Monday, February 14, 2011

"Plunder Bill 2?"

Ohioans--tell your state senator to protect Ohio job creation from corporatization by voting no on JobsOhio bill

Governor John Kasich has proposed to create a private corporation, JobsOhio, which would take over the job creation programs from the state's Department of Development. Kasich claims that the state's jobs are under "siege" and that we need an agency that moves at "business speed" to negotiate deals and bring more employers to the state.

But JobsOhio is unconstitutional and will undermine citizens ability to keep tabs on tax incentive deals. We're asking you to contact your state senator and tell him or her to vote this measure down.

The Ohio constitution prohibits the state from investing in corporations. It says Ohio can't be a "joint owner, or stockholder, in any company...formed for any purpose whatever." JobsOhio would be funded by public tax dollars, but operate as a semi-private nonprofit corporation.

Why? The reason for the restriction dates from 1837 and the Ohio Loan Law, otherwise known as the "Plunder Law." The law allowed the state to loan funds to help railroads, canals and turnpike companies construct and maintain infrastructure, and led to strong economic development. But allowing the legislature to manage state investments in private corporations led to favoritism, a huge public debt, tax hikes, and the belief that the government had been "plundered" by corporations. You can read more about the Plunder Law by clicking on the Read More link below.

Plus, the nine-member private board of JobsOhio would be able to extend tax credits to businesses that say they'll expand to the state, but as a private organization, it would be exempt from many current public record, disclosure and auditing laws. A private board shouldn't be making tax deals without public scrutiny.

Contact your State Senator. Ask him/her to oppose corporatizing the job-creation duties of the state through creating the unconstitutional Jobs Ohio. To find the number of your state senator, go to

The Ohio House has already passed the measure and the Senate could vote on it as early as this week. A final hearing on the JobsOhio bill is scheduled for tomorrow at the Statehouse in Columbus. Please call today!

Early Corporate Usurpations

Since the original state constitution placed nearly total power in the hands of the legislative branch, it was no surprise that those who sought to gain special privileges, including corporate owners and managers, would try to corrupt legislators and pervert legislation. Perhaps if democracy in Ohio had been more widespread from the start, the state legislature would not have been so easily corrupted.

An early example of corporate usurpation was perversion of the 1837 Ohio Loan Law. The law provided funds to railroads, canals, and turnpike companies for construction and maintenance - loans to railroads and funds for the purchase of stock in canal and turnpike companies.

The law greatly benefited Ohio's development and permitted the state to have a different yet significant role in that development. Corporate influence on legislators, however, resulted in a few years in tremendous favoritism to certain companies (i.e. one railroad over another) and industries (i.e. railroads over canals). This combination resulted in a $20 million state debt, increased taxes and popular belief that government had been plundered (thus the nickname the'"Plunder
Law") by corporate interests.

Corporate influence of the legislature was evident in the number of pieces of legislation benefiting one or more corporations (called "special" legislation). In 1833 the legislature enacted only 30 pieces of general legislation but 250 pieces of special legislation. In 1849, the legislature enacted 75 plank road, 67 railroad, and 78 turnpike bills. In 1851, as the Constitutional Convention finished its work, 817 pieces of special legislation were enacted, including 40 to benefit insurance companies, 66 for plank roads, 74 for turnpikes, and 89 for railroads.

In 1842, two events transpired which altered the corporate form in Ohio. First, the Plunder Law was repealed. Some have noted that corporations didn't want state control through stock ownership and that propagandizing the Loan act as plunder represented the start of a laissez faire movement in the relationship between the state and business corporations.

Second, a general law was passed which created a set of general rules governing corporate activity. These rules removed the requirement that corporate charters had to be granted through the passage of a specific statute. More importantly the rules stated that direct managers and stockholders were not immune from personal liability for the corporation's wrongdoing so long as the aggrieved party sued the corporation first. If the suit was successful, the corporate directors, managers, and stockholder could be held personally responsible.

The 1842 act changed corporate law in two major ways. First, it set forth specific laws to govern corporations where none had existed. Second, the act made corporate officials subordinate to the people. No longer could evil deeds be shrouded in the guise of corporate action. So long as the injured parties followed the proper procedure, wrongdoers could be found personally liable. Significant public pressure must have forced passage of such a law.

Unfortunately, this provision of the 1842 act was short-lived. Enraged by the loss of their liability shield, corporate officials and their agents forced through a measure which repealed the provision in 1845.

1851 Constitution

The Constitution of 1802 proved to be an ineffective instrument because "the legislature swallowed up all the rest of the government" and  "corporate power and the money  power...joined hands." Nearly forty years of corruption and laws such as the Plunder Act proved too much for Ohioans. Public alarm over massive state debt,
particularly indebtedness for canal construction and unsound investments in railroad stock and other private ventures, led to public action. A ballot proposal to hold a constitutional convention was approved statewide by 73%. As the Cleveland Plain Dealer put it, the convention provided an opportunity to pluck "the root of all political sin" from Ohio's soil. In the words of one commentator, "the major motivating force [for the convention] was an anti-corporation sentiment."

H.D. Clark, delegate to the Convention stated the problem in these terms:
The experiment has been tried in that body and almost every effort to engraft private responsibility on corporations has failed. The State is now strewed with the rotten, putrid carcasses of defunct corporations, and the effluvia is a stench in the nostrils of an outraged, swindled, community. The people of the county I represent have been scourged too much by corporations, to be willing to trust the Legislature.

Although the convention addressed issues such as race and judicial reform, concern over legislatively-sponsored corporate greed dominated the debate.

The 1851 Constitution addressed the problem of "special laws" benefiting corporations by agreeing that "the General Assembly shall pass no special act conferring corporate powers. Corporations may be formed under general laws; but all such laws may, from time to time be altered or repealed." At that time this was seen as an attempt to increase citizen power. No longer could the state legislature pass specific acts incorporating specific corporations with specific provisions. In the following year, only 24 pieces of special legislation were passed. The same overall rules would now apply to all classes of corporations.

The portions of the 1851 Constitution with the greatest impact upon corporations are contained in Article VIII and Article XIII. Section 4 of Article VIII deals primarily with prohibiting the state from colluding with corporations, while Section 6 places similar limits on local governments. Essentially, these sections prohibit the gift or loan of state credit "to, or in aid of, any individual, association or corporation whatever" and forbids the state to ever "become a joint owner, or stockholder, in any company or association in this state or elsewhere, formed for any purpose whatever."

Article XIII consists of seven sections placing general limits on the exercise of corporate power. Most significant are Sections 2 and 3 which reinforce the notion that corporate powers and identity exist only to the extent provided for by law; Section 4 states that "[t]he property of corporations...shall forever be subject to taxation, the same as the property of individuals," and Section 7 precludes the state from "authorizing associations with banking powers" unless such a measure is passed by the people in a general election.

The new Constitution that emerged from the convention was adopted in 1852. With the addition of several amendments, the same document still guides Ohio's government today.

From the Northeast Ohio American Friends Service Committee page on "Corporations vs Democracy", "Create Real Democracy" blog

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