Obama’s Final Blows Against Corporate Crime

January 19th, 2017 by Phil Mattera

$335 billion: that’s what has been paid by companies in fines or settlements in cases brought by federal agencies and the Justice Department during the Obama Administration. The estimate comes from the amounts associated with entries already in Violation Tracker and an update that is in the works.

Preparing that update has proven to be a challenge because of the remarkable flurry of cases that the Obama Administration has resolved in the waning days of its existence. Since the election the penalty tally has risen by more than $30 billion, much of that coming this month alone. The past ten days have seen four ten-figure settlements: Deutsche Bank’s $7.2 billion toxic securities case; Credit Suisse’s $5.3 billion case in the same category; Volkswagen’s $4.3 billion case relating to emissions fraud; and Takata’s $1 billion case relating to defective airbag inflators.

Here are some of the next-tier cases that would normally get significant coverage but may have gotten lost in the stream of announcements:

  • Moody’s agreed to pay $864 million to resolve allegations relating to flawed credit ratings provided for mortgage-backed securities during the run-up to the financial crisis.
  • Western Union agreed to pay $586 million to settle charges that it failed to guard against the use of its system for money laundering.
  • Shire Pharmaceuticals agreed to pay $350 million to settle allegations that one of its subsidiaries violated the False Claims Act by paying kickbacks to healthcare providers.
  • Rolls-Royce agreed to pay $170 million to resolve foreign bribery criminal charges; the military contractor was offered a deferred prosecution agreement.
  • McKesson, a large pharmaceutical distribution, was fined $150 million by the Drug Enforcement Administration for failing to report suspicious bulk purchases of opioids.

Although a few of these cases — including Volkswagen, Takata and Western Union– have involved criminal charges, for the most part the Obama Justice Department has kept its focus on extracting substantial monetary penalties from corporate wrongdoers.

While this approach has served the purpose of highlighting the magnitude of business misconduct, it remains unclear whether it has done much to deter such behavior. One of the aims of Violation Tracker is to document the problem of ongoing recidivism among corporate offenders by listing their repeated transgressions. JPMorgan Chase, for example, has racked up $28 billion in penalties in more than 40 cases resolved since the beginning of 2010. The list is likely to continue growing.

The steady stream of big-ticket cases has provided a constant source of new content for Violation Tracker, but it would have been preferable if federal prosecutors and regulators had figured out a way to get the bank and others like it to behave properly.

The Obama Justice Department’s rush to complete the recent settlements seems to be based in part on uncertainty as to whether the Trump Administration will continue to give priority to the prosecution of corporate crime. Attorney General nominee Jeff Sessions has not said much on the subject, while the President-elect has been uncharacteristically silent — both during his campaign and since the election — about corporate scandals such as the Wells Fargo bogus-account case while being outspoken in his critique of regulation.

We may soon look back fondly at the Obama approach as the new administration takes an even weaker posture toward the ongoing corporate crime wave.

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