Bribery

The 2015 Corporate Rap Sheet

The ongoing corporate crime wave showed no signs of abating in 2015. BP paid a record $20 billion to settle the remaining civil charges relating to the Deepwater Horizon disaster (on top of the $4 billion in previous criminal penalties), and Volkswagen is facing perhaps even greater liability in connection with its scheme to evade emission standards.

Other automakers and suppliers were hit with large penalties for safety violations, including a $900 million fine (and deferred criminal prosecution) for General Motors, a record civil penalty of $200 million for Japanese airbag maker Takata, penalties of $105 million and $70 million for Fiat Chrysler, and $70 million for Honda.

Major banks continued to pay large penalties to resolve a variety of legal entanglements. Five banks (Citigroup, JPMorgan Chase, Barclays, Royal Bank of Scotland and UBS) had to pay a total of $2.5 billion to the Justice Department and $1.8 billion to the Federal Reserve in connection with charges that they conspired to manipulate foreign exchange markets. The DOJ case was unusual in that the banks had to enter guilty pleas, but it is unclear that this hampered their ability to conduct business as usual.

Anadarko Petroleum agreed to pay more than $5 billion to resolve charges relating to toxic dumping by Kerr-McGee, which was acquired by Anadarko in 2006. In another major environmental case, fertilizer company Mosaic agreed to resolve hazardous waste allegations at eight facilities by creating a $630 million trust fund and spending $170 million on mitigation projects.

These examples and the additional ones below were assembled with the help of Violation Tracker, the new database of corporate misconduct my colleagues and I at the Corporate Research Project of Good Jobs First introduced this year. The database currently covers environmental, health and safety cases from 13 federal agencies, but we will be adding other violation categories in 2016.

Deceptive financial practices. The Consumer Financial Protection Bureau fined Citibank $700 million for the deceptive marketing of credit card add-on products.

Cheating depositors. Citizens Bank was fined $18.5 million by the CFPB for pocketing the difference when customers mistakenly filled out deposit slips for amounts lower than the sums actually transferred.

Overcharging customers. An investigation by officials in New York City found that pre-packaged products at Whole Foods had mislabeled weights, resulting in grossly inflated unit prices.

Food contamination. In a rare financial penalty in a food safety case, a subsidiary of ConAgra was fined $11.2 million for distributing salmonella-tainted peanut butter.

Adulterated medication. Johnson & Johnson subsidiary McNeill-PPC entered a guilty plea and paid $25 million in fines and forfeiture in connection with charges that it sold adulterated children’s over-the-counter medications.

Illegal marketing. Sanofi subsidiary Genzyme Corporation entered into a deferred prosecution agreement and paid a penalty of $32.6 million in connection with charges that it promoted its Seprafilm devices for uses not approved as safe by the Food and Drug Administration.

Failure to report safety defects. Among the companies hit this year with civil penalties by the Consumer Product Safety Commission for failing to promptly report safety hazards were: General Electric ($3.5 million fine), Office Depot ($3.4 million) and LG Electronics ($1.8 million).

Workplace hazards. Tuna producer Bumble Bee agreed to pay $6 million to settle state charges that it willfully violated worker safety rules in connection with the death of an employee who was trapped in an industrial oven at the company’s plant in Southern California.

Sanctions violations. Deutsche Bank was fined $258 million for violations in connection with transactions on behalf of countries (such as Iran and Syria) and entities subject to U.S. economic sanctions.

Air pollution. Glass manufacturer Guardian Industries settled Clean Air Act violations brought by the EPA by agreeing to spend $70 million on new emission controls.

Ocean dumping. An Italian company called Carbofin was hit with a $2.75 million criminal fine for falsifying its records to hide the fact that it was using a device known as a “magic hose” to dispose of sludge, waste oil and oil-contaminated bilge water directly into the sea rather than using required pollution prevention equipment.

Climate denial. The New York Attorney General is investigating whether Exxon Mobil deliberately deceived shareholders and the public about the risks of climate change.

False claims. Millennium Health agreed to pay $256 million to resolve allegations that it billed Medicare, Medicaid and other federal health programs for unnecessary tests.

Illegal lobbying. Lockheed Martin paid $4.7 million to settle charges that it illegally used government money to lobby federal officials for an extension of its contract to run the Sandia nuclear weapons lab.

Price-fixing. German auto parts maker Robert Bosch was fined $57.8 million after pleading guilty to Justice Department charges of conspiring to fix prices and rig bids for spark plugs, oxygen sensors and starter motors sold to automakers in the United States and elsewhere.

Foreign bribery. Goodyear Tire & Rubber paid $16 million to resolve Securities and Exchange Commission allegations that company subsidiaries paid bribes to obtain sales in Kenya and Angola.

Wage theft. Oilfield services company Halliburton paid $18 million to resolve Labor Department allegations that it improperly categorized more than 1,000 workers to deny them overtime pay.

The 2014 Corporate Rap Sheet

gotojail The bull market in corporate crime surged in 2014 as large corporations continued to pay hefty fines and settlements that seem to do little to deter misbehavior in the suites. Payouts in excess of $1 billion have become commonplace and some even reach into eleven figures, as seen in the $16.65 billion settlement Bank of America reached with the Justice Department to resolve federal and state claims relating to the practices of its Merrill Lynch and Countrywide units in the run-up to the financial meltdown.

This came in the same year in which BofA reached a $9.3 billion settlement with the Federal Housing Finance Agency concerning the sale of deficient mortgage-backed securities to Fannie Mae and Freddie Mac and in which the Consumer Financial Protection Bureau ordered the bank to pay $727 million to compensate consumers harmed by deceptive marketing of credit card add-on products.

The BofA cases helped boost the total penalties paid by U.S. and European banks during the year to nearly $65 billion, a 40 percent increase over the previous year, according to a tally by the Boston Consulting Group reported by the Wall Street Journal.

Among the other big banking cases were the following:

France’s BNP Paribas pleaded guilty to criminal charges and paid an $8.9 billion penalty to U.S. authorities in connection with charges that it violated financial sanctions against countries such as Sudan and Iran.
Citigroup paid $7 billion to settle federal charges relating to the packaging and sale of toxic mortgage-backed securities.
U.S. and European regulators fined five banks — JP Morgan Chase, Citigroup, HSBC, Royal Bank of Scotland and UBS — a total of more than $4 billion after accusing them of conspiring to manipulate the foreign currency market.
Credit Suisse pleaded guilty to one criminal count of conspiring to aid tax evasion by U.S. customers and paid a penalty of $2.6 billion.
JPMorgan Chase paid $1.7 billion to victims of the Ponzi scheme perpetuated by Bernard Madoff to settle civil and criminal charges that it failed to alert authorities about large numbers of suspicious transactions made by Madoff while it was his banker.

Banks were not the only large corporations that found themselves in legal trouble during the year. The auto industry faced a never-ending storm of controversy over its safety practices. Toyota was hit with a $1.2 billion criminal penalty by U.S. authorities for concealing defects from customers and regulators. The National Highway Traffic Safety Administration fined General Motors $35 million (the maximum allowable) for failing to promptly report an ignition switch defect that has been linked to numerous deaths. Hyundai and its subsidiary Kia paid $300 million to settle allegations that they misstated the greenhouse gas emissions of their vehicles.

Toxic dumping. Anadarko Petroleum paid $5.1 billion to resolve federal charges that had been brought in connection with the clean-up of thousands of toxic waste sites around the country resulting from decades of questionable practices by Kerr-McGee, now a subsidiary of Anadarko.

Pipeline safety. The California Public Utilities Commission proposed that $1.4 billion in penalties and fined be imposed on Pacific Gas & Electric in connection with allegations that the company violated federal and state pipeline safety rules before a 2010 natural gas explosion that killed eight people.

Contractor fraud. Supreme Group BV had to pay $288 million in criminal fines and a $146 million civil settlement in connection with allegations that it grossly overcharged the federal government while supplying food and bottled water to U.S. personnel in Afghanistan.

Bribery. The French industrial group Alstom consented to pay $772 million to settle U.S. government charges that it bribed officials in Indonesia and other countries to win power contracts. Earlier in the year, Alcoa paid $384 million to resolve federal charges that it used a middleman to bribe members of Bahrain’s royal family and other officials to win lucrative contracts from the Bahraini government.

Price-fixing. Japan’s Bridgestone Corporation pleaded guilty to charges that it conspired to fix prices of anti-vibration rubber auto parts and had to pay a criminal fine of $425 million.

Defrauding consumers. AT&T Mobility had to pay $105 million to settle allegations by the Federal Trade Commission and the Federal Communications Commission that it unlawfully billed customers for services without their prior knowledge or consent.

The list goes on. Whether the economy is strong or weak, many corporative executives cannot resist the temptation to break the law in the pursuit of profit.

Note: For fuller dossiers on some of the companies listed here, see my Corporate Rap Sheets.

Paying for Protection from Protests

grasberg_mine_11 Responding to pressure from groups such as the International Corporate Accountability Roundtable, the Obama Administration has just announced that the United States will finally adopt a national action plan on combating global corruption, especially when it involves questionable foreign payments by transnational corporations that serve to undermine human rights. The White House statement notes that “the extractives industry is especially susceptible to corruption.”

True that. In fact, U.S.-based mining giant Freeport-McMoRan is an egregious case of a company that is reported to have made extensive payments to officials in the Indonesian military and national police who have responded harshly to popular protests over the environmental, labor and human rights practices of the company, which operates one of the world’s largest gold and copper mines at the Grasberg site (photo) in West Papua. There have been reports over the years that the U.S. Justice Department and the Securities and Exchange Commission were investigating the company for violations of the Foreign Corrupt Practices Act, but no charges ever emerged.

Here is some background on the story: Freeport moved into Indonesia in 1967, only two years after Suharto’s military coup in which hundreds of thousands of opponents were killed. The company developed close ties with the regime and was able to structure its operations in a way that was unusually profitable. Benefits promised to local indigenous people never fully materialized, and the mining operation caused extensive downstream pollution in three rivers.

Until the mid-1990s these issues were not widely reported, but then Freeport’s practices started to attract more attention. In April 1995 the Australian Council for Overseas Aid issued a report describing the oppressive conditions faced by the Amungme people living near the mine. It also described a series of protests against Freeport that were met with a harsh response from the Indonesian military. A follow-up press release by the Council accused the army of killing unarmed civilians. An article in The Nation in the summer of 1995 provided additional details, including an allegation that Freeport was helping to pay the costs of the military force.

In November 1995, despite reported lobbying efforts on the part of Freeport director Henry Kissinger, the Clinton Administration took the unprecedented step of cancelling the company’s $100 million in insurance coverage through the Overseas Private Investment Corporation because of the damage its mining operation was doing to the tropical rain forest and rivers (the human rights issue was not mentioned).

The company responded with an aggressive public relations campaign in which it attacked its critics both in Indonesia and abroad. Freeport also negotiated a restoration of its OPIC insurance in exchange for a promise to create a trust fund to finance environmental initiatives at the Grasberg site. Within a few months, however, Freeport decided to give up its OPIC coverage and proceeded to increase its output, which meant higher levels of tailings and pollution.

The criticism of Freeport continued. It faced protests by students and faculty members at Loyola University in New Orleans (where the company’s headquarters were located at the time) who called attention both to the situation in Indonesia and to hazardous waste dumping into the Mississippi River by Freeport’s local phosphate processing plant. Another hotbed of protest was the University of Texas, the alma mater of Freeport’s chairman and CEO James (Jim Bob) Moffett and the recipient of substantial grants from the company and from Moffett personally, who had a building named after him in return.

After its ally Suharto resigned amid corruption charges in 1998, Freeport had to take a less combative position. The company brought in Gabrielle McDonald, the first African-American woman to serve as a U.S. District Court judge, as its special counsel on human rights and vowed to share more of the wealth from Grasberg with the people of West Papua. But little actually changed.

Freeport found itself at the center of a new controversy over worker safety. In October 2003 eight employees were killed in a massive landslide at Grasberg that an initial government investigation concluded was probably the result of management negligence. A few weeks later, the government reversed itself, attributing the landslide to a “natural occurrence” and allowing the company to resume normal operations.

In 2005 Global Witness published a report that elaborated on the accusations that Freeport was making direct payments to members of the Indonesian military, especially a general named Mahidin Simbolon. In an investigative report published on December 27, 2005, the New York Times said it had obtained evidence that Freeport had made payments totaling $20 million to members of the Indonesian military in the period from 1998 to 2004. (A 2011 estimate by Indonesia Corruption Watch put company payments to the national police at $79 million over the previous decade.)

Reports such as these raised concerns among some of Freeport’s institutional investors. The New York City Comptroller, who oversees the city’s public pension funds, charged that the company might have violated the Foreign Corrupt Practices Act.

Back in Indonesia, protests escalated. In 2006 the military responded to anti-Freeport student demonstrations by instituting what amounted to martial law in the city of Jayapura. Around the same time, the Indonesian government released the results of an investigation by independent experts concluding that the company was dumping nearly 700,000 tons of waste into waterways every day. In 2006 the Norwegian Ministry of Finance cited Freeport’s environmental record in Indonesia as the reason for excluding the company from its investment portfolio.

In 2007 workers at the Grasberg mine staged sit-down strikes to demand changes in management practices along with improved wages and benefits. More strikes occurred in 2011. Two years later, more than two dozen workers were killed in a tunnel collapse at Grasberg. Indonesia’s National Commission on Human Rights charged that the company could have prevented the conditions that caused the accident.

Freeport’s questionable labor, environmental and human rights practices continue, yet aside from that OPIC cancellation two decades ago it has faced little in the way of penalties. It remains to be seen whether the new Obama Administration policy changes this sorry state of affairs.

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Note: This piece draws from my new Corporate Rap Sheet on Freeport-McMoRan, which can be found here.

Inverted Values

medtronic-headquarters Conservatives are up in arms about the surge of undocumented women and children coming across the border from Mexico. So great a threat is purportedly being caused by this influx that Republican members of Congress are clamoring for legislation that would allow faster deportations. Even President Obama seems to agree.

Much less urgency is being expressed about another sort of immigration crisis: the presence of a growing number of foreign-based corporations masquerading as American companies. Large-scale tax dodging by these firms does much more harm to the United States than the modest impact of those desperate Central Americans.

A recent report by the Congressional Research Service describes a new wave of companies going through a process politely known as “inversions.” What’s really happened is that these firms have renounced their U.S. “citizenship” and reincorporated themselves in tax haven countries in order to escape federal taxes.

Yet these companies go on operating as before, keeping their U.S. offices, their U.S. sales and all the other benefits of doing business here but not paying their fair share of the cost of government. They are the real illegitimate aliens.

While a few members of Congress have spoken out against this corporate treason, many adhere to the idea that the companies are blameless — that it is the supposedly oppressive tax system that is to blame. The editorialists at the Wall Street Journal, who can always be counted on to go to any length to defend corporate avarice, recently began a piece on inversions by writing: “What kind of country does this to itself?”

This is typical of the pro-corporate mindset: Big business, apparently, can do no wrong, so if a company does something controversial, it is the rest of us who are to blame.

In reality, many of the companies that have turned to inversions are not only tax dodgers; they are bad actors in other respects. Take the case of Medtronic, which is involved in the most recent re-registration deal involving a plan to merge with Covidien, a competitor in the medical devices industry that earlier turned itself into an “Irish” company.

Only a couple of weeks before the Covidien deal became public, the U.S. Justice Department announced that Medtronic would pay $9.9 million to resolve allegations under the False Claims Act that it made improper payments to physicians to get them to implant the company’s pacemakers and defibrillators in Medicare and Medicaid patients. The settlement came less than three years after Medtronic had to pay $23.5 million to resolve another False Claims Act case involving other kinds of improper inducements to physicians.

And five years before that, Medtronic paid $40 million to settle yet another kickback case. In 2010 the company had to pay $268 million to settle lawsuits claiming that defective wires in its defibrillators caused at least 13 deaths.

An even worse track record belongs to Pfizer, which attempted an inversion a couple of months ago by seeking to acquire Britain’s AstraZeneca but has backed off for now. In 2009 Pfizer agreed to pay $2.3 billion to resolve criminal and civil charges relating to the improper marketing of Bextra and three other medications. The amount was a record for a healthcare fraud settlement. John Kopchinski, a former Pfizer sales representative whose complaint helped bring about the federal investigation, told the New York Times: “The whole culture of Pfizer is driven by sales, and if you didn’t sell drugs illegally, you were not seen as a team player.”

Like Medtronic, Pfizer has had problems with questionable payments. In August 2012 the SEC announced that it had reached a $45 million settlement with the company to resolve charges that its subsidiaries, especially Wyeth, had bribed overseas doctors and other healthcare professionals to increase foreign sales.

Or take the case of Walgreen, which is reported to be planning an inversion of its own. In 2008 it had to pay $35 million to settle claims that it defrauded the federal government by improperly switching patients to different version of three prescription drugs in order to increase its reimbursements from Medicaid. Last year, the Drug Enforcement Administration announced that the giant pharmacy chain would pay a record $80 million in civil penalties to resolve charges that it failed to properly control the sales of narcotic painkillers at some of its stores.

The examples could continue. Corporations resorting to extreme measures such as foreign re-incorporations are not innocent victims. Their tax dodging is just another symptom of corporate cultures that put profit maximization above loyalty to country and adherence to the law.

The 2013 Corporate Rap Sheet

The ongoing corporate crime wave showed no signs of abating in 2013. Large companies continued to break the law, violate regulations and otherwise misbehave at a high rate. Whatever lip service the business world gives to corporate social responsibility tends to be overwhelmed by bad acts.

Continuing the trend of recent years, 2013 saw an escalation of the amounts that companies have to pay, especially in the United States, to get themselves out of their legal entanglements. In November JPMorgan Chase set a record with its $13 billion settlement with the U.S. Department of Justice and other state and local agencies on charges relating to the sale of toxic mortgage-backed securities. JPMorgan’s legal problems are not over. There have recently been reports that it may face criminal charges and pay $2 billion in penalties in connection with charges that it turned a blind eye to the Ponzi scheme being run by Bernard Madoff while it was serving as his primary bank.

Other banks have also been shelling out large sums to resolve disputes over the sale of toxic securities in the run-up to the financial crisis. Much of the money has gone to settlements with mortgage agencies Fannie Mae and Freddie Mac. Bank of America alone agreed to pay out $10.3 billion ($3.6 billion in cash and $6.75 billion in mortgage repurchases) to Fannie.

Here are some of the year’s other highlights (or lowlights):

FORECLOSURE ABUSES. In January, ten mortgage servicing companies–including Bank of America, Citibank and JPMorgan Chase–agreed to an $8.5 billion settlement to resolve allegations by federal regulators relating to foreclosure abuses.

LIBOR MANIPULATION. In February, U.S. and UK regulators announced that the Royal Bank of Scotland would pay a total of $612 million to resolve allegations relating to rigging of the LIBOR interest rate index. In December, the European Union fined RBS and five other banks a total of $2.3 billion in connection with LIBOR manipulation.

ILLEGAL MARKETING. In November, the Justice Department announced that Johnson & Johnson would pay more than $2.2 billion to settle criminal and civil allegations that it improperly marketed the anti-psychotic drug Risperdal for unapproved use by older adults, children and people with development disabilities.

SALE OF DEFECTIVE MEDICAL IMPLANTS. Also in November, Johnson & Johnson agreed to pay more than $2 billion to settle thousands of lawsuits charging that the company sold defective hip implants, causing many individuals to suffer severe pain and injury from metallic debris generated by the faulty devices.

INSIDER TRADING. In March, the SEC announced that an affiliate of hedge fund giant SAC Capital Advisors had agreed to pay $602 million to settle SEC charges that it participated in an insider trading scheme involving a clinical trial for an Alzheimer’s drug being jointly developed by two pharmaceutical companies. At the same time, a second SAC affiliate agreed to pay $14 million to settle another insider trading case. Later, SAC agreed to pay $1.2 billion to settle related criminal and civil insider trading charges.

PRICE-FIXING. In July, German officials fined steelmaker ThyssenKrupp the equivalent of about $115 million for its role in a price-fixing cartel. In September, the U.S. Justice Department announced that nine Japanese automotive suppliers had agreed to plead guilty to price-fixing conspiracy charges and pay more than $740 million in criminal fines, with the largest amount ($195 million) to be paid by Hitachi Automotive Systems.

MANIPULATION OF ENERGY PRICES. In July, the Federal Energy Regulatory Commission ordered Barclays and four of its traders to pay $453 million in civil penalties for manipulating electricity prices in California and other western U.S. markets during a two-year period beginning in late 2006.

BRIBERY. In May, the Justice Department announced that the French oil company Total had agreed to pay $398 million to settle charges that it violated the Foreign Corrupt Practices Act by paying bribes to officials in Iran.

VIOLATION OF DRUG SAFETY RULES. In May, DOJ announced that generic drug maker Ranbaxy USA Inc., a subsidiary of the Indian company Ranbaxy Laboratories, had pleaded guilty to felony charges relating to the manufacture and distribution of adulterated drugs and would pay $500 million in fines.

VIOLATION OF RULES ON THE SALE OF NARCOTICS. In June, the U.S. Drug Enforcement Administration announced that the giant Walgreen pharmacy chain would pay a record $80 million in civil penalties to resolve charges that it failed to properly control the sales of narcotic painkillers at some of its stores.

DEALINGS WITH ENTITIES SUBJECT TO SANCTIONS. In June, New York officials announced that Bank of Tokyo Mitsubishi-UFJ had agreed to pay $250 million to settle allegations that it violated state banking laws by engaging in transactions with entities from countries such as Iran subject to sanctions.

LABOR LAW VIOLATIONS. In November, the National Labor Relations Board found that Wal-Mart had illegally disciplined and fired workers involved in protests over the company’s labor practices. A Wal-Mart spokesperson was found to have unlawfully threatened employees who were considering taking part in the actions.

CLEAN WATER ACT VIOLATIONS. In May, the Environmental Protection Agency announced that Wal-Mart had pleaded guilty to charges that it illegally disposed of hazardous materials at its stores across the country. The company had to pay $81.6 million in civil and criminal fines.

HEALTH AND SAFETY CODE VIOLATIONS. In August, Chevron pleaded no contest and agreed to pay $2 million to settle charges that it violated state health and safety regulations in connection with a fire at its refinery in Richmond, California that sent thousands of people to hospital for treatment of respiratory problems.

DELAYS IN RECALLING UNSAFE VEHICLES. In August, Ford Motor was fined $17.4 million by the National Highway Traffic Safety Administration for taking too long to recall unsafe sport utility vehicles.

PRIVACY VIOLATIONS. In November, Google agreed to pay $17 million to 37 states and the District of Columbia to settle allegations that the company violated privacy laws by tracking online activity of individuals without their knowledge.

Note: For fuller dossiers on many of the companies listed here, see my Corporate Rap Sheets.

China’s Familiar Charges Against Glaxo

big-pharma-pills-and-money Global corporations piously claim to adhere to the laws of the countries in which they do business, knowing full well that those laws in many places are weak or are not rigorously enforced.

It’s thus amusing to see British drug giant GlaxoSmithKline squirm in the face of corruption charges unexpectedly brought by the Chinese government. GSK purports to be shocked by allegations that its Chinese executives used funds laundered through travel agencies to bribe doctors, hospitals and public officials to purchase more of its products. The company insists that it has zero tolerance for such behavior and that a recent internal investigation had found no evidence of corruption in its Chinese operations.

These protestations are as unconvincing as the Chinese government’s claims that it is simply enforcing the law—as opposed to giving its emerging pharmaceutical industry a leg up. GSK’s alleged transgressions are little different from the practices that it and the rest of Big Pharma employ around the world.

Take the United States. In recent years, GSK has become known as the company that pays massive amounts to resolve wide-ranging allegations brought by regulators and prosecutors.

Some of those charges involved payments very much like the ones it is being accused of making in China. GSK was charged with giving kickbacks to doctors and other health professionals to prescribe drugs such as the anti-depressants Paxil and Wellbutrin for unapproved (and possibly dangerous) purposes. Payments also went to figures such as radio personality Drew Pinsky, who was given $275,000 by the company to promote Wellbutrin on his program.

The kickback allegations were among the charges covered by a $3 billion settlement GSK reached with the U.S. Justice Department in 2012. Also included in the deal were accusations that GSK withheld crucial safety data on its diabetes medication Avandia from the Food & Drug Administration and that it defrauded government healthcare programs in its pricing practices.

These safety and pricing matters were the culmination of years of controversy surrounding GSK and its predecessor companies. The safety issues dated back at least to the 1950s, when Smith, Kline & French was among the firms linked to Thalidomide and its horrible legacy of birth defects.

Until it was sold off in the late 1980s, Glaxo’s infant formula business, like that of Nestle, was accused of undermining public health in the third world by marketing the powder to women who were so poor that they tended to dilute the formula to the point that it lost its nutritional potency.

In the 1980s, SmithKline Beckman was the target of a rare criminal case brought under U.S. drug laws for failing to warn regulators and the public about the potentially lethal side effects of its blood pressure medication Selacryn.

Later years saw frequent charges that GSK suppressed evidence about the dangers of Paxil, especially in children. There were also many cases involving pricing abuses, including one in which GSK paid $150 million to resolve allegations of violating the federal False Claims Act in its dealings with Medicare and Medicaid.

Unlike many corporate settlements, GSK’s $3 billion deal with the feds required it to plead guilty to several criminal counts. It also had to sign a Corporate Integrity Agreement with the Department of Health and Human Services.

In other words, the company is in effect on parole and subject to heightened scrutiny. The Chinese accusations seem to point to a big, fat violation of the U.S. Foreign Corrupt Practices Act. That would jeopardize GSK’s settlement and subject it to new penalties and sanctions.

Foreign corporations have long taken advantage of China’s lax regulatory system. Now that the People’s Republic is (selectively) cracking down, a company such as GSK deserves no sympathy.

The 2012 Corporate Rap Sheet

Corporate crime has been with us for a long time, but 2012 may be remembered as the year in which billion-dollar fines and settlements related to those offenses started to become commonplace. Over the past 12 months, more than half a dozen companies have had to accede to ten-figure penalties (along with plenty of nine-figure cases) to resolve allegations ranging from money laundering and interest-rate manipulation to environmental crimes and illegal marketing of prescription drugs.

The still-unresolved question is whether even these heftier penalties are punitive enough, given that corporate misconduct shows no sign of abating. To help in the consideration of that issue, here is an overview of the year’s corporate misconduct.

BRIBERY. The most notorious corporate bribery scandal of the year involves Wal-Mart, which apart from its unabashed union-busting has tried to cultivate a squeaky clean image. A major investigation by the New York Times in April showed that top executives at the giant retailer thwarted and ultimately shelved an internal probe of extensive bribes paid by lower-level company officials as part of an effort to increase Wal-Mart’s market share in Mexico. A recent follow-up report by the Times provides amazing new details.

Wal-Mart is not alone in its behavior. This year, drug giant Pfizer had to pay $60 million to resolve federal charges related to bribing of doctors, hospital administrators and government regulators in Europe and Asia. Tyco International paid $27 million to resolve bribery charges against several of its subsidiaries. Avon Products is reported to be in discussions with the U.S. Justice Department and the Securities and Exchange Commission to resolve a bribery probe.

MONEY LAUNDERING AND ECONOMIC SANCTIONS. In June the U.S. Justice Department announced that Dutch bank ING would pay $619 million to resolve allegations that it had violated U.S. economic sanctions against countries such as Iran and Cuba. The following month, a U.S. Senate report charged that banking giant HSBC had for years looked the other way as its far-flung operations were being used for money laundering by drug traffickers and potential terrorist financiers. In August, the British bank Standard Chartered agreed to pay $340 million to settle New York State charges that it laundered hundreds of billions of dollars in tainted money for Iran and lied to regulators about its actions; this month it agreed to pay another $327 million to settle related federal charges. Recently, HSBC reached a $1.9 billion money-laundering settlement with federal authorities.

INTEREST-RATE MANIPULATION. This was the year in which it became clear that giant banks have routinely manipulated the key LIBOR interest rate index to their advantage. In June, Barclays agreed to pay about $450 million to settle charges brought over this issue by U.S. and UK regulators. UBS just agreed to pay $1.5 billion to U.S., UK and Swiss authorities and have one of its subsidiaries plead guilty to a criminal fraud charge in connection with LIBOR manipulation.

DISCRIMINATORY LENDING. In July, it was announced that Wells Fargo would pay $175 million to settle allegations that the bank discriminated against black and Latino borrowers in making home mortgage loans.

DECEIVING INVESTORS. In August, Citigroup agreed to pay $590 million to settle a class-action lawsuit alleging that it failed to disclose its full exposure to toxic subprime mortgage debt in the run-up to the 2008 financial crisis. The following month, Bank of America said it would pay $2.4 billion to settle an investor class-action suit charging that it made false and misleading statements during its acquisition of Merrill Lynch during the crisis. In November, JPMorgan Chase and Credit Suisse agreed to pay a total of $417 million to settle SEC charges of deception in the sale of mortgage securities to investors.

DEBT-COLLECTION ABUSES. In October, American Express agreed to pay $112 million to settle charges of abusive debt-collection practices, improper late fees and deceptive marketing of its credit cards.

DEFRAUDING GOVERNMENT. In March, the Justice Department announced that Lockheed Martin would pay $15.9 million to settle allegations that it overcharged the federal government for tools used in military aircraft programs. In October, Bank of America was charged by federal prosecutors with defrauding government-backed mortgage agencies by cranking out faulty loans in the period leading to the financial crisis.

PRICE-FIXING. European antitrust regulators recently imposed the equivalent of nearly $2 billion in fines on electronics companies such as Panasonic, LG, Samsung and Philips for conspiring to fix the prices of television and computer displays. Earlier in the year, the Taiwanese company AU Optronics was fined $500 million by a U.S. court for similar behavior.

ENVIRONMENTAL CRIMES. This year saw a legal milestone in the prosecution of BP for its role in the 2010 Deepwater Horizon drilling accident that killed 11 workers and spilled a vast quantity of crude oil into the Gulf of Mexico. The company pleaded guilty to 14 criminal charges and was hit with $4.5 billion in criminal fines and other penalties. BP was also temporarily barred from getting new federal contracts.

ILLEGAL MARKETING. In July the U.S. Justice Department announced that British pharmaceutical giant GlaxoSmithKline would pay a total of $3 billion to settle criminal and civil charges such as the allegation that it illegally marketed its antidepressants Paxil and Wellbutrin for unapproved and possibly unsafe purposes. The marketing included kickbacks to doctors and other health professionals. The settlement also covered charges relating to the failure to report safety data and overcharging federal healthcare programs. In May, Abbott Laboratories agreed to pay $1.6 billion to settle illegal marketing charges.

COVERING UP SAFETY PROBLEMS. In April, Johnson & Johnson was ordered by a federal judge to pay $1.2 billion after a jury found that the company had concealed safety problems associated with its anti-psychotic drug Risperdal. Toyota was recently fined $17 million by the U.S. Transportation Department for failing to notify regulators about a spate of cases in which floor mats in Lexus SUVs were sliding out of position and interfering with gas pedals.

EXAGGERATING FUEL EFFICIENCY. In November, the U.S. Environmental Protection Agency announced that Hyundai and Kia had overstated the fuel economy ratings of many of the vehicles they had sold over the past two years.

UNSANITARY PRODUCTION. An outbreak of meningitis earlier this year was tied to tainted steroid syringes produced by specialty pharmacies New England Compounding Center and Ameridose that had a history of operating in an unsanitary manner.

FATAL WORKFORCE ACCIDENTS. The Bangladeshi garment factory where a November fire killed more than 100 workers (who had been locked in by their bosses) turned out to be a supplier for Western companies such as Wal-Mart, which is notorious for squeezing contractors to such an extent that they have no choice but to make impossible demands on their employees and force them to work under dangerous conditions.

UNFAIR LABOR PRACTICES. Wal-Mart also creates harsh conditions for its domestic workforce. When a new campaign called OUR Walmart announced plans for peaceful job actions on the big shopping day after Thanksgiving, the company ignored the issues they were raising and tried to get the National Labor Relations Board to block the protests. Other companies that employed anti-union tactics such as lockouts and excessive concessionary demands during the year included Lockheed Martin and Caterpillar.

TAX DODGING. While it is often not technically criminal, tax dodging by large companies frequently bends the law almost beyond recognition. For example, in April an exposé in the New York Times showed how Apple avoids billions of dollars in tax liabilities through elaborate accounting gimmicks such as the “Double Irish with a Dutch Sandwich,” which involves artificially routing profits through various tax haven countries.

FORCED LABOR. In November, global retailer IKEA was revealed to have made use of prison labor in East Germany in the 1980s.

Note: For fuller dossiers on a number of the companies listed here, see my Corporate Rap Sheets. The latest additions to the rap sheet inventory are drug giants AstraZeneca and Eli Lilly.

Pfizer’s Long Corporate Rap Sheet

The Dirt Diggers Digest is taking a break from commentary for the Thanksgiving holiday, but the Corporate Rap Sheets project marches on. I’ve just posted a dossier on drug giant Pfizer. Here is its introduction:

Pfizer made itself the largest pharmaceutical company in the world in large part by purchasing its competitors. In the last dozen years it has carried out three mega-acquisitions: Warner-Lambert in 2000, Pharmacia in 2003, and Wyeth in 2009.

Pfizer has also grown through aggressive marketing—a practice it pioneered back in the 1950s by purchasing unprecedented advertising spreads in medical journals. In 2009 the company had to pay a record $2.3 billion to settle federal charges that one of its subsidiaries had illegally marketed a painkiller called Bextra. Along with the questionable marketing, Pfizer has for decades been at the center of controversies over its pricing, including a price-fixing case that began in 1958.

In the area of product safety, Pfizer’s biggest scandal involved defective heart valves sold by its Shiley subsidiary that led to the deaths of more than 100 people. During the investigation of the matter, information came to light suggesting that the company had deliberately misled regulators about the hazards. Pfizer also inherited safety and other legal controversies through its big acquisitions, including a class action suit over Warner-Lambert’s Rezulin diabetes medication, a big settlement over PCB dumping by Pharmacia, and thousands of lawsuits brought by users of Wyeth’s diet drugs.

Also on Pfizer’s list of scandals are a 2012 bribery settlement; massive tax avoidance; and lawsuits alleging that during a meningitis epidemic in Nigeria in the 1990s the company tested a risky new drug on children without consent from their parents.

READ THE ENTIRE PFIZER RAP SHEET HERE.

Wal-Mart’s Other Sins

The job actions taking place at many Wal-Mart locations around the United States have brought new attention to the abysmal labor practices of the country’s largest private employer. More than any other company, Wal-Mart depends on low wages, meager benefits, overtime abuses and gender discrimination to keep its labor costs artificially low while quashing any efforts by workers to rectify those conditions.

Two weeks ago, I used this blog to recount Wal-Mart’s labor and employment track record. Here I want to remind readers of some of the company’s many sins outside the workplace, using information I assembled for the new 5,000-word Wal-Mart entry in my Corporate Rap Sheets series.

Corruption. Wal-Mart doesn’t seem to mind its hardline reputation on personnel matters, but it has tried to otherwise paint itself as a squeaky-clean operation. That image was shattered last spring, when the New York Times published an 8,000-word front-page exposé about moves by top management to thwart and ultimately shelve an investigation of Foreign Corrupt Practices Act violations, focusing on extensive bribes paid by lower-level company officials as part of an effort to increase Wal-Mart’s market share in Mexico.

That story made a huge splash and reportedly undermined the company’s urban expansion efforts. A major public pension fund, the California State Teachers’ Retirement System, sued the company for breach of fiduciary duty in connection with the bribery scandal. It and other institutional investors showed their discontent with top management by opposing the official slate of directors at Wal-Mart’s annual meeting. About 12 percent of the shares outstanding were voted against the slate, an unprecedented level of dissent by the company’s previously quiescent shareholders. The company, apparently still trying to deal with the fallout, has just announced an overhaul of its compliance department.

State income tax avoidance. In 2007 the Wall Street Journal published a front-page story revealing that Wal-Mart was using a real estate gimmick to avoid paying many millions of dollars in state corporate income taxes each year. It was doing this by putting many of its stores under the ownership of a real estate investment trust (REIT) controlled by the company. The stores would pay rent to the captive REIT and deduct those payments as a business expense.

This trick, essentially paying rent to itself, reduced the company’s taxable income and thus lowered its state tax bill (the REIT was structured so its income wasn’t taxed by any state). A report by Citizens for Tax Justice estimated that Wal-Mart had thereby avoided some $2.3 billion in state income tax payments between 1999 and 2005–an average of more than $300 million a year.

Local property tax avoidance. A 2007 report by my colleagues and me at Good Jobs First found that Wal-Mart has sought to reduce its property tax payments by frequently and aggressively challenging the assessed value attached to its U.S. stores and distribution centers by local officials. The report examined a 10 percent random sample of the stores and found that such challenges had been filed for about one-third of them; an examination of all of the distribution centers found challenges at 40 percent, even though many of the latter had been granted property tax abatements when they were built.

Sales tax “skimming.” In a 2008 report by Good Jobs First entitled Skimming the Sales Tax, we found that Wal-Mart was receiving an estimated $60 million a year as a result of the little-known practice in some states of compensating retailers for collecting sales taxes and calculating the amount of that compensation based on total sales. This, in addition to the estimated $130 million in sales-tax-based economic development subsidies, means that Wal-Mart is depriving hard-pressed state and local governments of at least $73 million each year. This is just a small part of the more than $1.2 billion in state and local subsidies that Good Jobs First has documented on our website Wal-Mart Subsidy Watch.

Environmental violations. Wal-Mart has tried very hard in recent years to depict itself as a pioneer of sustainability by wide-ranging initiatives with regard to energy efficiency and the addition of organic foods and other green products to its shelves. Wal-Mart is largely silent about the environmental impact of the millions of customers who in most cases must still drive to the company’s retail outlets. It also wants us to forget that the company itself has had its share of environmental violations. For example, in 2004 the U.S. Department of Justice and the Environmental Protection Agency announced that Wal-Mart would pay a $3.1 million civil penalty and take remedial action to resolve alleged violations of the Clean Water Act in connection with storm water runoff from two dozen company construction sites in nine states. The following year, the company agreed to pay $1.15 million to the state of Connecticut to settle a suit alleging that it had allowed rain water to carry fertilizer, pesticides and other harmful substances stored outside its retail outlets into rivers and streams. It also signed a consent decree with the EPA to resolve charges relating to diesel truck idling at its facilities.

Undocumented Workers. When talking about Wal-Mart it is difficult to avoid the workplace entirely. Aside from its mistreatment of its own employees, the company takes advantage of exploited contract workers. For example, in 2003 a federal racketeering suit was filed against Wal-Mart by lawyers seeking to represent thousands of janitors who cleaned company stores and were reported to be working seven days a week and not receiving overtime pay. The filing took place 18 days after federal agents raided 60 Wal-Mart stores in 21 states to round up about 250 janitors described as undocumented aliens. In 2005 Wal-Mart agreed to pay $11 million to settle federal immigration charges. Documents later emerged suggesting that Wal-Mart executives knew that the company’s cleaning contractors were using undocumented immigrants.

“Dead Peasant” Insurance. Wal-Mart has not only worked people to death but also continued exploiting them after their demise. The mega-retailer is one of the large companies that engaged in the repugnant practice of secretly taking out life insurance on low-paid employees and making itself the beneficiary. The polite term for this is corporate-owned life insurance, though critics have labeled it “janitor’s insurance” or “dead peasant insurance.” In 2004 Wal-Mart settled one case brought in Houston for an undisclosed amount. Two years later it agreed to pay $5.1 million for a class action brought by the estates of former employees in Oklahoma, and in 2011 the company agreed to pay just over $2 million in a class-action suit filed in Florida.

The list could go on. In fact, it is difficult to find a form of corporate misconduct Wal-Mart has not exhibited. Yet it is probably the labor arena that counts the most in determining whether the company will be reined in. Support your local Wal-Mart “associates” in their efforts to stand up to the bully of Bentonville.

Corporate Recidivism

The announcements by the Justice Department and the Securities and Exchange Commission that they had each charged Tyco International with engaging in foreign bribery was not just another all-too-familiar instance of corporate misconduct. It is an indicator of how a large corporation can be repeatedly drawn to illicit behavior even after being embroiled in a huge scandal that shook it to its core.

In the early 2000s, Tyco ranked with Enron and WorldCom as the leading symbols of the sleazy side of big business. In 2002 its chairman and CEO Dennis Kozlowski resigned amid reports that he was being investigated for evading more than $1 million in sales taxes due on artwork for his $18 million apartment on Park Avenue.

That was just the beginning. Kozlowski and Tyco’s former chief financial officer Mark Swartz were then indicted in a racketeering lawsuit charging them with looting the company of some $600 million through stock fraud, falsified expense accounts and other means. During their trial, details were revealed about Kozlowski’s lavish lifestyle—including what would become an infamous $6,000 shower curtain—based on what the prosecution called his misappropriation of company funds. In 2005, the two men were convicted of fraud, conspiracy and grand larceny; they were sentenced to 8-25 years in prison.

While the actions of Kozlowski and Swartz were meant to enrich themselves, Tyco benefited from other questionable maneuvers, such as the transfer of its corporate domicile offshore to Bermuda to avoid paying some $400 million a year in federal income taxes. In December 2002 the company, acknowledging what had long been suspected, admitted that for years it had engaged in financial gimmickry to inflate its reported earnings.

An internal investigation documented that Tyco managers had been openly encouraged to engage in creative accounting to give investors a misleadingly rosy view of how the company was performing. At the time, Tyco reduced its stated earnings by $382 million and later reported another $1 billion in accounting irregularities. In 2006 Tyco agreed to pay $50 million to settle SEC charges related to the accounting improprieties, and the following year it paid $3 billion to settle related class-action investor lawsuits.

In an effort to improve its reputation with shareholders, Tyco has undergone several restructurings and spinoffs. It also moved its legal headquarters from Bermuda to Switzerland, where the tax avoidance possibilities are apparently even more attractive.

Yet the one thing that should have been the top priority—ending its ethical shortcomings—apparently fell off the list, if the new SEC complaint is any indication.

According to the agency, Tyco repeatedly violated the Foreign Corrupt Practices Act through illicit payments to officials in more than a dozen countries during a period that began before 2006 and continued at least until 2009. After settling its earlier case with the SEC, Tyco allegedly continued to cook its books to disguise the bribes its subsidiaries were paying in places such as Turkey, China, Thailand, Malaysia, Egypt and Saudi Arabia.

At the same time the SEC and Justice Department revealed their actions against Tyco, the agencies announced that the company had settled the civil and criminal charges by agreeing to pay a total of $26 million—less than what it paid the SEC six years ago.

This comes across as a slap on the wrist for a company which had previously been accused of serious accounting fraud and which was supposed to cleaning up its act. The fact that Tyco could be granted a non-prosecution agreement for the criminal conspiracy charge is especially odious.

Both the SEC and Justice seemed to be trying to justify the light penalties by praising Tyco for cooperating in the investigation of the bribery. Yet this is the same company that was supposed to have rooted out its culture of corruption long ago.

It didn’t do a very good job of that, and the $26 million penalties—for a company with more than $17 billion in annual revenue and $1.7 billion in profits—does not create much pressure to end the profitable misconduct.

If there’s one thing that can be said for Kozlowski and the others who looted Tyco and cooked its books, it’s that they thought big. The prosecutors deciding on penalties for the company’s misdeeds should do the same.