Archive for the ‘Regulation’ Category

The Other Trump Collusion Scandal

Tuesday, June 6th, 2017

For months the news has been filled with reports of suspicious meetings between Trump associates and Russian officials. Another category of meetings also deserves closer scrutiny: the encounters between Trump himself and top executives of scores of major corporations since Election Day. What do these companies want from the new administration?

During the presidential campaign, Trump often hinted that he would be tough on corporate misconduct — especially the offshoring of jobs — and this won him a significant number of votes. After taking office, however, much of the economic populism has disappeared in favor of a shamelessly pro-corporate approach, especially when it comes to regulation. Big business has put aside whatever misgivings it had about Trump and now seeks favors from him.

There is always a fine line between deregulation and the encouragement of corporate crime and misconduct. We should be concerned about the latter, given the roster of executives who have made pilgrimages to the White House.

Public Citizen has just published a report looking at the track record of the roughly 120 companies whose executives have met publicly with Trump since November 8 and finds that many of them “are far from upstanding corporate citizens.”

Using data from Violation Tracker (which I and my colleagues produce at the Corporate Research Project of Good Jobs First), Public Citizen finds that more than 100 of the visitors were from companies that appear in the database as having paid a federal fine or settlement since the beginning of 2010.

In its tally of these penalties, which includes those associated with companies such as Goldman Sachs and Exxon Mobil whose executives were brought right into the administration, Public Citizen finds that the total is about $90 billion.

At the top of the list are companies from the two sectors that have been at the forefront of the corporate crime wave of recent years: banks and automakers. JPMorgan Chase, with penalties of almost $29 billion, is in first place. Also in the top dozen are Citigroup ($15 billion), Goldman Sachs ($9 billion), HSBC ($4 billion) and BNY Mellon ($741 million). Volkswagen, still embroiled in the emissions cheating scandal, has the second highest penalty total ($19 billion). Two other automakers make the dirty dozen: Toyota ($1.3 billion) and General Motors ($936 million).

The rest of the dirty dozen are companies from another notorious industry: pharmaceuticals. These include Johnson & Johnson ($2.5 billion),  Merck ($957 million), Novartis ($938 million) and Amgen ($786 million).

All these companies have a lot to gain from a relaxation of federal oversight of their operations. While it remains unclear whether the Trump campaign used its meetings with Russian officials to plan election collusion, there is no doubt that the administration has been using its meetings with corporate executives to plan regulatory rollbacks that will have disastrous financial, safety and health consequences.

Another Form of Denial

Thursday, May 4th, 2017

Lurking behind the assault on regulation being carried out by the Trump Administration and its Congressional allies is the assumption that corporations, freed from bureaucratic meddling, will tend to do the right thing. That assumption is belied by a mountain of evidence that companies, if allowed to pursue profit without restraint, will act in ways that harm workers, consumers and communities. In fact, they will do so even when those restraints are theoretically in effect.

The latest indication of the true proclivities of big business comes in a report just released by the U.S. Chemical Safety Board on a 2015 explosion at the Exxon Mobil refinery in Torrance, California. That accident spewed toxic debris and kept the facility at limited capacity for a year, boosting gasoline prices in the region and costing drivers in the state an estimated $2.4 billion.

According to the safety board, the accident was not an act of god but rather the result of substandard practices on the part of Exxon. The report states:

The CSB found that this incident occurred due to weaknesses in the ExxonMobil Torrance refinery’s process safety management system.  These weaknesses led to operation of the FCC [fluid catalytic cracking] unit without pre-established safe operating limits and criteria for unit shutdown, reliance on safeguards that could not be verified, the degradation of a safety-critical safeguard,  and the re-use of a previous procedure deviation without a sufficient hazard analysis that confirmed that the assumed process conditions were still valid.

Exxon was also found to have used critical equipment beyond its expected safe operating life. The CSB investigation also discovered that a large piece of debris from the explosion narrowly missed hitting a tank containing tens of thousands of pounds of highly toxic modified hydrofluoric acid. Exxon refused to respond to the agency’s request for information detailing the safeguards it had (or did not have) in place to prevent or mitigate a release of the acid. The agency has gone to court to try to get the information.

The CSB is an investigatory and not a regulatory body, so it does not have the power to penalize Exxon for its role in bringing about what the agency called a “preventable” incident. Yet its report adds another entry to Exxon’s dismal corporate rap sheet. The Torrance refinery itself, which came from the Mobil side of the family, has a long history of fires, explosions and leaks. The rest of Exxon has a track record that includes the disastrous Exxon Valdez oil spill in Alaska, numerous pipeline accidents and much more, including many years of climate denial. This tainted record did not prevent the company’s CEO from being the U.S. Secretary of State.

Last year, the Torrance refinery was sold by Exxon to PBF Energy, which has subsequently experienced “multiple incidents,” as the CSB diplomatically put it.

No matter how many instances of corporate negligence are brought to light, there are always business apologists ready to point the finger at regulators instead. The gospel of deregulation is now the state religion of the Trump Administration. How many preventable disasters will it take to share that belief?

Grand Theft Wage

Tuesday, April 18th, 2017

Several weeks ago, in one of his few legislative successes, President Trump signed a bill rescinding the Obama Administration’s executive order on Fair Pay and Safe Workplaces. The order, designed to promote better employment practices by companies doing business with the federal government, instructed procurement officials to consider the labor track record of contractors, which were required to disclose their recent violations.

Business groups, which had attacked the order as a form of blacklisting, have gotten their way, but it is still possible for a federal procurement officer to determine whether a bidder is a rogue employer. It’s simply a matter of plugging the company’s name into Violation Tracker, the free database on corporate crime and misconduct I have assembled with my colleagues at the Corporate Research Project of Good Jobs First.

We’ve just announced the latest expansion of the database: 34,000 Fair Labor Standards Act cases brought since the beginning of 2010 by the Wage and Hour Division of the U.S. Labor Department. The dataset, covering cases with back pay and penalties of $5,000 or more, represents the recovery of more than $1.2 billion by WHD investigators.

Many of the offending employers are smaller businesses, but wage theft is far from unknown among large corporations. The biggest cumulative amounts collected by the WHD since 2010 came from oilfield services company Halliburton, which in 2015 agreed to an $18 million settlement of alleged overtime violations, and CoreCivic (the new name of private prison operator Corrections Corporation of America), which in 2014 agreed to an $8 million settlement. Also among the top ten are Walt Disney ($4.2 million) and Royal Dutch Shell ($2.6 million).

The wage and hour cases supplement existing Violation Tracker data in two other key areas that had been included in the executive order: workplace safety (OSHA cases) and employment discrimination (cases brought by the Equal Employment Opportunity Commission and the Office of Federal Contract Compliance Programs). We are now in the process of obtaining data on the remaining category — unfair labor practice cases — from the National Labor Relations Board.

DOL administrative actions are not the only game in town when it comes to challenging wage theft, which a 2014 Economic Policy Institute report estimated could be costing U.S. workers as much as $50 billion a year. Some of the biggest recoveries come in lawsuits known as collective actions that are brought in federal court on behalf of groups of workers and often result in multi-million-dollar settlements. Unfortunately, there is no central information source on these settlements. The Corporate Research Project is in the process of piecing together the data from multiple sources and will add it to Violation Tracker later this year.

The issues covered by the Obama executive order are just a portion of what can be found in Violation Tracker. We now have 158,000 cases brought by 42 federal regulatory agencies and all divisions of the Justice Department. The fines and settlement amounts in these cases total more than $320 billion.

Violation Tracker data is now current through late March of this year, but for some agencies there was not a lot of case information to collect for the first two months of the Trump Administration. For example, the Wage and Hour Division, which in recent years usually announced numerous case resolutions each month via press releases, has posted only a handful of such releases since Inauguration Day. There’s no indication that the work of the division has stopped, but it appears that the Trump appointees now running the Labor Department are not eager to publicize enforcement activities.

The Tainted Reverse Revolving Door

Thursday, April 13th, 2017

Given his own string of business controversies, it perhaps should come as no surprise that Donald Trump does not seem to worry much about the accountability track record of the companies from which he has recruited key members of his administration.

It’s well known that he chose as his Secretary of State the chief executive of environmental culprit Exxon Mobil, that he brought in a slew of people from controversial investment house Goldman Sachs, that his Treasury Secretary had operated a bank notorious for foreclosures, and that his first pick for Labor Secretary had run a fast-food company with numerous wage and hour violations.

It’s becoming increasingly clear that those were not anomalies. Research being carried out in collaboration with independent investigator Don Wiener shows that the administration also has a tendency in its second-tier White House and subcabinet appointees to select people associated with companies that have a checkered reputation.

When we initially embarked on this effort we expected to have to look into hundreds of names, primarily by checking their affiliated companies in our Violation Tracker. So far, whether by design or disorganization, the Trump Administration has announced nominees for only a few dozen of the hundreds of positions in the various departments and agencies, though things have been moving somewhat faster for White House staffers who do not require Senate confirmation. Within both of these groups there have been some questionable choices. Here are some initial examples; more will come in later posts.

Kenneth Juster and Bridgepoint Education. In February Trump chose Kenneth Juster, a partner at the private equity firm Warburg Pincus, to be Deputy Assistant to the President for International Economic Policy.  Prior to his appointment Juster was a member of the board of directors of Bridgepoint Education, an operator of for-profit colleges. He was a board representative for Warburg, which was an early backer of the company and which controls one-third of the firm’s shares.

As shown in Violation Tracker, in 2016 the Consumer Financial Protection Board alleged that Bridgepoint deceived students into taking out private loans that cost more than advertised. The agency fined the company $8 million and ordered it to provide $23.5 million in relief and refunds to clients.

Michael Brown and Chesapeake Energy. Brown, an executive assistant to Energy Secretary Rick Perry, previously worked for Chesapeake Energy, the controversial fracking company based in Oklahoma. In 2013 the Environmental Protection Agency announced that a subsidiary of the company was being fined $3.2 million and would spend $6.5 million on site restoration to settle allegations that it violated the Clean Water Act through improper discharges into streams and wetlands.

Drew Maloney and Hess Corporation. Maloney, chosen to be the Assistant Secretary for Legislative Affairs at the Treasury Department, previously worked at the oil company Hess. In 2012 the EPA announced that Hess would pay a penalty of $850,000 and spend more than $45 million on pollution control equipment to settle Clean Air Act allegations at its refinery in New Jersey.

These are but a few examples of the what might be called the tainted reverse revolving door. The term “revolving door” is used to refer to the movement of government officials into lobbying and other private sector jobs where they exploit connections made in their public positions. The reverse revolving door is the process by which private sector people take government posts in which they are likely to promote the priorities of their previous (and likely future) employers.

Not only is Trump filling his administration with people with a business background, but he’s selecting people from some of the worst companies the private sector has to offer.

Regulation is Not Dead Yet

Thursday, March 23rd, 2017

Donald Trump tries to give the impression that his crusade against business regulation is moving ahead rapidly. While several rules have been rescinded and more are threatened, it turns out that for now the enforcement systems at most agencies are functioning normally.

In preparing a forthcoming update of the Violation Tracker database, I’ve found that since the inauguration federal regulatory agencies have announced more than 160 case resolutions with fines and settlements totaling more than $1.6 billion. This two-month dollar amount does not compare to the $20 billion collected by the Obama Administration during its final tens weeks in office. Yet it does show that the so-called administrative state is not dead yet.

A large portion of the Trump collections come from enforcement actions against a single company that are in line with the new president’s views. The Chinese telecommunications company ZTE was penalized $1.2 billion for violating economic sanctions against Iran and North Korea by supplying them with prohibited items. The Commerce Department’s Bureau of Industry and Security imposed a $661 million civil penalty and the Treasury’s Office of Foreign Assets Control collected another $106 million while the Justice Department got ZTE to plead guilty and pay $430 million in fines and criminal forfeiture.

The remaining $422 million was collected in cases brought by 21 different agencies and four divisions of the Justice Department. Among the larger actions:

  • The Commodity Futures Trading Commission reached an $85 million settlement with the Royal Bank of Scotland to resolve allegations that it attempted to manipulate interest-rate benchmarks.
  • The Federal Energy Regulatory Commission reached an $81 million settlement with GDF Suez to resolve allegations that it manipulated energy markets.
  • TeamHealth Holdings agreed to pay $60 million to settle Justice Department allegations that its subsidiary IPC Healthcare Inc. violated the False Claims Act by overbilling Medicare, Medicaid, the Defense Health Agency and the Federal Employees Health Benefits Program.
  • Offshore oil driller Wood Group PSN was ordered to pay a total of $9.5 million to resolve criminal charges that it falsely reported over several years that its personnel had performed safety inspections on offshore facilities and that it negligently discharged oil into the Gulf of Mexico.
  • Keurig Green Mountain agreed to pay $5.8 million to settle allegations by the Consumer Product Safety Commission that it failed to report a defect in its Mini Plus Brewing System that had caused scores of serious burn injuries.
  • The Consumer Financial Protection Bureau imposed a $3 million penalty on Experian for deceptively marketing credit scores.

The list also includes: 14 settlements with the Equal Employment Opportunity Commission by employers in cases involving gender, pregnancy and disability discrimination; six cases in which private sponsors of Medicare Advantage plans violated consumer protection rules; two cases in which companies were charged with violating the Controlled Substances Act by failing to properly monitor opioid prescriptions; and much more.

On the other hand, the situation remains puzzling at the Labor Department, where agencies such as OSHA have not announced a single enforcement action since Trump took office. [UPDATE: It’s been pointed out to me that despite the absence of OSHA press releases the agency is still posting enforcement actions on its website on this page, which shows numerous cases since Inauguration Day.]

It is likely that most of the 160 cases were initiated while the Obama Administration was in office, but it is heartening that they have gotten resolved under the new management. The career officials in the various agencies should be commended for continuing to do their job in difficult circumstances. Let’s hope they can convince their new bosses that there is a value to protecting consumers, workers and the public against corporate misconduct in its many forms.

Labor Unenforcement

Thursday, March 16th, 2017

Once upon a time, a key component of American populism was the demand for stricter controls over big business: in other words, regulation. Today, the country’s purported populist in chief is instead promoting the dubious claim that deregulation is what will benefit the masses. Through executive orders and now with his administration’s budget blueprint, Donald Trump is seeking an unprecedented rollback of workplace, environmental and consumer protections.

There are signs that at least one agency in the Trump Administration may not waiting for the legal changes to take effect before providing relief to business. In the eight weeks since the inauguration, the regulatory arms of the Labor Department appear to have been in a near state of suspended animation, at least in terms of their announced enforcement activity.

Take the case of the Occupational Safety and Health Administration. Since the inauguration it has not posted a single press release about an enforcement matter on the DOL website. This compares to more than 70 releases — about the filing of cases or the imposition of penalties — posted during the same period last year.

This can’t be explained by delays in a new administration getting up and running. During the comparable time period for the newly installed Obama Administration in 2009, OSHA made more than 30 enforcement announcements.

A similar pattern can be seen at DOL’s Wage and Hour Division, which under the Obama Administration aggressively pursued employers that violated minimum wage, overtime and other provisions of the Fair Labor Standards Act. Since January 20, the WHD has made only one case announcement. By contrast, during the same period last year WHD announced 35 cases in which an employer was being sued or had settled allegations by agreeing to pay back wages and sometimes a monetary penalty. In 2009, right after Obama took office, the WHD announced 14 cases in the same period.

Other parts of the Labor Department are also quiet. The Office of Federal Contract Compliance Programs, which makes sure government contractors comply with anti-discrimination laws, has not issued a single press release since inauguration day — on enforcement matters or anything else.

Enforcement is handled by career employees of the DOL, whose activities should not be affected by the delays in filling the Labor Secretary’s job, unless their work is being impeded by Trump’s appointed “beachhead” officials now running the department.

There are no indications that the work of DOL agencies has been suspended. Yet the almost complete disappearance of enforcement announcements may indicate that the Trump appointees have been holding up case resolutions or are choosing not to publicize those matters that have been resolved.

In any event, this enforcement lethargy may be a rehearsal for things to come. The Trump budget blueprint calls for a 21 percent reduction in DOL funding, and while the document provides limited details on what would be targeted, a cut of that size is bound to impair enforcement. How many workers who voted for Trump were seeking more dangerous conditions on the job and greater vulnerability to wage theft?

UPDATE: It’s been pointed out to me that despite the absence of OSHA press releases the agency is still posting enforcement actions on its website on this page, which shows numerous cases since Inauguration Day.

Trump’s Misguided Crusade Against the EPA

Thursday, March 2nd, 2017

Executives at Volkswagen must be cursing the bad timing. If only they had been able to keep their emissions cheating scheme quiet for a while longer, they could have avoided a lot of grief. That’s because the U.S. Environmental Protection Agency’s enforcement capacity may soon be crippled.

This is a likely consequence of the Trump Administration’s plans, just reported by the Washington Post, to cut the staff of the agency by one-fifth and eliminate dozens of programs. It’s not yet known exactly what functions are being targeted, but cuts of this magnitude will certainly make it more difficult for the EPA to pursue the kind of investigations that led to the filing of civil and criminal charges against VW.

In January, shortly before Trump took office, the company agreed to plead guilty to three federal felony counts and pay a criminal penalty of $2.8 billion along with another $1.5 billion to settle civil claims. VW previously reached a settlement with the EPA and other agencies under which it committed to spend more than $14 billion to buy back cars containing “defeat devices” and undertake projects to mitigate the extra pollution generated by those vehicles.

VW is one of the thousands of polluters whose activities have been thwarted by the EPA. As shown in Violation Tracker, since the beginning of 2010 the agency (on its own or with the Justice Department) has collected more than $43 billion in fines and settlements in more than 15,000 cases. That does not include billions more from companies such as BP in cases in which the EPA joined with other agencies in joint referrals to the DOJ. Apart from VW and BP, here are the biggest EPA penalty cases over the past seven years:

In 2015 a $5 billion settlement with the EPA and the DOJ went into effect under which Anadarko Petroleum agreed to pay for the clean-up of toxic waste sites across the country linked to Tronox Inc., a spinoff of Anadarko’s subsidiary Kerr-McGee.

In 2013 Wisconsin Power and Light Company, a subsidiary of Alliant Energy, agreed to spend over $1 billion on new equipment to substantially reduce air pollution generated by three coal-fired power plants.

In 2013 Transocean agreed to pay a $1 billion civil penalty to the EPA in connection with its role in the Deepwater Horizon disaster in the Gulf of Mexico three years earlier.

In a 2015 settlement with the EPA, fertilizer giant Mosaic agreed to establish a $630 million trust fund to pay for the future closure of and treatment of hazardous wastewater at four facilities in Florida and Louisiana. The company also agreed to spend $170 million on environmental mitigation at its operations.

In 2011 Hovensa, now owned by ArcLight Capital, agreed to spend more than $700 million on new air pollution controls at its massive petroleum refinery in the U.S. Virgin Islands.

Not all the companies are from the industrial and energy sectors. Retail behemoth Wal-Mart Stores has had to pay more than $90 million in EPA fines and settlements to resolve cases involving improper disposal of hazardous waste and other violations.

Data collected for an extension of Violation Tracker coverage back an additional ten years to 2000 includes EPA cases with total fines and settlements of more than $20 billion. Among these are a 2007 agreement by utility giant American Electric Power to spend an estimated $4.6 billion to reduce toxic air emissions at its power plants and a $50 million criminal penalty BP paid for environmental violations at its refinery in Texas City, Texas (now owned by Marathon Petroleum) where 15 workers were killed in an explosion in 2005.

These various examples do not include the many Superfund cases brought by EPA against multiple parties in connection with long-term toxic dumping or cases brought against government entities; nor do they include all the work EPA does apart from enforcement.

Trump’s assault on the EPA is based on the once common but now widely debunked notion that there is an inherent conflict between jobs and environmental protection. Today there is greater recognition that workers also need to breathe clean air and drink clean water, and that there are many business and employment opportunities associated with environmental clean-up and sustainable practices.

Decimating the EPA will serve only to empower rogue corporations such as Volkswagen. There is nothing to be gained from making polluters great again.

Documenting the Last Hurrah of Regulatory Enforcement

Tuesday, February 21st, 2017

Since the beginning of 2010 the Equal Employment Opportunity Commission has resolved more than 200 cases of workplace discrimination based on race, religion or national origin and imposed penalties of more than $116 million on the employers involved.

During that same period, the Department of Housing and Urban Development — now in the hands of Ben Carson — settled more than two dozen discrimination cases against banks and mortgage companies, collecting more than $200 million in penalties.

The Occupational Safety and Health Administration has handled more than 50 cases of whistleblower retaliation since 2010. These have involved both cases in which workers complained about physically unsafe conditions as well as ones involving complaints about corporate financial misconduct. The latter, stemming from authority given to OSHA under the Sarbanes-Oxley Act, include cases brought against banks such as JPMorgan Chase and Bank of America.

Eight large pharmacy chains and drug distributors have been penalized more than $400 million by the Drug Enforcement Administration during the past seven years for various violations of the Controlled Substances Act.

These are examples of the kind of information that can be found in latest expansion of Violation Tracker, which adds case data from nine additional federal regulatory agencies, bringing the total to 39 agencies and the Justice Department.

In addition to the new agencies, the expansion includes updated information for the existing ones. That includes the final burst of cases seen during the closing weeks of the Obama Administration. Between election day and the inauguration, the Justice Department and agencies such as the Consumer Financial Protection Bureau announced several dozen case resolutions with total fines and settlements in excess of $20 billion.

These include 16 cases with penalties of $100 million or more; four in excess of $1 billion: Deutsche Bank ($7.2 billion), Credit Suisse ($5.3 billion), Volkswagen ($4.3 billion) and Takata ($1 billion).

Banks and other financial services companies account for the largest portion by far of the recent cases, racking up nearly $15 billion in fines and settlements with DOJ, the CFPB, the SEC and banking regulators. Automotive companies like Volkswagen and Takata are second with about $5.5 billion, while pharmaceutical and healthcare firms account for about $1.2 billion.

Given the Trump Administration’s focus on deregulation rather than enforcement, the Obama Administration’s final wave of settlements may represent Uncle Sam’s last hurrah against business misconduct for some time. The data in Violation Tracker, which show widespread misconduct and high levels of recidivism, should give pause to those pushing for less oversight.

With the update and coverage expansion, Violation Tracker now contains more than 120,000 entries with total penalties of more than $320 billion, most of that connected to some 2,300 large parent companies whose disparate individual entries are linked together in the database. Coverage currently begins in 2010 but will be extended back to 2000 later this year.

Individual entries include links to official online information sources. The new version of Violation Tracker supplements those with links to archival copies of those sources preserved on our server.

Having completed the update, the expansion and the creation of the archive, we will return to our effort to collect comprehensive data on wage theft cases — both those brought by the Labor Department’s Wage and Hour Division and related private litigation. We expect that to be ready later this year.

We can only wonder what will be left of the regulatory system by that point.

Trump’s Other Ban

Thursday, February 2nd, 2017

Trump’s travel ban and his rightwing Supreme Court pick are troubling in themselves, but they are also serving to deflect attention away from the plot by the administration and its Republican allies to undermine the regulation of business.

Surprisingly little is being said about Trump’s January 30 executive order instructing federal agencies to identify two prior regulations for elimination for each new rule they seek to issue. It also dictates that the total incremental cost of new rules (minus the cost of repealed ones) should not exceed zero for the year.

While Trump’s appointees will probably not propose much in the way of significant new rules that would have to be offset, the order amounts to a ban on additional regulation.  It boosts the long-standing effort by corporate apologists to delegitimize regulation by focusing on the number of rules and their supposed cost while ignoring their social benefits.

Meanwhile, the regulation bashers are also busy on Capitol Hill. Republicans have resurrected the rarely used Congressional Review Act as a mechanism for undoing the Obama Administration’s environmental regulations as well as its Fair Pay and Safe Workplaces executive order concerning federal contractors.

Both Trump and Congressional Republicans are also targeting the Dodd-Frank law that enhanced financial regulation after the 2008 meltdown. Calling the law a “disaster,” Trump recently said “we’re going to be doing a big number on Dodd-Frank,” adding: “The American dream is back.”

If Trump was referring to the aspirations of the wolves of Wall Street, then that dream may indeed be in for a resurgence. For much of the rest of the population, the consequences would be a lot less pleasant.

To take just one example, an attack on Dodd-Frank would certainly include an assault on the Consumer Financial Protection Bureau that was created by the law and which has aggressively gone after financial predators. As Violation Tracker shows, during the past five years the agency has imposed more than $7 billion in penalties in around 100 enforcement actions against banks, payday lenders, credit card companies and others. Its $100 million fine against Wells Fargo last September brought attention to the bank’s bogus-account scheme.

The CFPB has not let the election results impede its work. Since November 8 it has announced more than a dozen enforcement actions with penalties totaling more than $80 million. The largest of those involves Citigroup, two of whose subsidiaries were fined $28.8 million for keeping borrowers in the dark about options to avoid foreclosure and burdening them with excessive paperwork demands when they applied for foreclosure relief.

Citigroup, one of the companies that has the most to gain from restrictions on the CFPB and Dodd-Frank in general, has shown up often as I have been collecting data on recent enforcement cases from various agencies for a Violation Tracker update that will be released soon.

The Securities and Exchange Commission recently announced that Citigroup Global Markets would pay $18.3 million to settle allegations that it overcharged at least 60,000 investment advisory clients with unauthorized fees. In a separate SEC case, Citi had to pay $2.96 million to settle allegations that it misled investors about a foreign exchange trading program.

Around the same time, the Commodity Futures Trading Commission filed and settled (for $25 million) allegations that Citigroup Global Markets engaged in the illicit practice of spoofing — bidding or offering with the intent to cancel the bid or offer before execution — in U.S. Treasury futures markets and that it failed to diligently supervise the activities of its employees and agents in conjunction with the spoofing orders.

Citi’s record, along with that of other rogue banks, undermines the arguments of Dodd-Frank foes and in fact makes the case for stricter oversight. Yet the reality of financial misconduct is about to be overwhelmed by a barrage of alternative facts about the magic of deregulation.

Update: After this piece was written, Congress voted to repeal another provision of Dodd-Frank known as Cardin-Lugar or Section 1504, which required publicly traded extractive companies to report on payments to foreign governments in their SEC filings. The disclosure was meant as an anti-corruption measure. 

Corporate Crime and the Trump Administration

Thursday, January 12th, 2017

With all that’s happening in the chaotic Trump transition, less attention is being paid to the announcement that Volkswagen is pleading guilty to felony charges and paying more than $4 billion in penalties while a half dozen of its executives face individual criminal indictments.

A development of this sort should represent a turning point in the prosecutorial handling of the corporate crime wave that has afflicted the United States for years. Yet because of its timing, it may end up being no more than a parting gesture of an administration that has struggled for eight years to find an effective way of dealing with widespread and persistent misconduct by large companies. And it may be followed by a weakening of enforcement in a new administration led by a president whose attacks on regulation were a hallmark of his electoral campaign.

First, with regard to the Obama Administration: The treatment of Volkswagen is what should have been dished out against the banks that caused the financial meltdown, against BP for its role in the Deepwater Horizon disaster, against Takata for its production of deadly airbags, and against the other corporations involved in major misconduct ranging from large-scale oil spills and contracting fraud to market manipulation and wage theft.

Instead, the Obama Justice Department continued the Bush Administration’s practice of avoiding individual prosecutions and offering many corporations deferred and non-prosecution deals in which they essentially bought their way out of jeopardy, albeit at rising costs. These arrangements, which are catalogued in Violation Tracker, imposed a financial burden but appear to have had a limited deterrent effect.

In a few instances, companies did have to enter guilty pleas, but the impact was softened when, for examples, the large banks that had to take that step in a case involving manipulation of the foreign exchange market later got waivers from SEC rules that bar firms with felony convictions from operating in the securities business.

It remains to be seen how much VW’s guilty plea affects its ability to continue doing business as usual. Yet the bigger question is how corporate criminals will fare in the Trump Administration.

Trump the candidate said little or nothing about VW, Wells Fargo and the other big corporate scandals of the day and instead parroted Republican talking points about the supposedly intrusive nature of regulation. Corporations that have supposedly been put on notice about moving jobs offshore or seeking overly lucrative federal contracts apparently are to have a free hand when it comes to poisoning the environment, maiming their workers or defrauding customers.

Although some have speculated that Jeff Sessions will be tough on corporate crime, a Public Citizen report on his time as Alabama’s attorney general in the 1990s provides evidence strongly to the contrary.

While Sessions took pains during his confirmation testimony to claim that he would not be a “rubber stamp” for the new Administration, he has strong political ties to Trump and worked hard to legitimize some of his more extreme positions during the campaign. Trump is unlikely to pay much heed to the traditional independence of the Justice Department, and Sessions is unlikely to adopt policies that rub Trump the wrong way.

Despite the inclinations of Sessions, the appointment of anti-regulation foes to head many federal agencies will mean that fewer cases will get referred to the Justice Department. And if Trump’s deregulatory legislative agenda gets enacted, the enforcement pipeline will dry up even more.

Corporate misconduct may very well decline during the Trump era because much of that conduct will become perfectly legal.