I rob banks for a living. I consider myself on a higher moral plane than the crooks who run those banks.
Willie Sutton

Have you done any business with a large multinational company recently? And if so, during the transaction did you have that feeling of confidence which comes only in the presence of grandiosity, as eloquently expressed in the slogan adopted by a mammoth northern California savings & loan association some years ago? "Big . . . Safe . . . Friendly." Most certainly the prominent companies never fail to remind us of their prominence, forever stressing that imposing size guarantees vast resources, inherent capability, and responsiveness—all of which naturally equates to corporate integrity. And why not? After all, you can’t argue with success. But, despite the hyperbole, perhaps it’s time to take a closer look at the titans among us to see whether their performance matches their billing. Can we really rest assured that our best interests are uppermost in the collective consciences of the nation’s corporate giants? May we place our assurances in the good faith of the large firms we deal with regularly, typified by the slogan that one well-recognized company so proudly proclaims: "You’re in Good Hands With Allstate"?

Here’s a place to start. Just a few days ago I received a "Notice of Change in Terms to Your Card Agreement" from my Mastercard issuer, Citibank, one of the largest commercial establishments in the world. Two sentences buried in the text caught my eye. "Your annual percentage rates may also vary if you default under any Card Agreement that you have with us because you fail to make a payment to us or any other credit when due, you exceed your credit line, or you make a payment to us that is not honored. In such circumstances, we may increase your annual percentage rates (including any promotional rates) on all balances to a variable default rate of 23.99% plus the applicable U.S. Prime Rate." With the prime rate currently at 4.25%, Citibank’s rate to a credit card customer whose payment may be received a few days late, or who for whatever reason failed to resolve a dispute with some other creditor, could without notice become 28.24%. I can think of some words to describe this, but they are not properly printable.

Let’s now look at the aggregation from which nearly 100 million of our fellow Americans depend for investment acumen and performance—the mutual fund industry. Until early September of 2003, this $7 trillion colossus was virtually untouched by disrepute. Since then it has become synonymous with scandal. In addition to disclosure of massive abuses involving illegal market timing and insider trading, we may now add industry-wide practices including undisclosed overcharging and unwarranted churning of accounts as endemic rituals. With revelations of impropriety by formerly sacrosanct fund groups—Putnam Investments, Janus Capital Group, Strong Capital Management, and dozens of others—it becomes hard to dispute the acrid exclamation of New York Attorney General Eliot Spitzer: "It’s a cesspool!"

And while focused on recent abuses, we mustn’t ignore infamies that reach back to earlier times. Among the corporate giants that for generations raped Americans by purveying sickness and death for a profit, are found some of the most recognizable names: Phillip Morris, R.J. Reynolds, Brown & Williamson, Lorillard, and American Tobacco, among others. Whether or not they worked in concert to deceive the public on the perils of cigarettes, as the government claims, or merely foisted off their products independently is immaterial. The evidence is overwhelming that the tobacco companies systematically targeted children in their marketing campaigns, as well as lied to the public as to health hazards while manipulating nicotine levels to enhance addictive properties. As a teenage smoker of the 1940s, I recall the effectiveness of various sales techniques used to push the product while denying all risks. Perhaps the catchy slogan by the makers of a popular cigarette of the day, Old Gold, pretty well captures the essence of the industry: "Not a cough in a carload."

There is, of course, another set of players in the tobacco conspiracy. These are the governmental entities, state and federal, that manage to cut themselves into the racket by court and regulatory action. The states succeeded in extracting $246 billion from the industry in the late 1990s. The federal government is now seeking to extort an additional $280 billion under threat of fines and imprisonment. Perhaps these actions don’t seem so outlandish when you realize that big government is just that: big government—and a business in its own right. There’s no reason to doubt their willingness to participate as unindicted co-conspirators, so to share in the loot.

If you now think that I have some suggestions on how we may secure greater responsiveness and fairer dealings from these overpowering establishments, I must disappoint you. What we witness is human nature in action, and human nature does not change. The perennial struggle of mankind is the battle between those on the inside versus those on the outside. And the larger that an organization becomes, the more entrenched and powerful are those on the inside. Unfortunately I cannot recommend a cure. The best thing I can do is clearly state the condition as a warning to the wary.

Jacobs' Law: As an organization grows in size and prominence, its propensity to systematically swindle its clients, customers, employees, and the general public, increases.

Before concluding what may seem like a particularly dismal critique on human ethics, I’d like to express a final word of encouragement. Though you may anticipate abuse from every large organization you encounter, you needn’t be its victim. To recall an old adage: Forewarned is forearmed. This dictates that you guard yourself in the clinches and approach every relationship as a possible adversarial situation. This is a subject I cover in detail in Chapter 4 of my book Nobody’s Fool: A Skeptic’s Guide to Prosperity.

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