To the Editor:
Yesterday, four of my colleagues coauthored a letter raving against Dodd-Frank’s Conflict Minerals Rule, §1502, which is in President Trump’s crosshairs after a leaked Executive Order allegedly advocated its suspension. Specifically, my colleagues believe §1502 decreased militia-led violence in the Democratic Republic of Congo. It did not. They correctly judged the intent of §1502 — and I agree with the statute’s intent — but not its result. My response will explain the regulation, expose its failure, and argue against their mandate that Cornell University waste its endowment and our tuition on useless audits.
My colleagues asserted that §1502 “prevents American companies from purchasing conflict minerals.” Well, that’s a very simplified picture of what the statute does. A more nuanced view is this: the statute requires companies using conflict minerals, or companies contracting the procurement of conflict minerals, spend millions of dollars on costly disclosures and independent audits to ensure their conflict minerals are “conflict-free.” The contracts my colleagues talk about are really company disclosures to the Security and Exchange Commission. Companies spend extra money to comply with these regulations and charge us more for their products as a result.
Speaking for myself, I’d pay that extra price if it meant preventing child labor in the DRC. That’s what this is for, isn’t it? The intent of the statute was to prevent militia-led violence within the mines — and I wish it did, but it doesn’t. The Government Accountability Office published a 2015 report with a telling title: “SEC Conflict Minerals Rule: Initial Disclosures Indicate Most Companies Were Unable to Determine the Source of Their Conflict Minerals.” Even after these expensive, independent audits, most companies still don’t know if they’re funding the DRC militias. A 2015 quantitative study from the University of Wisconsin goes even further: “Instead of reducing violence, the evidence here indicates the policies increased the incidents in which armed groups looted civilians and committed violence against them.” This costly statute did more than cost American companies billions of dollars — it cost DRC citizens their lives.
Why did the incidents of violence increase? Well, when Dodd-Frank’s Title XV regulations came into place, companies reduced the amount of conflict minerals they bought. How did militias respond? They moved to unregulated mines, killed civilians, looted innocents’ homes and sold conflict minerals to European companies without our regulations. §1502 is an utter disaster, albeit well intentioned, which deserves repudiation and revocation.
Now let’s apply these facts to Cornell University. According to an S.A. resolution passed to make our campus conflict-free, Cornell University allocates $50 million to purchase technology from companies that use conflict minerals in their supply chain. In 2010, when this resolution was passed, I would have completely agreed with the intent. I still agree with the intent. But as we’ve seen since the statute was passed in 2010, we have no way of knowing whether or not the company’s conflict minerals are actually conflict-free. That’s what the GAO report shows — and those are companies that are doing their due diligence! Even more worrying, the referenced study concludes that this policy is actually contributing to a spike of civilian murders and lootings in the DRC.
I don’t want my university to waste its endowment and our tuition by paying KPMG or EY for a useless audit supporting a policy that increases violence in a country we should be helping.
I admire my colleagues’ intent, but that doesn’t mean any of us will like the result.
Irvin McCullough ’18
Vice President, Cornell Republicans