Archive for the ‘Auto industry’ Category

A Boom Decade for Corporate Misconduct

Thursday, January 2nd, 2020

Business journalists are looking back with amazement at the stock market’s track record over the past decade. Yet the 2010s were also a boom period for corporate crime and misconduct.

In Violation Tracker my colleagues and I have documented more than 240,000 cases for that period representing $442 billion in fines and settlements—more than twice the $161 billion total for the previous decade. (The numbers are not adjusted for inflation.)

The cases from the 2010s include 574 with a penalty of $100 million or more, 147 with a penalty of $500 million or more, and 67 with a penalty of $1 billion or more.

The top tier of these mega-cases is dominated by four corporations. BP is linked to the largest single case on the list—the $20.8 billion settlement with the federal government and five states to resolve civil claims stemming from the massive 2010 Deepwater Horizon oil spill in the Gulf of Mexico. BP paid out numerous other mega-penalties and smaller ones to put its total for the decade at nearly $28 billion.

The second biggest single penalty during the decade was Bank of America’s $16.65 billion settlement with the Justice Department in 2014 to resolve claims relating to fraud in the period leading up to the financial crisis, including such behavior on the part of Merrill Lynch and Countrywide Financial, which BofA acquired during that crisis. BofA also had plenty of other penalties during the decade—including two in excess of $10 billion—bringing its total for that period to an eye-popping $62 billion.

The third of the penalty leaders is Volkswagen, which in 2016 reached a $14.7 billion settlement with the federal government and the state of California to resolve allegations relating to systematic cheating on diesel pollution emission testing through the use of defeat devices. VW paid out several other multi-billion penalties related to the cheating and racked up a penalty total of more than $23 billion for the decade.

Rounding out the list of companies with individual penalties in excess of $10 billion is JPMorgan Chase, which in 2013 reached a $13 billion settlement to resolve federal and state claims relating to the sale of toxic mortgage-backed securities by the bank itself and by its acquisitions Bear Stearns and Washington Mutual. JPMorgan also had several other penalties of $1 billion or more, along with smaller ones, that pushed its penalty total for the decade to more than $29 billion.

Other big domestic banks had a substantial share of mega-penalties. These include Citigroup, with a $7 billion toxic securities settlement in 2014 (and a penalty total of $16 billion for the decade) and Wells Fargo, with a similar $5.3 billion settlement in 2012 (and a penalty total of $15 billion stemming from issues such as the creation of bogus accounts to generate illicit fees).

The decade also saw a slew of mega-cases involving foreign banks such as BNP Paribas, Deutsche Bank, Royal Bank of Scotland and Credit Suisse for offense such as violations of economic sanctions and their own toxic securities abuses.

Financial services companies of all kinds dominated the mega-penalty list, accounting for 41 of the 67 billion-dollar cases. Also worthy of mention are the pharmaceutical companies, including settlements by GlaxoSmithKline for $3 billion and Johnson & Johnson for $2.2 billion, both for marketing drugs for purposes not approved as safe by the Food and Drug Administration. That industry will end up paying much more when the pending multistate opioid litigation is resolved.

The list could continue. Suffice it to say that the decade’s major cases made it clear that corporate misconduct perseveres through good times and bad.

The 2019 Corporate Rap Sheet

Thursday, December 19th, 2019

While the news has lately focused on political high crimes and misdemeanors, 2019 has also seen plenty of corporate crimes and violations. Continuing the pattern of the past few years, diligent prosecutors and career agency officials have pursued their mission to combat business misconduct even as the Trump Administration tries to erode the regulatory system. The following is a selection of significant cases resolved during the year.

Online Privacy Violations: Facebook agreed to pay $5 billion and to modify its corporate governance to resolve a Federal Trade Commission case alleging that the company violated a 2012 FTC order by deceiving users about their ability to control the privacy of their personal information.

Opioid Marketing Abuses: The British company Reckitt Benckiser agreed to pay more than $1.3 billion to resolve criminal and civil allegations that it engaged in an illicit scheme to increase prescriptions for an opioid addiction treatment called Suboxone.

Wildfire Complicity: Pacific Gas & Electric reached a $1 billion settlement with a group of localities in California to resolve a lawsuit concerning the company’s responsibility for damage caused by major wildfires in 2015, 2017 and 2018. PG&E later agreed to a related $1.7 billion settlement with state regulators.

International Economic Sanctions: Britain’s Standard Chartered Bank agreed to pay a total of more than $900 million in settlements with the U.S. Justice Department, the Treasury Department, the Federal Reserve, the New York Department of Financial Services and the Manhattan District Attorney’s Office concerning alleged violations of economic sanctions in its dealing with Iranian entities.

Emissions Cheating: Fiat Chrysler agreed to pay a civil penalty of $305 million and spend around $200 million more on recalls and repairs to resolve allegations that it installed software on more than 100,000 vehicles to facilitate cheating on emissions control testing.

Foreign Bribery: Walmart agreed to pay $137 million to the Justice Department and $144 million to the Securities and Exchange Commission to resolve alleged violations of the Foreign Corrupt Practices Act in Brazil, China, India and Mexico.

False Claims Act Violations: Walgreens agreed to pay the federal government and the states $269 million to resolve allegations that it improperly billed Medicare, Medicaid, and other federal healthcare programs for hundreds of thousands of insulin pens it knowingly dispensed to program beneficiaries who did not need them.

Price-fixing: StarKist Co. was sentenced to pay a criminal fine of $100 million, the statutory maximum, for its role in a conspiracy to fix prices for canned tuna sold in the United States.  StarKist was also sentenced to a 13-month term of probation.

Employment Discrimination: Google’s parent company Alphabet agreed to pay $11 million to settle a class action lawsuit alleging that it engaged in age discrimination in its hiring process.

Investor Protection Violation: State Street Bank and Trust Company agreed to pay over $88 million to the SEC to settle allegations of overcharging mutual funds and other registered investment company clients for expenses related to the firm’s custody of client assets.

Illegal Kickbacks: Mallinckrodt agreed to pay $15 million to resolve claims that Questcor Pharmaceuticals, which it acquired, paid illegal kickbacks to doctors, in the form of lavish dinners and entertainment, to induce them to write prescriptions for the company’s drug H.P. Acthar Gel.

Worker Misclassification: Uber Technologies agreed to pay $20 million to settle a lawsuit alleging that it misclassified drivers as independent contractors to avoid complying with labor protection standards.

Accounting Fraud: KPMG agreed to pay $50 million to the SEC to settle allegations of altering past audit work after receiving stolen information about inspections of the firm that would be conducted by the Public Company Accounting Oversight Board.  The SEC also found that numerous KPMG audit professionals cheated on internal training exams by improperly sharing answers and manipulating test results.

Trade Violations: A subsidiary of Univar Inc. agreed to pay the United States $62 million to settle allegations that it violated customs regulations when it imported saccharin that was manufactured in China and transshipped through Taiwan to evade a 329 percent antidumping duty.

Consumer Protection Violation: As part of the settlement of allegations that it engaged in unfair and deceptive practices in connection with a 2017 data breach, Equifax agreed to provide $425 million in consumer relief and pay a $100 million civil penalty to the Consumer Financial Protection Bureau. It also paid $175 million to the states.

Ocean Dumping: Princess Cruise Lines and its parent Carnival Cruises were ordered to pay a $20 million criminal penalty after admitting to violating the terms of their probation in connection with a previous case relating to illegal ocean dumping of oil-contaminated waste.

Additional details on these cases can be found in Violation Tracker, which now contains 397,000 civil and criminal cases with total penalties of $604 billion.

Note: I have just completed a thorough update of the Dirt Diggers Digest Guide to Strategic Corporate Research. I’ve added dozens of new sources (and fixed many outdated links) in all four of the guide’s parts: Key Sources of Company Information; Exploring A Company’s Essential Relationships; Analyzing A Company’s Accountability Record; and Industry-Specific Sources.

Who Pays the Penalties for Volkswagen’s Crimes?

Thursday, December 7th, 2017

It’s refreshing to see the book thrown at a corporate criminal, but it would have been even better if federal prosecutors had aimed higher.

Oliver Schmidt, who had once been a mid-level manager at VW’s engineering and environmental office in Michigan, was sentenced to seven years in prison for his role in the company’s long-running scheme to defraud the federal government in diesel emissions testing. The charges against him included conspiracy and violations of the Clean Air Act. He was also fined $400,000.

Schmidt, who was arrested when he foolishly came to the United States for a family vacation, must be pissed off at having to pay such a severe personal price while higher ranking VW officials back in Germany will probably remain unscathed. Appearing at his sentencing hearing in a prison jumpsuit with his wrists shackled, Schmidt admitted culpability and did not point the finger at any company superiors. However, he did not let VW completely off the hook.

In a letter to the judge overseeing his case, Schmidt said he felt “misused” by the company and that he was following VW talking points when he met with a California air pollution official in 2015 and concealed the existence of the software that made the cheating possible.

Schmidt could not have participated in a conspiracy all by himself. Yet the Justice Department does not appear to have tried very hard to land any bigger fish (though at least one person senior to Schmidt is being prosecuted in Germany).

Instead, the DOJ took the typical route of bringing a case against the company as a whole and letting it buy its way out of the entanglement. In 2015 the DOJ, along with the Federal Trade Commission and the State of California, agreed on a civil settlement under which VW had to spend up about $10 billion to compensate customers and $4.7 billion on pollution mitigation.

That was followed by a criminal case in which VW had to pay a $2.8 billion penalty. At least this involved a real criminal plea rather than one of those deferred-prosecution or non-prosecution shams, but it is unclear what consequences VW has faced beyond the payout.

The company is technically on probation and has a compliance monitor, but that will probably not mean much. Even before these cases, the company had already been under federal supervision because of a consent decree stemming from a 2005 case also involving emissions irregularities.

Given the severity of the VW cheating and the fact that it was in effect a repeat offense, the DOJ should have done more to prosecute top executives, and the case against the company itself should have had more than financial consequences.

Whereas strict limitations are placed on the activities of individual felons, VW has been able to go on operating as if the scandal had never happened. A case can be made that the company should have been shut out of the U.S. market, but instead it has been advertising heavily and seeking to regain market share. The main challenge is that it can no longer promote its vehicles under the banner of “clean diesel.” Presumably, VW is working on a new way to deceive the public.

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.

The Emissions Scandal Widens

Thursday, June 1st, 2017

Big business would have us believe that it is on the side of the angels when it comes to the Paris climate agreement. A group of large companies just published full-page ads in the New York Times and Wall Street Journal urging (unsuccessfully, it turned out) President Trump to remain in the accord.

Not included in the list of blue chip signatories were the big auto producers, which may reflect the realization among those companies that it is becoming increasingly difficult for them to present themselves as defenders of the environment.

On the contrary, recent developments could cause them to be regarded as among the worst environmental criminals. That’s because evidence is growing that the kind of emissions cheating associated with Volkswagen is more pervasive in the industry.

Recently, the Justice Department, acting on behalf of the Environmental Protection Agency, filed a civil complaint against Fiat Chrysler alleging that the company produced more than 100,000 diesel vehicles with systems designed to evade federal emission standards. As a result, those vehicles end up producing pollutants (especially oxides of nitrogen or NOx) well above the acceptable levels set by EPA. In its announcement of the case, DOJ noted: “NOx pollution contributes to the formation of harmful smog and soot, exposure to which is linked to a number of respiratory- and cardiovascular-related health effects as well as premature death.” This is a polite way of accusing the company of homicide.

Around the same time, a class action lawsuit was filed against General Motors accusing the company of programming some of its heavy-duty pickup trucks to cheat on diesel emissions tests.

The two companies are responding differently. GM is denying the allegations, calling them “baseless” and vowing to defend itself “vigorously.” Fiat Chrysler tried to ward off the federal lawsuit by promising to modify the vehicles. It expressed disappointment at the DOJ filing but is still vowing to work with regulators to resolve the issue. Fiat Chrysler is also maintaining that its systems are different from those used by Volkswagen, which has had to pay out billions in settlements and criminal fines; several of its executives are facing individual criminal charges.

Whether the response involves stonewalling, remediation or splitting hairs, the emergence of these new cases turns the emissions scandal from one involving a single rogue corporation to a pattern of misconduct that may turn out to be standard practice throughout the auto sector.

This in turn raises broader issues about deregulation. The Trump Administration and its Republican allies in Congress try to depict corporations as helpless victims of regulatory overreach in need of relief. What the widening emissions scandal shows is that large companies are often instead flagrantly violating the rules and in doing so are putting public health at risk. Rather than relaxing regulation, policymakers should be intensifying oversight to make it harder for cheating to occur.

The car industry would be a good place to start. Misconduct among automakers dates back decades. It was GM’s resistance to safety improvements that inspired Ralph Nader to launch the modern public interest movement in the 1960’s, and it was Ford’s negligence in the deadly Pinto scandal of the 1970s that gave new meaning to corporate greed and irresponsibility. It’s time for these companies to clean up their act once and for all.

Targeting Those at the Top

Thursday, May 18th, 2017

It remains to be seen how high the new special counsel Robert Mueller aims his probe of the Trump campaign, but there are reports that another prominent investigation is targeting those at the top. German prosecutors are said to be examining the role of Volkswagen chief executive Matthias Muller and his predecessor Martin Winterkorn in the emissions cheating scheme perpetrated by the automaker. They are also looking at the chairman of Porsche SE, which has a controlling interest in VW.

Mueller and Muller, by the way, have more of a connection than the similarity of their names. Last year, the former FBI director was chosen by a federal judge to serve as the “settlement master” to help resolve hundreds of lawsuits brought against VW in U.S. courts. Mueller has played a similar role regarding suits brought against Japanese airbag maker Takata.

Although Winterkorn was forced to resign after the emissions scandal erupted in 2015, he and Muller — who was VW’s head of product planning while the cheating was taking place — denied any wrongdoing, and the company sought to pin the blame on lower-level managers.

The initial U.S. Justice Department case against VW named no executives at all, though a company engineer later pleaded guilty to fraud charges and in January DOJ indicted six other VW middle managers.

There is no question that many individuals had to be involved in a scheme as widespread as the one at VW. Although it was corrupt, VW was also bureaucratic, so it is to be expected that lower-level managers either sought permission from their superiors for undertaking a risky scheme — or they were carrying out a plot that originated from above.

In fact, the New York Times reports that it has been shown internal company emails and memos suggesting that VW engineers implementing the scheme were operating with the knowledge and consent of top managers.

As the evidence mounts, the issue for German prosecutors may no longer be whether the likes of Muller and Winterkorn were involved but whether they, the prosecutors, are willing to bring charges against those at the apex of the corporate hierarchy.

In the United States, a reluctance to take that step has tainted the prosecution of business crime for more than a decade. At a time when discussion of whether anyone is above the law is the focus of discussion in the government realm, we should not forget that the principle applies in the corporate sector as well.

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.

The Real Crime Wave

Thursday, August 11th, 2016

Donald Trump’s recent economic policy address portrayed an economy crippled by “overregulation.” This came on the heels of his convention acceptance speech depicting a country afflicted by a wave of street crime perpetrated by “illegal immigrants.”

As with most of Trump’s statements, these comments took real issues and distorted them to the point that that they no longer had much resemblance to reality. There is a regulation crisis in the United States, but the problem is inadequate business oversight, not an excess. And there is a crime wave taking place, but the culprits are not immigrants but rather rogue corporations.

It was particularly odd that Trump chose to mention the auto industry in his rant on regulation. It has apparently not come to his attention that just about all the major carmakers are embroiled in some of the biggest safety and compliance scandals in the industry’s history.

Volkswagen exhibited contempt for the law in its long-standing scheme to circumvent auto emission standards. Since the brazen cheating came to light the company has been scrambling to make amends. It had to agree to spend nearly $15 billion (mostly to compensate customers) to resolve some of its legal entanglements, and it may still face criminal charges with larger potential penalties. While the amounts may seem high, VW is lucky it is being allowed to remain in business.

Then there’s the Japanese company Takata, whose airbags have turned out to be deadly and now is reported to have routinely manipulated test results of its products. General Motors had to pay a $900 million fine and Toyota $1.2 billion, both for safety reporting deficiencies. Electric car producer Tesla, which has taken advantage of a lax regulatory regarding self-driving technology, now faces scrutiny in the wake of several serious accidents involving vehicles operating on autopilot.

Automobiles are far from the only industry with serious regulatory compliance problems. In case we had forgotten the severity of the 2010 Deepwater Horizon catastrophe in the Gulf of Mexico, BP provided a reminder recently when it estimated that its legal and clean-up costs will reach more than $61 billion.

And we must not leave out the banks. In a report I put out in June to accompany the expansion of Violation Tracker, I found that since the beginning of 2010 there have been 144 cases settled against major banks with penalties in excess of $100 million each. In all, the banks have had to pay $160 billion in these cases to resolve allegations relating to a wide range of misconduct: mortgage abuses, defrauding of investors, manipulation of foreign exchange markets and interest rate benchmarks, assisting tax evasion, and much more.

Rampant corporate misconduct is one of the missing issues of the presidential race, especially since Bernie Sanders dropped out. Hillary Clinton’s website has some decent language on the subject but she has hardly made it a central issue in her campaign. In her convention acceptance speech she presented an upbeat picture of American business, and her reference to the auto industry was not to criticize its misconduct but to celebrate that it “just had its best year ever.”

Neither Clinton nor Trump can be expected to be a crusader for corporate accountability, but we need to make sure that whoever is the next occupant of the White House feels pressure to rein in and not unleash big business.

Manufacturing McJobs at Nissan and Elsewhere

Thursday, May 12th, 2016

Bring back manufacturing jobs: For years this has been put forth as the silver bullet that would reverse the decline in U.S. living standards and put the economy back on a fast track. The only problem is that today’s production positions are not our grandparents’ factory jobs. In fact, they are often as substandard as the much reviled McJobs of the service sector.

The latest evidence of this comes in a report by the UC Berkeley Center for Labor Research and Education, which has issued a series of studies on how the growth of poorly paid jobs in retailing and fast food have burdened government with ever-rising social safety net costs. Now the Center shows how the same problem arises from the deterioration of job quality in manufacturing.  The study estimates that one-third of the families of frontline production workers have to resort to one or more safety net program and that the federal government and the states have been spending about $10 billion a year on their benefits.

What makes these hidden taxpayer costs all the more galling is that manufacturing companies enjoy special benefits in the federal tax code and receive lavish state and local economic development subsidies, the rationale for which is that the financial assistance supposedly helps create high-quality jobs.

The Center’s analysis deals in aggregates and thus does not single out individual companies, but it is not difficult to think of specific firms that contribute to the vicious cycle. A suitable poster child, it seems to me, is Nissan. It is one of those foreign carmakers credited with investing in U.S. manufacturing, though like the other transplants it did so in a pernicious way.

First, it tried to avoid being unionized by locating its facilities in states such as Mississippi and Tennessee that are known to be unfriendly to organized labor. After the United Auto Workers nonetheless launched an organizing drive, the company has done everything possible to thwart the union.

Second, while boasting that its hourly wage rates for permanent, full-time workers are close to those of the Big Three domestic automakers, Nissan has denied those pay levels to large chunks of its workforce. Roughly half of those working at the company’s plant in Canton, Mississippi are temps or leased workers with much lower pay and little in the way of benefits.

It is significant that in the Center’s report, Mississippi — which has also attracted manufacturing investments from other foreign firms such as Toyota and Yokohama Rubber — has the highest rate of participation (59 percent) in safety net programs by families of production workers. The Magnolia State may have experienced a manufacturing revival, but many of those new jobs are so poorly paid that they are creating a burden for taxpayers.

At the same time, Mississippi is among the more generous states in dishing out the subsidies to those foreign investors. My colleague Kasia Tarczynska and I discovered that the value of the incentive package given to Nissan in 2000 will turn out to cost $1.3 billion — far more than was originally reported. Toyota got a $354 million deal in 2007, and Yokohama Rubber got a $130 million one in 2013.

There’s a lot of talk these days about bad trade deals and resulting job losses. We also need to worry about what happens when we gain employment from international investment but the jobs turn out to be lousy ones.

Emission Cheating and Lead Poisoning

Thursday, April 21st, 2016

Michigan Attorney General Bill Schuette announces Flint charges

Two legal cases involving egregious harm to public health have moved forward in recent days, though in very different ways. In one case an aggressive prosecutor, defying expectations, filed criminal charges against three individuals and vowed that they “are only the beginning. There will be more to come — that I can guarantee you.” In the other case, a large company reached a deal in which it will pay to modify or buy back hundreds of thousands of defective products.

The case in which the culprits are deservedly having the book thrown at them is the Flint water crisis, while in the other the boom is not yet being lowered on Volkswagen. The first involves misconduct by public officials, the second is a case of brazen corporate crime.

Admittedly, the settlement framework announced in the VW case does not necessarily reflect the full scope of the legal issues facing the automaker in connection with its systematic cheating in auto emission testing. It is not yet known whether the Justice Department’s reported criminal investigation of the matter will result in the filing of charges, nor is it clear whether the civil penalties that may be imposed on VW will come close to the theoretical maximum of $18 billion.

Yet the decision to announce the tentative buyback deal by itself creates the impression that it is the centerpiece of the resolution of the VW case. It’s being estimated that the U.S. buyback would cost the company about $7 billion. If that turns out to be the main cost imposed on VW, the automaker would be getting a bargain.

Causing financial harm to car owners is far from the only sin for which VW has to be held accountable, and it is probably not the most serious one. Of far more consequence are the environmental and public health impacts of the enormous amount of additional pollution that the VW engines have been spewing into the air. What started out as an effort to circumvent regulations will end up causing an unknown number of cases of asthma, bronchitis, emphysema, and possibly lung cancer.

There’s also the issue of deterrence. If VW and its relevant officials do not face serious consequences for their actions, people at other corporations may think they can also flout vital regulations. It’s already clear that VW’s emission fraud was not an anomaly. Mitsubishi just admitted it has been doing the same thing in Japan for at least one of its vehicles.

We don’t yet know the full story of what happened at VW much less Mitsubishi, yet it is likely that flagrant emissions deception arose out of a corporate mindset that sees regulations as obstacles to be overcome rather than legitimate rules designed to protect the public. That mindset will not change until corporations and individuals within them pay as heavy a price for their transgressions as that facing the public officials who poisoned the children of Flint.