Kamala Harris as A Corporate Crime Fighter

The coming weeks are likely to see much discussion, pro and con, about Kamala Harris’ record prosecuting street crime during her time as District Attorney of San Francisco. Perhaps even more relevant to her as a presidential candidate was her tenure as the California Attorney General.

State attorneys general involve themselves in many issues, but one of their key roles is to address business misconduct, especially in the areas of consumer protection and antitrust. As the California AG from 2011 through 2016, Harris was for the most part an aggressive corporate crime fighter.

In Violation Tracker we have more than 40 cases her office successfully prosecuted, resulting in over $3 billion in fines and settlements. About one-third of that total came from a 2016 judgment against the predatory for-profit Corinthian Colleges, which by that time had ceased operations and was in bankruptcy.

Here are some of the other more significant cases:

A $750 million settlement with the Canadian company Powerex, which was accused of manipulating the market during the 2000-2001 western energy crisis.

A $323 million settlement with SCAN Health Plan to resolve allegations the company overcharged the state’s Medicaid program, known as Medi-Cal.

A $298 million settlement with JPMorgan Chase, which was accused of misleading state pension funds in the marketing of residential mortgage-backed securities. This was part of a broader $13 billion settlement the bank reached with state and federal agencies concerning the toxic securities that helped bring about the financial crisis of the late 2000s.

A $241 million settlement with Quest Diagnostics, which also involved Medi-Cal billing abuses.

A $168 million settlement with K12 Inc., a for-profit online charter school operator, and 14 affiliated non-profit schools known as the California Virtual Academies it managed, over alleged violations of California’s false claims, false advertising and unfair competition laws.

An $86 million settlement with Volkswagen concerning the installation of defeat devices to evade emissions testing in its diesel vehicles. This was a supplement to the company’s $14 billion federal-state settlement.

Among the other companies her office successfully pursued were Walmart (for over-charging customers), Toshiba (price-fixing), Wells Fargo (privacy violations) and Chevron (improper hazardous waste disposal).

Harris’ office was also involved in many cases brought by groups of state AGs, often taking a leading role. The largest case was a $25 billion settlement reached by federal and state agencies in 2012 with five of the largest mortgage servicing companies over their foreclosure practices. Others included:

A $687 million settlement with Standard & Poor’s Financial Services, which had been accused of inflating ratings of residential mortgage-backed securities at the center of the financial crisis.

A $339 million settlement with Abbott Laboratories (now AbbVie) to resolve allegations it promoted its drug Depakote for uses not approved by the Food and Drug Administration. 

A $151 million settlement with drug wholesaler McKesson to resolve allegations the company inflated the price of prescription drugs by as much as 25 percent, causing the states’ Medicaid programs to overpay millions of dollars in pharmacy reimbursements.

A $90 million settlement with the Swiss bank UBS on charges of anticompetitive and fraudulent conduct in the municipal bond derivatives industry, which took the form of bid-rigging, submission of non-competitive courtesy bids and submission to government agencies, among others, of fraudulent certifications of compliance with U.S. Treasury regulations.

Harris’s record as AG was not flawless. Most notably, she was criticized for failing to prosecute OneWest Bank for foreclosure violations. The bank was controlled by Steve Mnuchin, who would go on to become Donald Trump’s Secretary of the Treasury.

If she were to become president, Harris would be in a position to set the tone for the way her administration would address corporate misconduct. That would begin with her choice for attorney general and extend to the approach she encourages for all regulatory agencies.

This is an area in which she cannot simply promise to continue the policies of the current administration. Biden’s Justice Department initially signaled it would get tough on corporate miscreants after Trump’s lax approach, but it has largely failed to deliver. Instead, the DOJ has stressed leniency agreements, which have turned out to be a boon for recidivist companies.

Harris would do well to signal that she intends to change course and draw on her experience as state AG to be an aggressive corporate crime fighter at the federal level.

The False Hope of Vance’s Populism

The claim that Donald Trump’s near-death experience in Pennsylvania is a sign of divine intervention is not the only far-fetched notion emerging from the Republican Convention. It is also difficult to swallow the idea that the choice of J.D. Vance as Trump’s running mate is an indication that the GOP is embracing pro-worker populism.

Vance is one of a group of younger Republican senators who are seeking to address one of the key contradictions of the MAGA movement. Trump has done a good job tapping into the anger of working class voters, but he has used it mainly to stoke resentment against immigrants and cultural elites. He has offered little in the way of proposals that would improve the lot of communities still suffering the effects of economic dislocation.

In his 2016 campaign, Trump promoted the idea he would revive the coal industry. That excited many voters in states such as West Virginia, but it was a false promise. Coal continued to decline. Now Trump is relying on gimmicks such as eliminating payroll taxes on tips received by hospitality workers while pushing widespread tariffs that could seriously backfire. At the same time, he brought about a Republican platform containing tax and regulatory policies that are anything but populist.

Vance and his group are smart enough to realize that those workers flocking to the Republican Party may not be satisfied with cultural populism alone. They are thus willing to flirt with ideas that are antithetical to long-standing GOP orthodoxy.

They seem to be more receptive toward labor unions—a stance that got a boost after the Teamsters president agreed to speak at the convention. They have a more positive view of antitrust enforcement, at least when it comes to Big Tech. In the past, Vance has expressed support for increasing the minimum wage and raising taxes on corporations.

There is no indication that any of these ideas are going to be adopted by Donald Trump, who continues to espouse the corporate agenda on most issues. He clings to the business-friendly claims that regulation harms the economy and that low business taxes are the key to prosperity. He vilifies unions and environmental groups. A second Trump Administration would likely pander to corporate interests the way the first one did.

While many CEOs are still wary of endorsing Trump and his social agenda, some are moving into his camp. Most notable is Elon Musk, who has committed to spending tens of millions of dollars to support the Republican ticket. Other major figures in Silicon Valley are also jumping on the Trump bandwagon.

It is unclear whether Trump’s selective populism will continue to satisfy his supporters, but for now he seems to be riding high. As for Vance, it is more likely that Trump will change his views rather than the other way around. After all, this is the same Vance who once denounced Trump and now worships him. I am betting he will have a similar conversion when it comes to economic policy.

From SCOTUS to Project 2025

There has never been any question that the Supreme Court’s conservative majority is solidly pro-corporate. Yet in a slew of audacious rulings at the end of the term, those Justices abandoned any pretense of even-handedness.

Chief Justice Roberts and his allies swept away a 40-year-old precedent that directed judges to defer to federal regulatory agencies in interpreting laws involving oversight of business. The decision is expected to result in a wave of lawsuits by corporate interests challenging all manner of regulations. Many of those cases will ultimately be decided by the Justices, and it is clear how that will go.

Along with its ruling in the Chevron deference case, the Court took several other whacks at regulators. It invalidated the Securities and Exchange Commission’s use of in-house administrative law judges, a move that could cripple the agency’s ability to resolve securities fraud cases and could undermine similar enforcement procedures at other regulators. At the same time, SCOTUS put on hold an Environmental Protection Agency plan to curtail air pollution that drifts across state lines. Finally, the Court gave corporations more time to challenge regulations by extending the statute of limitations.

All of this is bad enough, but it could turn out to be a prelude to a wider assault on federal oversight of corporate conduct. A large coalition of business-friendly conservative groups have come together under the banner of Project 2025 to provide a blueprint for how a second Trump Administration could start to dismantle the so-called administrative state.

The plan is set out in a 922-page compendium titled Mandate for Leadership and published by the Heritage Foundation, which produced a similar volume for the incoming Reagan Administration. It calls for radical changes across the executive branch to usher in what it calls a “return to self-governance to the American people” but is in reality a call to give corporations a freer hand.

Mandate is filled with strident anti-regulatory rhetoric. It accuses the EPA of engaging in “vendetta-driven enforcement” and “liberty-crushing regulation.” It describes the Consumer Financial Protection Bureau as being “assailed by critics as a shakedown mechanism” and claims that penalties collected by the agency “have “ended up in the pockets of leftist activist organizations.”

Many of the recommendations in the volume consist of weakening agencies by cutting their budgets and staffs while re-orienting them to the needs of business. The chapter on the EPA says the agency should “foster cooperative relationships with the regulated community,” a thinly veiled call to retreat from enforcement. There is also a call for more “state leadership,” presumably meaning those states antagonistic to the mission of the agency.

On Day One of a Trump Administration, Mandate argues, the president should issue an executive order creating “pause and review” teams at EPA that would, among other things, “identify existing rules to be stayed and reproposed.”

The only regulations viewed favorably in Mandate are those that would promote the conservative social agenda that also suffuses the volume. For example, the plan supports measures that would prevent companies from providing abortion-related healthcare coverage for employees.

After Project 2025 started to attract more attention, Trump recently tried to distance himself from the effort. Like most of what the presumptive Republican nominee says, that statement should not be taken too seriously.

In fact, the tone and substance of the Mandate volume are entirely consistent with the regulation-bashing that has been part of Trump’s shtick since he entered the national political arena. With help from the Supreme Court and Project 2025, a second Trump Administration could do a lot more to weaken public protections and make life comfortable for rogue corporations.

Reprehensible Corporate Behavior

Government officials are usually restrained in the way they talk about corporate behavior, even when a company is involved in a scandal. But Jennifer Homendy, chair of the National Transportation Safety Board, let loose against Norfolk Southern in a meeting about last year’s derailment and hazardous substances release in East Palestine, Ohio.

Homendy charged that the rail carrier “delayed or failed to provide critical investigative information to our team,” forcing her to have to threaten to issue subpoenas to compel disclosure. She described the company’s actions as “unconscionable” and “reprehensible.”

Homendy listed a series of company actions taken during the investigation she called unethical or inappropriate, including Norfolk Southern’s decision to retain a private company to conduct testing of vinyl chloride for inclusion in the NTSB record. Parties “are not permitted to manufacture their own evidence and develop their own set of facts outside of the NTSB investigative process, which is exactly what Norfolk Southern did,” Homendy said.

On top of that, Homendy said that a Norfolk Southern executive recently delivered what she and other NTSB employees interpreted as “a threat” by pressing the agency to dampen speculation about whether the company was responsible for the decision to incinerate toxic materials at the site of the derailment, a process known as vent and burn.

Those remarks came as the safety agency issued an abstract of a report on the incident in which Norfolk Southern is alleged to have “compromised the integrity of the decision to vent and burn the tank cars by not communicating expertise and dissenting opinions to the incident commander making the final decision. This failure to communicate completely and accurately with the incident commander was unjustified.”

The incineration of those toxic substances forced widespread evacuations, and even after people returned to their homes there have been lingering concerns about the potential long-term health impacts from the smoke that covered East Palestine.

It will be interesting to see whether the NTSB chair’s skewering of Norfolk Southern prompts Congress to take action on railroad safety. As documented in Violation Tracker, the Class I railroads have been fined thousands of times by the Federal Railroad Administration. Norfolk Southern was targeted more than 1,600 times by the FRA.

Yet most of these cases involve relatively minor matters. When it comes to major issues, the FRA has shown itself to be pretty ineffective. That varies somewhat from one presidential administration to another, but the industry has managed to avoid major reforms.

In fact, it has been brazen in pushing for changes that would enhance profits but increase the risk of derailments and other accidents. This is the industry, after all, which thinks it is okay to operate trains stretching for a mile or more with just one human being on board. There is even growing use of trains that are entirely remote-controlled—a practice that has already led to a rash of accidents.

Railroads have been flexing their corporate muscles since the mid-19th Century. It is time to subject them to some serious oversight.

Nothing to Be Proud Of

Seated in a hearing room between hostile Senators and relatives of the victims of 737 Max crashes calling for criminal prosecutions, Boeing CEO David Calhoun tried to have it both ways. He apologized to the families and admitted that the company has to work hard to regain the public’s trust, but he avoided taking personal responsibility and sought to preserve some remnant of Boeing’s reputation.

“I’m proud of every action we have taken,” he declared, eliciting an incredulous response from Sen. Josh Hawley, who accused Calhoun of cutting corners on safety to maximize profits: “You are strip-mining Boeing.” Connecticut Sen. Richard Blumenthal called the hearing “a moment of reckoning” for a “a once iconic company that somehow lost its way.”

These comments and others designed to put Calhoun on the defensive imply that Boeing was a model company before the 737 Max debacle. In fact, the company has been the subject of safety concerns for several decades.

For example, after a Japan Air Lines 747 crashed during a domestic flight in 1985, killing 520 people, Boeing admitted that it had performed faulty repairs on the plane’s rear safety bulkhead.

In 1989 the U.S. Federal Aviation Administration ordered inspections of engine monitoring and fire alarm systems on more than 700 Boeing 737s—all of those built since the end of 1980—after one of those jets crashed in Britain as a result of malfunctions in two engines.

In 1994 the Seattle Times, after reviewing 20 years of reports submitted to the FAA, concluded that more than 2,700 Boeing 737s then in service were flying with a defective part that could cause the plane’s rudder to move unpredictably, possibly turning the aircraft in the opposite direction being steered by the pilot.

In 1999 the FAA proposed a penalty of $392,000 against Boeing for failing to notify regulators of a safety defect in the fuel valves of its 757 jets.

In 2002 the FAA ordered U.S. airlines to inspect more than 1,400 planes manufactured by Boeing see if they were equipped with an improperly wired fuel pump that could cause an explosion in the rare event that fuel went below minimal levels.

In 2012 the FAA proposed a civil penalty of $13.57 million against Boeing for failing to meet a deadline to submit service instructions that would enable airlines to reduce the risk of fuel tank explosion on its 747 and 757 jets.

In 2013, after several incidents in which lithium-ion batteries in 787s caught fire, the FAA ordered the grounding of all U.S.-based Dreamliners. A federal official accused the company of having submitted flawed safety test results on the batteries.

Boeing has also been accused of doing faulty work in its military contracts. For example, in 2000, the company agreed to pay up to $54 million to resolve two whistleblower lawsuits charging that the company placed defective gears in CH-47D Chinook helicopters and then sold the aircraft to the U.S. Army.

In 2009 Boeing agreed to pay $25 million to settle allegations that it performed defective work on the entire KC-10 Extender fleet, a mainstay of the Air Force’s aerial refueling fleet used in Iraq and Afghanistan.

Boeing had a glorious history from the 1920s, when it pioneered the aviation industry, through the 1940s, when its bombers helped win the Second World War, and into the postwar era, when it played a major role in bringing about the jet age and mass airline travel.

The company’s record in recent decades has been much less impressive. The 737 Max scandal is not an anomaly, but rather the culmination of a long-term decline that is nothing to be proud of.

A 17-Year Quest for Accountability

The phrase banana republic was coined in the early 20th Century to describe countries dominated by large corporations which operated plantations marked by the ruthless exploitation of their workers. Perhaps the most notorious of those companies was United Fruit, which used both its economic power and the might of the U.S. military to rule much of Central America. The latter was seen clearly in the 1954 ouster of the populist Arbenz government in Guatemala in a coup engineered by the CIA.

United Fruit later changed its name to United Brands and then to Chiquita Brands International, but its behavior did not cease to be scandalous. In the 1970s, for instance, it was revealed to have paid a large bribe paid to the president of Honduras.

Another major controversy with its origins in the 1990s has tainted the company for three decades, culminating in a recent jury verdict against Chiquita in a federal civil lawsuit in Florida. That controversy stemmed from the company’s decision to make payments to a rightwing paramilitary group in Colombia, supposedly to protect its personnel and operations in the country. Chiquita continued to bankroll the group, the United Self-Defense Forces of Columbia (known by its Spanish initials AUC), even after it was designated as a Foreign Terrorist Organization by the U.S. government.

Chiquita eventually found itself the target of an investigation by the U.S. Justice Department, and in 2007 it pleaded guilty to criminal charges and paid a penalty of $25 million.

But that was not the end of the matter. Families of farmers and other civilians slaughtered by the AUC brought suit against the company in the U.S. with the help of EarthRights International. They argued that Chiquita improperly benefitted from the group’s reign of terror, including the purchase of land at depressed prices that had been owned by murdered farmers. It took 17 years of litigation, but the jury in the first of a series of trials just awarded the plaintiffs $38.3 million in damages.

Chiquita plans to appeal, but the verdict was a major accomplishment in the effort to hold large corporations responsible for abuses in connection with their foreign operations. In its statement hailing the verdict, EarthRights International said: “This historic ruling marks the first time that an American jury has held a major U.S. corporation liable for complicity in serious human rights abuses in another country, a milestone for justice.”

While it is true that Chiquita has major offices in Florida, the company has its international headquarters in Switzerland. Chiquita is owned by two Brazilian firms: Cutrale and the Safra Group. Fortunately, these complications did not prevent the jury from finding the company culpable under U.S. law.

Chiquita is not the only large company to have gotten into legal jeopardy for bankrolling an entity designated as a terrorist group. In 2022 Lafarge S.A., part of the Swiss building materials group Holcim, and its Syrian subsidiary pleaded guilty to a criminal charge brought by the U.S. Justice Department, accusing them of conspiring to provide material support and resources to the Islamic State of Iraq and al-Sham (ISIS) and the al-Nusrah Front, both U.S.-designated foreign terrorist organizations. Lafarge was sentenced to probation and ordered to pay $777 million in penalties.

Naming the Offenders

Regulatory agencies and prosecutors seek to punish misbehaving corporations in the hope they will change their practices and obey the rules. That happens occasionally, but all too often corporate offenders go on to break the law again, sometimes repeatedly.

The prevalence of such recidivism is one of the main conclusions that arises from the data on enforcement actions—numbering more than 600,000—my colleagues and I have collected in Violation Tracker.

Now one of the more aggressive federal regulators is planning to assemble an official resource on rogue corporations. The Consumer Financial Protection Bureau just announced it will create a registry of companies that have broken consumer protection laws and that are subject to court orders regarding their ongoing behavior.

“Too often, financial firms treat penalties for illegal activity as the cost of doing business,” said CFPB Director Rohit Chopra. “The CFPB’s new rule will help law enforcement across the country detect and stop repeat offenders.”

I am happy to report that Violation Tracker played a role in the agency’s development of the registry. As noted on page 405 of the lengthy description of the plan, CFPB made use of data from Violation Tracker to estimate how many companies might be affected.

Given that CFPB’s registry will cover only nonbank consumer finance companies, its scope will be much narrower than that of Violation Tracker, which covers all kinds of corporations, large and small. Yet it is important for there to be official compilations, since they will hopefully provide more pressure on bad actors.

It would be good if the CFPB’s move inspires the Justice Department to do more to respond to calls from members of Congress and corporate accountability advocates to create a comprehensive database on corporate crime.

Last year, DOJ created a page of its website called Corporate Crime Case Database, which initially contained only about a dozen items but was described as being “still in the process of being populated.” It’s now been about 12 months since the site went up, but that process is proceeding at a glacial pace. The page currently contains all of 85 case summaries, making it far from a comprehensive database.

It is no surprise that DOJ seems reluctant to do more to highlight its criminal enforcement, given that the department has been emphasizing leniency rather than aggressive prosecution of corporate miscreants. DOJ continues to allow large corporations to escape from criminal investigations with a deferred or non-prosecution agreement under which the company pays a penalty but does not need to plead guilty.

In theory, companies which fail to change their behavior would be subject to a real prosecution in the future, but there are many cases in which one leniency agreement is followed by nothing more than another leniency agreement.

Sometimes DOJ employs another device known as a declination in which the possibility of a prosecution is completely taken off the table. This deal was recently offered to a company called Proterial (formerly known as Hitachi Cable), which misrepresented to customers that the motorcycle brake hose assemblies it sold met federal safety performance standards. The problem was not that the company failed to test the assemblies. It did the tests but lied to customers about the results, claiming that the assemblies had passed when in fact they had failed. A page on the DOJ website lists 20 declinations, but there may be more that are not disclosed.

When it comes to corporate crime, DOJ needs to engage in more aggressive prosecutions and make sure the public knows about them.

Connive Nation

When Live Nation, the giant of the concert promotion business, and Ticketmaster, which dominated the performance booking business, proposed to merge in 2008, antitrust regulators thought it would be sufficient to require some concessions from the firms.

The Justice Department and state attorneys general gave their blessing to the deal in exchange for an agreement by Ticketmaster to license its ticket software to a competitor, to sell a subsidiary, and to promise not to engage in various anti-competitive practices.

Christine Varney, Assistant Attorney General in charge of the Department of Justice’s Antitrust Division, declared: “The Department of Justice’s proposed remedy promotes robust competition for primary ticketing services and preserves incentives for competitors to innovate and discount, which will benefit consumers. The proposed settlement allows for strong competitors to Ticketmaster, allowing concert venues to have more and better choices for their ticketing needs, and provides for anti-retaliation provisions, which will keep the merged company in check.”

That’s not exactly what happened. The merged company, Live Nation Entertainment, was accused by DOJ of repeatedly violating the agreement. In 2019 DOJ extended the court order under which it was overseeing Live Nation for another five years—which hardly seemed like an adequate way to rein in a company that was apparently flouting the commitments it had made.

Now DOJ is finally moving to undo its original mistake of allowing the merger. It and a group of state AGs have filed a lawsuit accusing Live Nation of operating as an illegal monopoly and calling for its dismantlement. Attorney General Merrick Garland charged that the company’s anti-competitive practices harm fans, artists, smaller promoters, and venue operators: “The result is that fans pay more in fees, artists have fewer opportunities to play concerts, smaller promoters get squeezed out, and venues have fewer real choices for ticketing services.”

Along with these economic impacts, Live Nation has been frequently embroiled in regulatory actions and class action lawsuits alleging a variety of misconduct. Violation Tracker documents a slew of such cases in which the company has paid tens of millions of dollars in fines and settlements. They include:

A $71 million settlement with the Arizona Attorney General to resolve allegations it failed to provide refunds for live events that were cancelled, postponed, or rescheduled due to the COVID-19 pandemic.

A $42 million settlement of a class action alleging it overcharged customers for delivery and processing fees.

A $23 million settlement of a class action alleging it misled customers into joining a costly online coupon service.

A $19 million settlement of a class action alleging it misled customers into purchasing tickets from a companion website that charged more than the face value.

There is even a criminal case in the mix. The Ticketmaster portion of Live Nation was accused by federal prosecutors in New York of improperly accessing the computer system of a competitor. The company was able to resolve the matter in 2020 by entering into a deferred prosecution agreement and paying a $10 million fine.  

If the DOJ is successful in its current lawsuit, the result could be greater competition as well as fairer practices in the live event industry.

Corporate Criminals Await Sentencing

A federal court in California will soon decide whether a bold move by the Consumer Product Safety Commission and the Justice Department will pay off. At issue is whether two corporate executives should face prison time for endangering the public.

Judge Dale Fischer is considering what sentence to impose on Simon Chu and Charley Loh, who were convicted last November of conspiracy to defraud the CPSC in the first-ever criminal prosecution brought under the 1972 Consumer Product Safety Act. The two men were part owners and top officers of Gree USA, Inc., a subsidiary of the Chinese-owned Hong Kong Gree Electric Appliances Sales Co., Ltd. Chu and Loh were charged with deliberately withholding information about defective dehumidifiers that could catch fire and selling these units with false certification marks stating that the products met applicable safety standards. They were convicted of conspiracy to defraud the CPSC and failure to meet reporting requirements, though they were acquitted of wire fraud.

The CPSC worked with the Justice Department to prosecute Chu and Loh individually after first bringing a criminal action against the company. That case was resolved through a 2021 deferred prosecution agreement under which Gree was able to avoid a conviction by paying a penalty of $91 million and agreeing to provide restitution for any uncompensated victims of fires caused by its defective dehumidifiers.

It is unusual for a deferred prosecution or non-prosecution deal with a company to be followed by criminal charges against executives at the firm. Given the uncertainties related to cases against individual corporate executives, the convictions won by DOJ sent a strong signal.

The question now is whether Chu and Loh will face a strong punishment. Not surprisingly, lawyers for each of the men submitted filings to the court arguing for no prison time as all. Loh’s filing makes a case for leniency based on the fact that the CPSC failed to bring criminal charges in other instances in which companies and executives failed to promptly report hazards. At the same time, the document tried to downplay Loh’s culpability, claiming his “actions were not those of a ‘typical’ criminal or felon – though those are labels he will have to live with for the rest of his life – but of a well-intentioned man who wrongly opted for self-preservation over economic suicide.”

For good measure, the filing goes on to state: “Numerous family members, friends, and colleagues have written testimonial letters to the Court attesting to Mr. Loh’s true nature, integrity, and charitable endeavors. Their letter provide [sic] a true sense of his good character. They also confirm that he is the sole caretaker for two elderly and infirm people: his 101 year old father who has Alzheimer’s disease and his 90 year old godmother who has advanced stage cancer.”

It remains to be seen whether the judge is swayed by any of this. Prosecutors clearly are not. They are seeking ten-year prison sentences for each of the men.

Although it may not provide justification for leniency in his sentence, Loh’s argument that CPSC had failed to pursue criminal charges in similar cases does raise an awkward issue for the agency. Its position might be stronger if the actions against Loh and Chu were part of a broader effort to tighten enforcement.

That does not appear to be the case. There has been no wave of additional product safety criminal prosecutions. In fact, there has not even been a rise in civil enforcement. The CPSC has not announced any penalty actions in more than six months, and there were only half a dozen in all of last year.

It is commendable that the CPSC has acted aggressively against Gree and its executives, but it should not be a one-off. The agency needs to punish all manufacturers that fail to protect the public.

The Limits of Leniency

The mission of the U.S. Justice Department is to enforce federal law, but when it comes to corporate offenders the DOJ often exhibits a puzzling reluctance to carry out that function.

A current example of this hesitancy involves Boeing. In 2021, in the wake of two crashes linked to defects in the company’s 737 MAX airliner, DOJ initiated a criminal investigation into whether Boeing conspired to mislead the Federal Aviation Administration about the safety of the plane.

Yet instead of filing charges, DOJ offered Boeing a deferred prosecution agreement (DPA) under which it would pay about $2.5 billion in penalties while not having to plead guilty. DOJ declined to require the appointment of an independent monitor, but it required the company to strengthen its compliance and ethics procedures.

More than three years have passed, and the DOJ has concluded that Boeing has not lived up to its obligations. Rather than announcing it will now bring actual criminal charges, Boeing sent a letter to the federal judge overseeing the case saying it is “is determining how it will proceed in this matter.”

This sounds like a prelude to some other kind of leniency deal with the company. That might mean a modification of the current DPA or a new one.

Boeing’s failure to comply with the DPA is hardly unprecedented, and there have been plenty of examples of corporations that have been offered more than one leniency arrangement. Among the more than 500 deferred prosecution and non-prosecution agreements documented in Violation Tracker, there are about three dozen parent companies that have received more than one. Among those is Boeing, which in 2006 was allowed to enter into a non-prosecution agreement to resolve a case involving federal contracting violations.

Amazingly, there are ten parents that have been given more than two leniency agreements. These are mostly banks, both domestic (such as JPMorgan Chase and Wells Fargo) and foreign-based (such as Deutsche Bank and HSBC). The DOJ is willing to go to great lengths to help rogue banks avoid a guilty plea.

The rationale for leniency agreements is that they will prompt companies to clean up their practices. In all too many cases, that is not what happens. After getting its deal, the corporation ends up violating the same or other laws. At that point, DOJ should throw the book at the offender. When DOJ instead offers up more leniency, that makes a mockery of the process.

In the case of Boeing, more leniency would be especially ridiculous, given that the company is already the subject of a new criminal investigation stemming from an incident earlier this year in which a fuselage panel blew off an Alaska Airlines 737 MAX mid-flight.

At the very least, DOJ should file real criminal charges against Boeing for violating the DPA. The Department should also use this as an opportunity to rethink its entire approach to corporate criminality. The reliance on leniency is not working.

It is time to explore new forms of punishment that will compel large companies to take their legal obligations more serious—and thereby protect the public from the consequences of their misconduct.