News Analysis

NEW BRITAIN, Conn. – A major victory was scored here last week, as Stanley Works withdrew its push to re-incorporate in Bermuda and avoid paying $30 million a year in U.S. taxes. The announcement came only three days after AFL-CIO President John Sweeney and International Association of Machinists (IAM) President Tom Buffenbarger led a spirited rally in front of the 150-year-old factory.

The issue of corporate tax havens has traveled from the streets into the halls of Congress, and is shaping up as a major issue in the 2002 elections.

“United we won,” said IAM General Vice President Warren L. Mart. “But the job is only half done. Since 1997 Stanley Works has moved over 1,000 jobs out of the New Britain area, most of which went abroad for cheaper labor. The fight must continue to keep our jobs here.” The profitable company is a leading world-wide manufacturer of tools, hardware and doors.

“The mood in the shop is very ecstatic.,” said Philip Vitali, who has 31 years’ seniority and is president of toolmaker Local 1137. “We knew it wasn’t right.”

The many-sided battle, involving the Connecticut AFL-CIO, Connecticut Citizens Action Group, NAACP and elected officials, included lawsuits, legislation, rallies and neighborhood leafleting which exposed the corporate greed of Stanley Works and CEO John Trani.

The campaign reached as far as California, where state treasurer Philip Angelides proposed that his state’s mammoth public employee and teacher pension funds sell investments in any U.S. companies that re-incorporate in overseas tax havens. The California Public Employee Retirement System owns 417,000 shares of Stanley stock, valued at about $17 million, and was actively opposing re-incorporation.

The issue has become a focal point in the newly re-districted 5th Congressional District where Stanley Works is located and where incumbent Democrat Jim Maloney is in a heated contest with incumbent Republican Nancy Johnson.

Maloney is leading the fight in the House of Representatives to outlaw “corporate inversion,” which means setting up a postal address in another country as a tax haven. “We will attach this issue as an amendment on every appropriations bill that comes before Congress,” Maloney declared at the July 29 rally.

Johnson, who only sought a moratorium on the practice, has issued ads taking credit for Stanley’s reversal. She has received well over a million dollars in corporate campaign contributions.

Last week the Senate adopted an amendment by Sen. Paul Wellstone (D-Minn.) to the annual Defense Department spending bill that bars companies that use the tax loophole from bidding on military contracts.

Stanley won nearly $5 milllion in military contracts last year. A report issued by the Democratic staff of the House Ways and Means Committee itemizes $1.08 billion in federal contracts held in 2001 by 26 companies located in the United States that incorporated in Bermuda, including Tyco International.

“We’re just putting everybody on notice,” said Wellstone. “You’re not going to be able to do that. This is an egregious practice.”

Earlier, in the House, Rosa DeLauro (D-Conn.) introduced an amendment to prohibit companies that use this tax loophole from bidding on contracts covered under the newly forming Homeland Security Department. When it became clear the amendment would pass, Majority Whip Tom DeLay released 100 Republican House members to change their votes to “yes,” fearing repercussions as they prepared to return home for summer campaigning.

Media reports have implicated George W. Bush and Dick Cheney in this tax evasion scam. In 1989 Harken Energy Corp. opened a subsidiary in the Cayman Islands while Bush was on the Board of Directors. During the years that Cheney headed Halliburton Co., from 1995 to 2000, they registered 20 subsidiaries in the Cayman Islands.

Trani is counting on Republicans to make up for it in the fall. They have promised more tax cuts to big business in the name of “remaining competitive in world markets.”

Trani did not rule out revisiting the reincorporation proposal in the event that Congress does not deliver. “Our ability to compete is being undermined by the U.S. tax code, which is archaic in today’s global market, putting U.S. companies that compete globally in an untenable position,” he said.

“John Trani, like most CEOs, is too used to getting whatever he wants,” said John Harrity, IAM organizer. “Having people raise hell, and deny him for once, is good. Really good.”

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