Author: Phil Mattera

DOJ’s Polite Approach to Corporate Crime

The Justice Department cannot seem to decide what stance it wants to take toward corporate criminality. After Biden came into office, DOJ initially signaled a get-tough approach, only to hedge on that last year. A new policy creates even more ambiguity.

Assistant Attorney General Kenneth Polite Jr. just delivered a speech that lives up to his name. He insisted that DOJ is “using every tool at our disposal to combat corporate crime, including more sophisticated data analytics and other means to proactively identify criminal conduct.” Yet he put his main emphasis on the additional opportunities the department will give corporations to reduce penalties and avoid criminal prosecutions altogether. The presentation, in effect, offered a new get out of jail free card to Corporate America.

To be fair, the card is not entirely free—the price is self-reporting. DOJ has apparently decided that the silver bullet for fighting corporate crime is giving companies more incentives to snitch on themselves. Polite’s speech announced a set of enhancements designed to make self-disclosure even more appealing.

At times, the text of his talk reads like an advertisement for a going-out-of-business sale. “If a company voluntarily self-discloses misconduct, fully cooperates, and timely and appropriately remediates, but a criminal resolution is still warranted,” he states, “the Criminal Division will now accord, or recommend to a sentencing court, at least 50%, and up to 75% off of the low end of the U.S. Sentencing Guidelines fine range, except in the case of a criminal recidivist.”

There were even steep penalty discounts offered to companies that don’t come forward: “The revised CEP [Corporate Enforcement Policy] provides incentives for companies that do not voluntarily self-disclose but still fully cooperate and timely and appropriately remediate. In such a case, the Criminal Division will recommend up to a 50% reduction off of the low end of the Guidelines fine range.”

Polite tried to give the impression that a stick is waiting for those who do not opt for the carrots. “The policy is sending an undeniable message: come forward, cooperate, and remediate…Failing to take these steps, a company runs the risk of increasing its criminal exposure and monetary penalties.”

Unfortunately, Justice has squandered its ability to play the bad cop. Take the issue of recidivism. The Biden DOJ initially vowed to crack down on repeat offenders, but they have been allowed to take advantage of leniency deals. This was evident in the case of ABB Ltd, the Swiss company which recently was offered a deferred prosecution agreement to resolve foreign bribery charges despite the fact that it had been involved in similar misconduct in the past. ABB itself was able to avoid criminal prosecution, though two subsidiaries had to plead guilty.

Even that kind of gesture may no longer occur. Polite announced that recidivists will not necessarily be required to plead guilty when faced with new charges and may be eligible for reduced fines even when they do not self-disclose.

There is a fundamental flaw in DOJ’s belief in the benefits of incentivizing corporate self-reporting. That faith seems to be based on the assumption that corporate crime usually involves actions by lower-level personnel. Top executives supposedly learn of the misconduct after the fact and must weigh the costs and benefits of reporting it to the authorities versus keeping quiet.

This ignores the fact that top management frequently is the source of the criminality, either directly or indirectly, as when the leadership of Wells Fargo imposed highly unrealistic revenue targets on employees, prompting them to create millions of sham fee-generating accounts. Penalty incentives will not mean much to residents of the C-suite who may be at risk of individual prosecution.

The other problem with DOJ’s approach is that it projects weakness. Its emphasis on leniency agreements, reduced fines and other incentives gives the impression the department is overwhelmed and outmatched in dealing with corporate miscreants.

Rogue corporations should have to beg for lighter penalties and be offered them only in extraordinary circumstances. Offering special deals to lawbreakers will not blunt corporate crime.

The Bank from Hell

Perhaps because it was announced just days before Christmas, the Consumer Financial Protection Bureau’s giant enforcement action against Wells Fargo has not received all the attention it deserves. The agency imposed a whopping $1.7 billion civil penalty and ordered the bank to provide more than $2 billion in consumer redress.

CFPB took these steps in response to what it called illegal practices affecting over 16 million consumer accounts. Wells was found to have repeatedly misapplied loan payments, wrongfully foreclosed on homes, improperly repossessed vehicles, and incorrectly assessed interest and fees, including surprise overdraft charges. Wells Fargo, it seems, was behaving like the bank from hell.

CFPB’s action does not come as a complete surprise. Wells already had a dismal track record. As shown in Violation Tracker, the bank has paid over $20 billion in fines and settlements during the past two decades. It has been especially tainted since 2016, when the CFPB revealed that bank employees, pressured to meet unrealistic sales goals, had been secretly opening unauthorized accounts in the name of unsuspecting customers who found themselves paying fees for services they had not requested.

Wells was initially fined only $100 million by CFPB, but the controversy over the bogus accounts continued. In 2020 the bank had to pay $3 billion to resolve criminal and civil charges brought by the Justice Department and the SEC. The impact of the case was diminished by the fact that DOJ offered Wells a deferred prosecution leniency agreement and by the decision not to prosecute any individual executives.

A different approach was taken by the Federal Reserve in its capacity as a bank regulator. In 2018 it announced that Wells would be subject to restrictions on its growth until it sufficiently improved its governance and internal controls. The Fed also pressured the bank to replace four members of its board of directors.

The new CFPB case suggests that neither the DOJ nor the Fed action was sufficient to get Wells to change its ways. Other evidence comes from private class action lawsuits. These include a $386 million settlement to resolve allegations the bank added unnecessary insurance fees to car loan bills and a $30 million settlement of allegations it improperly charged interest on Federal Housing Administration-insured loans after they were paid off.

All of this leads to two questions: Why does anyone continue to do business with Wells Fargo? And why do regulators allow it to continue to operate? The answers to both have a lot to do with the enormous concentration in the U.S. banking sector. In some parts of the country, Wells may be one of only a tiny number of full-service commercial banks doing business.

Size is also a factor in how Wells is treated by regulators. As outraged as they may be about the bank’s misconduct, they are not inclined to take any punitive action which might threaten its viability. A villainous Wells Fargo is apparently seen as preferable to the collapse of a bank with nearly $2 trillion in assets.

It is difficult to avoid the conclusion that Wells is taking advantage of this situation by pretending to reform its practices while continuing to conduct its dubious form of business as usual. Regulators need to find a way to bring this rogue bank under control once and for all.

Note: The new CFPB action was announced right after we completed an update of Violation Tracker. It will be added to the database as part of the next update later this month.

The 2022 Corporate Rap Sheet

The prognosis for the U.S. economy remains uncertain, but it is clear that 2022 has been a bumper year for corporate penalties. Including an update that will be posted soon, Violation Tracker will end up documenting more than $56 billion in fines and settlements. Among them are a dozen individual penalties in excess of $1 billion.

Many of the largest cases were brought by state attorneys general against large drug companies and pharmacy chains for their role in fueling the opiate crisis. Teva Pharmaceuticals entered into a settlement worth up to $4.25 billion to resolve allegations it deceptively marketed opioid products. Allergan paid $2.37 billion in a similar case.

Settlements were even higher in cases involving the failure of large pharmacy chains to question extraordinarily high volumes of suspicious opioid prescriptions. Walgreens paid $5.7 billion, CVS $5 billion and Walmart $3.1 billion.

The biggest Justice Department penalties were imposed on foreign companies in criminal cases. Allianz, the German insurance company and asset manager, paid $5.8 billion to resolve allegations that it misled public pension funds into investing in complex and risky financial products, causing them to suffer heavy losses. Denmark’s Danske Bank A/S paid $2 billion to settle charges that it lied to U.S. banks about its anti-money-laundering controls in order to help high-risk customers in countries such as Russia transfer assets.

Glencore, a commodity trading and mining company headquartered in Switzerland, paid $1.2 billion in a case involving international bribery. In another case brought under the Foreign Corrupt Practices Act, ABB Ltd, also based in Switzerland, paid DOJ a penalty of $315 million. It was also offered a leniency agreement called a deferred prosecution agreement, even though it was not the first time the company had been caught up in a bribery case.

In another case in which DOJ targeted a foreign company for actions abroad, the French building materials company Lafarge (part of the Holcim Group) paid $777 million to resolve allegations that it gave material support to terrorist groups such as ISIS when it made payments in exchange for permission to operate a cement plant in Syria.

Coming in just under a billion was the $900 million settlement DOJ reached with the drug company Biogen to resolve allegations that it paid illegal kickbacks to physicians to induce them to prescribe its products. This was the largest penalty among some 200 resolutions of cases brought under the False Claims Act during the year.

The biggest environmental fine of 2022 was the $299 million paid by automaker FCA US LLC (formerly the Chrysler Group and now part of Stellantis) to resolve criminal charges that it defrauded regulators and customers by making false and misleading representations about the design, calibration, and function of the emissions control systems on more than 100,000 of its vehicles. The allegations were similar to those faced by Volkswagen in its emissions cheating scandal, for which it paid around $20 billion in fines and settlements in previous years.

This year also saw an environmental settlement of $537 million paid by Monsanto (owned by Bayer) in a case involving the contamination of water supplies with polychlorinated biphenyls, or PCBs.

Privacy was the focus of numerous large cases, especially ones involving the tech giants. Google paid $391 million in a settlement with 40 state attorneys general of allegations the company misled consumers about the collection and use of their personal location data. Twitter had to pay $150 million to resolve allegations by DOJ and the Federal Trade Commission that it misrepresented how it employed users’ nonpublic contact information.

Employment-related cases tend to have lower regulatory penalty amounts, but private class action cases can result in sizeable settlements. This year saw Sterling Jewelers pay $175 million to settle a lawsuit alleging that for years it had discriminated against tens of thousands of women in its pay and promotion practices. Business services company ABM Industries agreed to pay $140 million to settle litigation alleging it failed to keep accurate records of time worked by its janitor employees, causing them to be underpaid.

There were also cases that overlapped employment issues and antitrust. Cargill, Sanderson Farms and Wayne Farms agreed to pay a total of more than $84 million to settle allegations that they violated antitrust laws by sharing poultry workers wage and benefit information, thereby depressing compensation levels.

In 2022 large corporations once again paid vast sums of money in connection with a wide range of misconduct. At the same time, they are spending more than ever to tout their supposed social responsibility credentials. The country would be a lot better off if big business focused less on ESG PR and more on compliance.

Update: After this blog was posted, several other major penalties were announced. The Consumer Financial Protection Bureau announced the largest penalty in its history against Wells Fargo, which was ordered to pay a fine of $1.7 billion and provide $2 billion in customer restitution to resolve allegations that the bank imposed illegal fees and interest charges on borrowers for automobile and home loans. The Federal Trade Commission fined software company Epic Games $520 million for violating online privacy protections for children. And a subsidiary of Honeywell was fined more than $160 million for paying bribes in Brazil.

Corporate Crime Groundhog Day

ABB Ltd, an industrial equipment giant based in Switzerland, seems to have a problem doing business honestly. The company has a tendency to get caught paying bribes to government officials around the world to obtain contracts to supply its goods and services.

The latest example of this came last week, when the U.S. Justice Department announced that ABB would pay a criminal penalty of $315 million to resolve allegations relating to the bribery of a high-ranking official at South Africa’s state-owned energy company. DOJ brought its action under a U.S. law, the Foreign Corrupt Practices Act, but in coordination with prosecutors in Switzerland and South Africa.

At first glance, one might think DOJ is throwing the book at ABB. Yet a closer reading of the announcement reveals that the company is the recipient of a kind of leniency agreement known as a deferred prosecution agreement. Under this arrangement, ABB Ltd pays a penalty but avoids having a criminal conviction.

DOJ did compel two of ABB’s foreign subsidiaries to enter guilty pleas, but freeing the parent of that consequence was a significant concession that allows the company to continue doing business as usual.

In its press release, DOJ congratulates itself on the handling of the case, stating: “This resolution demonstrates the Criminal Division’s thoughtful approach to appropriately balancing ABB’s extensive remediation, timely and full cooperation, and demonstrated intent to bring the misconduct to the department’s attention promptly upon discovering it, while also accounting for ABB’s historical misconduct.”

The last phrase is alluding to the fact that this is not the first time ABB has been charged with bribery by DOJ. In 2010 the company and two subsidiaries were charged in connection with bribes paid to a Mexican state-owned utility company and to officials in Iraq. The outcome was amazingly similar to this year’s case. The parent was offered a deferred prosecution agreement, while two subsidiaries pled guilty. The parties paid criminal penalties totaling $19 million.

There was also a Groundhog Day quality to the announcement last week by the SEC, which handled the parallel civil case against ABB and fined the company $75 million. After mentioning that it relieved ABB of having to pay an additional $72 million in disgorgement because of reimbursements it made to the South African government, the SEC casually noted that “ABB was the subject of two prior FCPA cases by the SEC in 2004 and 2010.” The 2010 case was related to the DOJ action cited above, while the 2004 SEC matter concerned illicit payments in Nigeria, Angola and Kazakhstan.

There is something almost comical about this history. ABB keeps getting caught breaking the rules and keeps promising to mend its ways. DOJ and the SEC keep giving special consideration to a company whose business model seems to depend on the use of improper payments.

Leniency deals such as deferred prosecution agreements are supposed to act as a deterrent against future misconduct, but the arrangement loses all meaning if the company continues to offend and is then offered another agreement. The financial penalties rise, but they are still insignificant for a company with annual revenues of about $30 billion and assets of about $40 billion.

Finding the most effective way to handle corporate crime is no easy task, yet DOJ should at least deny leniency deals to repeat offenders.

Derailing a Strike

The Biden Administration and Congressional Democrats purport to be pro-union, but in their desperation to prevent a rail strike they fail to understand something fundamental about collective bargaining: Sometimes workers have to inconvenience the public in order to achieve their legitimate goals.

A strike is a form of disruption. It is designed to put direct economic pressure on an employer by curtailing operations. Yet it also uses indirect means. The hope is that customers, suppliers, creditors and other stakeholders will press management to settle its differences with the union, resulting in better terms for workers. The louder the public uproar, the more likely there will be concessions by employers.

By trying to prohibit a strike by rail workers dissatisfied with the agreement previously negotiated with the help of the Biden Administration, Congress is eliminating both the direct and indirect pressures management might feel to improve on those contract provisions. It is trying to impose a clean solution in a conflict that is inherently messy.

At the insistence of progressives, Speaker Nancy Pelosi agreed to an add-on bill that would compel the railroads to provide additional paid sick days—a key point of contention—but as of this writing it seems unlikely that measure will pass the Senate.but that measure failed in the Senate.

Passage of a measure imposing the previous agreement and banning a strike would amount to one of the most egregious cases of strike-breaking by the federal government since Ronald Reagan busted the air traffic controllers union in 1981. It would also constitute an outrageous giveaway to a group of employers with a dismal track record on working conditions and safety.

As documented in Violation Tracker, the five U.S.-owned Class I railroads — BNSF, CSX, Kansas City Southern, Norfolk Southern and Union Pacific—have been fined more than 9,000 times by the Federal Railroad Administration and the Occupational Safety and Health Administration over the past two decades. They have paid over $100 million in penalties. The biggest offender is Union Pacific, with over 3,400 citations and $42 million in fines over safety issues.

The hazards indicated by these repeated violations—along with the grueling schedules imposed on rail workers—make the demand for ample paid sick leave all the more urgent.

That urgency applies not only to railroad employees but to the public. The safety lapses cited by the Federal Railroad Administration can lead to accidents such as collisions with cars and trucks at grade crossings or derailments in which hazardous materials spill out and endanger nearby communities.

Railroads have a history of trying to suppress information about dangerous working conditions. For example, in 2019 and 2020 BNSF, which is part of Warren Buffett’s Berkshire Hathaway conglomerate, was ordered to pay more than $1.7 million in damages and compensation to an employee who faced retaliation after reporting track defects.

CSX has been fined several times for whistleblower retaliation. For example, in 2021 OSHA found that the company violated the Federal Railroad Safety Act and demonstrated a pattern of retaliation after firing a worker in December 2019 for reporting safety concerns. The agency ordered the company to pay $71,976 in back wages, interest, and damages, and $150,000 in punitive damages.

In 2020 Norfolk Southern was ordered to pay $85,000 and reinstate an employee who was fired for reporting an on-the-job injury. Union Pacific has paid over $700,00 in five retaliation cases.

The rap sheets of the Class I railroads also include multiple environmental penalties. For example, in 2009 Union Pacific had to pay more than $31 million to settle alleged violations of the Clean Water Act in Nevada. In 2019 it paid $2.3 million to four California counties to resolve allegations relating to the mishandling of hazardous wastes.

In 2010 Norfolk Southern paid over $8 million to the Environmental Protection Agency in connection with a derailment and spill of hazardous chemicals in South Carolina. Three years earlier, it paid over $7 million to Pennsylvania to help pay for the restoration of waterways and wetlands affected by a lye spill.

In 2018 CSX paid $2.7 million to federal and state agencies to resolve liabilities related to water pollution caused by a 2015 derailment and oil spill in West Virginia. In 2004 BNSF paid North Dakota $29 million to resolve litigation relating to a massive underground leak of diesel oil.

The Biden Administration and Congressional Democrats may not have intended it, but their approach to the rail conflict ended up providing an extraordinary benefit to one of the least deserving industries.

The UN Calls Out Greenwashing

Thirty years ago, the United Nations shut down its Centre on Transnational Corporations. Over the prior two decades, the UNCTC had sought to shine a light on the growing influence and power of giant companies around the world, but especially in what was then called the third world.

After the UNCTC was gone, the United Nations said relatively little about corporations overall and even less of a critical nature. A new report from the international body begins to rectify that. As part of the COP27 climate conference, a group of experts convened by the Secretary-General has issued a critique of the commitments by non-state actors to achieve net zero greenhouse gas emissions in their operations.

Noting that many corporations with net zero pledges are still investing heavily in fossil fuels, the report calls for an end to what it does not hesitate to label as greenwashing—a term that was once used only by environmental activists. The title of the document, Integrity Matters, is a rebuff to companies that purchase dubious carbon offsets rather than making serious reductions in their own greenhouse gas emissions.

At the heart of the report are ten recommendations designed to make net zero commitments more meaningful. These include items such as setting short-term targets along with longer-term goals, engaging in better disclosure, and investing in just transitions.

But to my mind, the most important recommendation is the call for moving from voluntary pledges to enforceable rules. “Regulation is therefore needed,” the report states, “to level the playing field and transform the groundswell of voluntary commitments into ground rules for the economy overall.”

Even more promising is that the report urges cooperation among regulators in different countries to promote and enforce global standards. In fact, the document calls for the creation of a task force to convene a community of international regulators.

It is encouraging to see the United Nations take this posture. It will not be easy to get big business to move from self-serving and essentially meaningless promises to serious obligations.

Keep in mind that the phenomenon of greenwashing has been around for a long time. It was back in 1992 that the problem was first highlighted in a publication titled The Greenpeace Book of Greenwash written by environmental activist Kenny Bruno.

That report showed how corporations such as Shell were already pretending to be leaders in the effort to address global warming. Yet the deception was also taking place with regard to a slew of other environmental issues. Among the leading greenwashers cited by Bruno were General Motors, Westinghouse, Sandoz and DuPont.

Perhaps the most brazen of these was DuPont, which sought to divert attention from the extensive harm its chlorofluorocarbon products did to the ozone layer by running a series of television ads in which animals were made to look like they were applauding the company’s environmental initiatives while Beethoven’s Ode to Joy played in the background.

The lesson then, as today, is that large corporations will go to great lengths to give the impression that they are a key part of the solution when it comes to the environment, when in fact they are major contributors to the problem and will continue to do so until they are forced to change.

Tracing the Climate Culprits

We know that industries which produce fossil fuels or make heavy use of them in their production processes are major contributors to greenhouse gas emissions. A new tool identifies which of their operations are the biggest culprits.

Climate TRACE, a coalition of  researchers and NGOs, has just released a website that contains estimates of emissions by more than 70,000 individual facilities around the world. It has accomplished this amazing feat by amassing extensive data from remote sensing satellites and combining that with a variety of other public and commercial information. The process includes the use of artificial intelligence and machine learning.

The result is a resource that allows us to see, for example, which chemical and steel plants account for the most emissions. Users can also zoom into a specific geographic area and see how much individual power plants, mines, and oil fields are contributing to the climate crisis. The information can be broken down by the type of greenhouse gas, and it extends back to 2015.

Climate TRACE is not the only facility-level inventory of greenhouse gas emissions, but it appears to be the most detailed. Its great strength is that does not rely on company-reported data, which can too easily be manipulated.

By using satellites flying high above the earth, Climate TRACE is capturing unfiltered data directly from the facilities. It is, in effect, getting the power plants, refineries and the rest to confess the true impact they are having on the planet. A press release announcing the database claims that the use of AI will create increasingly accurate analyses of the satellite imagery.

What makes the tool even more powerful is that it incorporates ownership information about the facilities. It includes data on more than 4,000 companies, including state-owned enterprises, in 234 countries and administrative regions. A methodology document indicates that automated methods were used in compiling the data but few details are provided.

The website would be even more valuable if it added a feature allowing searches by facility and parent name and if it followed the lead of the Greenhouse Gas 100 and displayed emissions totals for large corporations.  These types of tabulations put more pressure on the companies with the worst results and help climate campaigners identify the most urgent targets.  

The extensive geographic scope of the data in Climate Trace will serve many purposes. For example, it reveals the extent to which emissions in Global South countries are caused by facilities owned by foreign investors. It also allows more accurate estimates of greenhouse gases being generated at various points in global supply chains.

The database arrives at a crucial time. One of the key questions being asked at the COP27 climate conference in Egypt is who will pay for the damage global warming is already creating as well as the cost of the adjustments needed to limit future damage. A substantial portion of that cost should fall on large corporations. Climate TRACE helps us determine which companies should get the biggest bills.

Getting Tougher with the Monopolists

The Antitrust Division of the Justice Department has announced that the former president of a paving and asphalt company based in Montana has pleaded guilty to criminal charges of attempting to monopolize the market for highway crack-sealing services in that state and Wyoming.

It is encouraging to see DOJ take aggressive action against an individual executive, especially since this action was the first criminal case to be brought under the Section 2 anti-monopoly provisions of the Sherman Act in decades.

Yet it is difficult to get too excited about the case, given that it involves a pretty small culprit in a minor market. DOJ should set its sights higher.

In doing so, prosecutors may want to look back at a case that shook up the corporate world 60 years ago. In what became known as the great electrical equipment conspiracy, dozens of executives from companies such as Westinghouse and General Electric were charged with colluding to fix prices and rig bids in the sale of transformers and other gear to industrial customers.

The defendants included a variety of vice presidents, division managers and other fairly high-level managers in the companies. Faced with incontrovertible evidence gathered by the DOJ during the Eisenhower Administration, they pleaded guilty or no contest and threw themselves on the mercy of the court. As Time magazine reported in 1961, defense attorneys argued for leniency:

One by one, as the sentencing went on, lawyers rose to describe their clients as pillars of the community. William S. Ginn, 45, vice president of General Electric, was the director of a boys’ club in Schenectady, N.Y. and the chairman of a campaign to build a new Jesuit seminary in Lenox, Mass. His lawyer pleaded that Ginn not be put “behind bars with common criminals who have been convicted of embezzlement and other serious crimes.”

Federal District Judge J. Cullen Ganey was not swayed. He sentenced Ginn and half a dozen other defendants to 30-day jail sentences, while many of the others received suspended sentences for reasons of age or health. A month was not a long stretch, but it was shocking at the time to see prominent businessmen being led off in handcuffs. In fact, it was the first time in the 70 years following the enactment of the Sherman Act that executives of large companies were incarcerated for antitrust offenses.

In the ensuing years, DOJ vacillated in its position on individual criminal charges for cartel activity. In the 1970s Congress revised the Sherman Act to allow violations to be prosecuted as felonies rather than just misdemeanors, but those provisions were not always applied.

Today the Antitrust Division regularly brings charges against individuals under Section 1 of the Sherman Act for price-fixing and bid-rigging, but the case volume is low and the sentences are not much harsher than those meted out by Judge Ganey. Moreover, the defendants in those cases are rarely high-level executives at large companies.

DOJ’s new willingness to bring Section 2 criminal cases is encouraging, but in order to shake up the business world the way the electrical equipment prosecutions did, the Antitrust Division will have to take aim at high-level executives at some of the mega-corporations that dominate our economy.

Poultry Concentration and Collusion

In the debate over the causes of today’s persistent inflation, corporate profiteering tends to get put far down on the list, well below factors such as supply-chain bottlenecks and the war in Ukraine. While corporate practices may not be the primary driver of rising prices, they are something government officials can actually do something about.

In fact, they already are trying to do so. One of the primary arenas is agribusiness, especially poultry processing. For instance, the Washington State Attorney General just announced that Tyson Foods has agreed to pay more than $10 million to settle its role in a lawsuit alleging that a dozen broiler chicken producers conspired to manipulate prices.

The U.S. Justice Department has also been targeting the broiler producers. It has run into difficulty proving its allegations against specific executives and has dropped a slew of individual charges. That doesn’t necessarily mean price fixing hasn’t been occurring. One of the major corporate defendants, Pilgrim’s Pride, pled guilty to criminal charges and paid a penalty of $107 million.

DOJ’s case against the chicken industry is not a response to recent inflation. It is an attempt to address many years of inflated prices resulting from collusion among a small group of companies in a highly concentrated industry.

Whatever happens with the government’s case, the industry is still facing a slew of private antitrust lawsuits that have been consolidated in federal court in Illinois. Last May, the judge presiding over the sprawling case certified three classes of plaintiffs: direct purchasers, indirect purchasers and end-user consumers. The plea by Pilgrim’s Pride in the DOJ case will make it much easier for the various plaintiffs to win substantial relief beyond the several hundred million dollars already paid out in partial settlements.

Chicken producers have also been accused of anti-competitive employment practices. In July, Cargill Meat Solutions, Sanderson Farms and Wayne Farms agreed to pay a total of $84.8 million to settle a civil antitrust case alleging that they engaged in a long-running conspiracy to depress wages by improperly exchanging information and coordinating their pay practices. A court-appointed monitor will oversee their behavior over the next decade.

The potential for future collusion, however, is now greater. Over the summer, a joint venture of Cargill and Continental Grain, the parent of Wayne Farms, acquired Sanderson and combined it with Wayne to form Wayne-Sanderson Farms. This deal creates another mega-producer alongside Tyson and Pilgrim’s Pride. The three will together control over 50 percent of the chicken market.

Diminished competition by itself serves to push prices higher. The effect is intensified in an industry whose dominant players have shown an inclination to engage in collusion as well. Anti-competitive practices by themselves do not account for mounting inflation, but they are a significant part of the story that deserves more attention—and more intervention by regulators and prosecutors.

Violation Tracker UK Year One

Corporate responsibility and ESG issues are receiving more attention than ever in the United Kingdom. Numerous services now exist to help investors pick ethical companies to add to their portfolios.

 Yet what about the irresponsible companies—the ones that break the rules and which investors may wish to shun? That’s where Violation Tracker UK comes in.

The free database, which is one year old this month, is a unique resource for identifying the companies that have been sanctioned by government regulators for infringements in areas extending from environmental compliance and employment standards to consumer protection and accounting fraud. Along with investors, users of the database include activists, journalists, lawyers, academics and public officials. VT UK is modeled on the U.S. Violation Tracker, which was launched in 2015.

VT UK collects data from four dozen regulatory agencies, ranging from the Health and Safety Executive and the Financial Conduct Authority to lesser known bodies such as the Groceries Code Adjudicator and the Gangmasters and Labour Abuse Authority. The latest agency to be added is the Jersey Financial Services Commission.

Since its launch, VT UK has grown to 77,000 entries dating back as far as 2010. We are constantly on the lookout for new datasets. For example, HM Revenue and Customs recently released a list of about 200 companies fined for having inadequate protections against money laundering. Their names are now in VT UK.

Every three months, we add new entries to the database and tag those that are subsidiaries of a group of more than 700 large UK and foreign parent companies, including those in the FTSE 100 and 250. This allows us to show which firms have the highest aggregate penalty totals. Those at the top of the list include aerospace giants Airbus and Rolls-Royce as well as major banks such as NatWest, Barclays and Lloyds.

The linkages are modified when there is a change of ownership. For example, the entries previously associated with the aerospace company Meggitt PLC now have Parker-Hannifin as their parent, given that company’s recent acquisition of Meggitt.

Every entry in VT UK is tagged with one of six broad offense groups. Safety-related cases account for the most cases–40,000—reflecting the heavy caseload of HSE. The second largest group, employment-related cases, contains 24,000 entries.

Although it has fewer cases, we have to spend a lot more time on the employment category. The reason is the difference in the way the major agencies in the two groups report their data. HSE posts its enforcement information on standardized pages that we are able to scrape fairly easily. The Employment Tribunal, on the other hand, reports its cases in individual PDF decision documents, which are often quite lengthy. Our lead UK researcher, Anthony Kay Baggaley, must read each decision—about 300 per month–and extract the key facts. His works allows us to determine, for example, that the companies with the largest number of employment-related offenses are the Royal Mail Group and Tesco.

The offense groups with the most cases don’t account for the largest aggregate monetary penalties. That distinction goes to competition-related offenses, with £5.4 billion paid by companies in just 320 cases. This is the result of the relatively heavy fines imposed by the Competition and Markets Authority, including a recent £63 million action against the U.S. drug company Pfizer, as well as some substantial bribery cases brought by the Serious Fraud Office.

When the penalty totals are viewed by parent industry, the financial services sector is in first place by far, with a total of £5 billion. That’s because the big banks have been hit with large fines across multiple offense groups, especially competition and, of course, financial cases. These offenders include not only the major UK financial institutions but also foreign banks headquartered in Europe (UBS, Deutsche Bank, etc.) and the United States (especially JPMorgan Chase and Citigroup).

We will continue to update and expand VT UK, but it is also a stepping-stone to a multi-country version of Violation Tracker we plan to create over the next couple of years. Stay tuned for Violation Tracker Global.