OK. Well, this was a bad thing that this company did,' without any guidelines, without understanding the whole background on it, it's just a mess that you step into," said Jennings. "And so now when you take action against that company, you've started the precedent and what if the next company does something else?"

Both Jennings and Schlomach say they are against governments offering incentives to businesses. Schlomach says he thinks the practice should be done away with entirely. Jennings argues that if governments are going to do it, there should be a clear set of guidelines for what is expected of the business, and what should happen if the business behaves badly.

Both argue that these incentives, however popular, do not seem to benefit their communities.

"The issue is do you want power politics to prevail in your state or your community? Or do you want true economic prosperity?" said Schlomach.

Morgan Loew's hard-hitting investigations can be seen weekdays on CBS 5 News at 6:30 p.m. and 10 p.m.

Copyright 2019 KPHO/KTVK (KPHO Broadcasting Corporation). All rights reserved.


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