Corporate Crime

Prosecuting the Boss

A courtroom in Germany is currently the scene of a rare occurrence in the business world: the trial of a high-level executive for corporate crimes. Martin Winterkorn, the former top executive of Volkswagen, is facing charges of commercial fraud, market manipulation and making false statements.

Arguably, he should be facing even more serious allegations. Winterkorn is being belatedly tried in connection with the vast conspiracy in which Volkswagen executives conspired to deceive regulators and the public about the environmental impact of its diesel cars. By rigging the vehicles so their emissions appeared to be within legal limits when they were actually much higher, VW was responsible for releasing vast amounts of extra pollution into the air. The health effects are incalculable.

Winterkorn’s trial, delayed for health reasons, comes nine years after the emissions scandal erupted. During that time, the company has faced perhaps the most wide-ranging regulatory barrage in business history.

In the United States, VW paid a series of enormous penalties. These included a $14.7 billion settlement with the federal government and the state of California announced in 2016. The deal included $10 billion to be used for buying back vehicles with the illegal defeat devices and $4 billion to mitigate pollution from the cars and invest in green vehicle technology.

The following year, VW paid another $4 billion to settle a case brought by the Federal Trade Commission concerning another group of vehicles. The company pled guilty to three felony counts and paid a criminal penalty of $2.8 billion.

VW also faced regulatory actions and lawsuits around the world. Here are some of the most notable.

In its home country of Germany, VW was fined the equivalent of $1.2 billion in a case brought by government prosecutors and another $900 million in a lawsuit brought by the Federation of German Consumer Organizations.

In a case brought by Environment and Climate Change Canada, VW paid a fine equal to $150 million. The Australian Competition and Consumer Commission fined VW the equivalent of $86 million for deceiving customers about compliance with Australian diesel emissions standards.

India’s National Green Tribunal fined VW 5 billion rupees (US$71 million) for installing the cheating devices. South Korea’s Fair Trade Commission fined VW the equivalent of $31 million for false advertising on vehicle emissions. Among the other countries that penalized VW are Poland ($31 million), Brazil ($13 million), and the Netherlands ($536,000).

As important as these cases have been in highlighting VW’s egregious misconduct and extracting financial penalties, the individual prosecution of Winterkorn could have a greater long-term impact. Even though he is no longer employed by the company (he resigned under pressure in 2015), his trial is a demonstration of how a high-level executive can be held personally accountable for misdeeds under his watch. This is especially true in a case such as Winterkorn’s in which the executive is accused of committing some of those misdeeds himself.

If convicted, Winterkorn, 77, is unlikely to spend time behind bars. But a guilty verdict would send a strong signal to other unscrupulous executives.

Note: the enforcement actions discussed above (and much more) will be included in the forthcoming Violation Tracker Global.

A New DOJ Payday for Whistleblowers

Over the past decade, the Securities and Exchange Commission has paid out around $2 billion to individuals who provided information that led to successful enforcement actions against rule-breaking corporations. The awards can amount to tens of millions of dollars and sometimes reach the nine-figure level. More than a dozen other federal agencies such as the Commodity Futures Trading Commission have similar incentive programs.

The Justice Department recently announced that it will jump on the whistleblower bandwagon with a pilot program designed to assist in the prosecution of corporate crimes. DOJ’s initiative will cover certain crimes involving financial institutions, from traditional banks to cryptocurrency businesses; foreign corruption involving misconduct by companies; domestic corruption involving misconduct by companies; and healthcare fraud schemes involving private insurance plans.

To be eligible for an award, someone must provide DOJ with original non-public information that leads to a successful prosecution with a corporate penalty of at least $1 million. The whistleblower, who must not have participated in the illegal activity, could receive up to 30 percent of the first $100 million in net proceeds and 5 percent of proceeds between $100 million and $500 million. That means that a whistleblower could receive as much as $55 million.

Whistleblowing is not entirely new to DOJ. The department has long employed the False Claims Act qui tam program to investigate fraud against the federal government by contractors and Medicare healthcare providers. Many of the nearly 4,000 False Claims Act cases in Violation Tracker were made possible by whistleblowers. These cases are handled as civil matters, whereas the new pilot program will cover criminal charges.

DOJ sees the whistleblower program as part of its broader effort to encourage corporations to self-report when they detect illegal behavior within their ranks. The department took the unusual step of structuring the program so that whistleblowers remain eligible for an award if they first report the misconduct to corporate superiors and the company in turn discloses it to DOJ.

It would be ill-advised for the department to offer leniency deals to companies that engage in self-reporting only after learning that a whistleblower is ready to go public. Such deals are meant to incentivize companies to come forward of their own volition, not when the boom is about to be lowered.

Some critics complain that the DOJ pilot is deficient in that it does not adequately protect whistleblowers from retaliation. The program description deals with the issue by saying that the department could respond to retaliation by declining to award the company cooperation credit and/or “institute appropriate enforcement action.” DOJ would do well to adopt procedures like those in the Sarbanes-Oxley Act providing specific remedies for whistleblowers who experience retaliation.

Despite these limitations, it is encouraging that DOJ is adopting a practice for its criminal cases that has a long track record of success in bringing to light corporate wrongdoing of a civil nature. Let’s hope that this approach will put more pressure on rogue companies to clean up their act.

Naming the Offenders

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

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

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

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

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

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

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

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

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

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

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

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

Corporate Criminals Await Sentencing

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

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

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

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

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

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

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

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

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

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

The Limits of Leniency

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

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

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

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

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

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

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

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

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

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

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

What Does a Billion-Dollar Settlement Accomplish?

The news that the Dutch company Royal Philips has just agreed to pay $1.1 billion to settle U.S. litigation concerning defective breathing machines was reported on page B3 of the print edition of the Wall Street Journal and page B5 of the New York Times. In other words, it was not considered a major story of the day.

There was a time when a billion-dollar class action settlement would be front-page news and might have an impact on a company’s stock price and its reputation. That was especially true with regard to the $368 billion settlement the tobacco industry reached with state governments. That deal merited a banner headline stretching across the entire front page of the Times in 1997.

A great deal of attention was also paid to the multi-billion settlements reached in 2012 with BP with regard to the Deepwater Horizon disaster and in 2016 with Volkswagen in connection with its emissions cheating scandal.

These days, major settlements receive less notice despite a spate of what might be called mega-settlements—those with a price tag of $5 billion or more. Last year, Johnson & Johnson agreed to pay around $9 billion to settle lawsuits alleging that its talcum powder causes ovarian cancer. 3M agreed to pay $6 billion to settle litigation over hearing loss said to be caused by defective combat earplugs supplied to members of the military.

This year 3M agreed to pay $12.5 billion to settle litigation alleging it was responsible for contaminating thousands of public water systems with dangerous PFAS chemicals. Visa and Mastercard agreed to a $30 billion settlement of antitrust litigation concerning the fees they charge to merchants.

A mega-settlement has also appeared in Brazil, where joint venture partners Vale and BHP have agreed to provide an estimated $25 billion to communities ravaged by the 2015 collapse of a tailings dam.

These examples are limited to private litigation. Companies are also paying billions in cases brought by government agencies, especially with regard to the opioid crisis.

There are positive and negative aspects to these settlements. On the plus side, it is good that giant corporations are being compelled to pay sizeable compensation packages to groups of people harmed by their misconduct. It is true that a big chunk of these payouts goes to plaintiffs’ lawyers, though the hope it that they will use the proceeds at least in part to fund future class actions.

The problematic part is that corporations can view the settlements—whose size often falls short of the estimated harm caused by the company—as a tolerable cost of doing business. They may then feel little pressure to change their practices in a fundamental way.

Major litigation is not just a way to punish corporations financially for wrongdoing. It is supposed to serve as a deterrent against future bad acts. That fact seems to be getting forgotten as companies regard settlements as mere transactions, and the public pays less attention. Normalization of corporate misconduct will result in more of it.

Declining Prosecution

Three attorneys at Covington & Burling recently received a letter that could be seen as the ultimate achievement of a corporate lawyer. The U.S. Justice Department wrote to inform them that, although fraud was committed by employees of their client, Proterial Cable America, no charges would be filed against the firm.

Proterial, formerly known as Hitachi Cable America, is the latest recipient of a DOJ leniency practice known as declination. The Department has frequently been criticized for its extensive use of deferred prosecution and non-prosecution agreements. These arrangements allow companies involved in criminal misconduct to avoid having to enter a plea, though they must pay a penalty. DOJ holds open the possibility of an actual prosecution at a later date if the company does not change its behavior.

In a declination, prosecution is in effect taken off the table entirely. The only real consequence for the company is having to disgorge the profits it earned as a result of the fraudulent behavior. In the case of Proterial, that amount is about $15 million. This is a far cry from the amounts companies pay in deferred and non-prosecution agreements, which for firms such as Wells Fargo and Boeing have been several billion dollars.

Proterial’s fraud consisted of misrepresenting to customers that the motorcycle brake hose assemblies it sold met federal safety performance standards. The problem was not that the company failed to test the assemblies. It did the tests but lied to customers about the results, claiming that the assemblies had passed when in fact they had failed.

The Justice Department justified its declination in various ways. It said Proterial self-reported the misconduct; it cooperated with the investigation; it terminated the employees; and it agreed to the disgorgement. DOJ’s declination letter does not, however, explain how the misconduct came about—specifically, the issue of whether the employees who lied about the test results were acting at the direction of supervisors or managers.

It is difficult to believe that low-level employees would decide on their own to engage in the deception. It may very well be that they were pressured, whether explicitly or implicitly, by their bosses to do so. This is what happened, for example, at Wells Fargo, where employees facing impossible demands from managers to increase revenue resorted to the creation of bogus accounts, unbeknownst to customers.

Proterial’s parent, Hitachi Metals Ltd., does not have a spotless record. In 2014 it pled guilty and paid a $1.25 million criminal fine to the DOJ for its role in a conspiracy to fix prices and rig bids for automotive brake hoses installed in cars sold in the United States and elsewhere. This prior offense should have made the company ineligible for the declination.

Since the Biden Administration took office, the DOJ has carried out half a dozen declinations, according to a list published on the Department’s website. It is unclear how many other leniency agreements contain the additional benefit of remaining anonymous.

The DOJ seems wedded to the idea that leniency provides an effective incentive for companies to self-report misconduct, but it may also be a way for rogue companies to take themselves off the hook.

The $1 Trillion Cost of Corporate Misconduct

When you hear a reference to $1 trillion, it usually is in connection to the stock market capitalization of a handful of the largest tech companies. Yet that ten-figure number can now also be applied to what those companies and others have together paid in fines and settlements to resolve allegations of misconduct.

The total penalties documented in the Violation Tracker database for the period from 2000 through the present now surpass $1 trillion. To mark this milestone, my colleagues and I have just issued a report called The High Cost of Misconduct, which looks back at the last quarter-century of corporate crime and regulatory non-compliance.

Total payouts grew from around $7 billion per year in the early 2000s to more than $50 billion annually in recent years. This amounts to a seven-fold increase in current dollars, or a 300 percent increase in constant dollars.

The $1 trillion total could not have been reached without the massive penalties paid by companies such as Bank of America ($87 billion, mainly in connection with the toxic securities and mortgage abuses scandals of the late 2000s), BP ($36 billion, mainly from the Deepwater Horizon disaster), Wells Fargo ($27 billion, largely from the bogus accounts scandal), and Volkswagen ($26 billion, primarily from the emissions cheating scandal). There are 127 companies with penalty totals of $1 billion or more.

With these companies and many others, their totals reflect flagrant recidivism. Looking only at the more serious cases, two dozen parents have been involved in 50 or more cases in which they paid fines or settlements of $1 million or more. Bank of America has the most, with an astounding 225 such cases.

While the vast majority of the 600,000 cases in Violation Tracker are civil actions, the database contains more than 2,000 entries involving criminal charges. These account for more than 13 percent of the $1 trillion penalty total. Twenty-six parent companies have paid $1 billion or more in criminal cases, with the largest totals coming from the French bank BNP Paribas in connection with economic sanctions violations and from Purdue Pharma for its role in causing the opioid epidemic.

In many of these criminal cases, the companies were able to resolve the matter without having to plead guilty. That is because the Justice Department makes extensive use of arrangements known as deferred prosecution agreements and non-prosecution agreements. These are leniency deals by which companies pay substantial penalties but avoid a criminal conviction. Violation Tracker documents more than 500 cases involving a DPA or an NPA, with total penalties of more than $50 billion.

The theory behind these leniency agreements is that companies will learn from their mistakes and clean up their conduct. Yet there have been numerous instances of companies that signed a DPA or NPA ending up embroiled in another scandal. Amazingly, some of these companies were offered another leniency agreement, thus making a mockery of the deterrence concept. Among the double-dippers are American International Group, Barclays, Boeing, Deutsche Bank, HSBC, and Teva Pharmaceuticals.

The fact that penalties have reached the 10-figure level suggests that during the past quarter century we have been living through a continuous corporate crime wave. Every year, companies pay out billions of dollars for a wide range of offenses. Many large corporations are fined or enter into settlements over and over again, often for the same or similar misconduct.

Monetary penalties are meant in part to deter future transgressions, but there is no indication that is happening. Instead, the fines and settlements seem to be regarded as little more than a cost of doing business. Presumably, the profits from wrongdoing outweigh the penalties.

It is odd that amid a move to return to tougher policies to combat street crime, there is not an analogous effort to crack down on corporate crime. Instead, the Justice Department continues to employ leniency agreements that have frequently been ineffective in getting rogue companies to change their ways. The DOJ also remains reluctant to bring criminal charges against corporate executives, except in the most flagrant circumstances.

In a few cases, DOJ has experimented with different approaches, including forcing companies to exit lines of business in which they behaved illegally. Last year, for example, Teva Pharmaceuticals and Glenmark Pharmaceuticals were not only fined for scheming to fix prices of several generic drugs—they had to divest their operations relating to one of the drugs. That kind of penalty should shake up companies more than fines alone and thus should be used more frequently.

Mega-Scandals

Over the past quarter century, large corporations have paid hundreds of billions of dollars in fines and settlements for a wide range of misconduct. In Violation Tracker we document many thousands of these cases and place them in various categories. We have just added a new way of looking at the most egregious kinds of wrongdoing.

On the website we now identify clusters of major cases in which companies paid substantial penalties—from $25 million up to the billions—for practices that harmed large numbers of consumers, workers, investors or community members. We call these Mega-Scandals.

Chronologically, the first mega-scandal was the series of accounting and corruption scandals of the early 2000s at companies such as Enron, the high-flying energy trading company that went out of business—taking its auditor Arthur Andersen with it—when it turned out to be engaged in brazen accounting fraud.

Similar misconduct came to light at companies such as WorldCom, a telecommunications provider found to have inflated its assets by billions of dollars; Tyco International, a security systems firm whose CEO was convicted of misusing corporate funds to support a lavish personal lifestyle; and Adelphia Communications, whose principals were found guilty of looting the firm. One of the new mega-deal summary pages in Violation Tracker documents over $6 billion in penalties resulting from these cases.

The magnitude of the Enron era cases would be dwarfed by another mega-scandal which erupted later in the 2000s. It was the outgrowth of a period of financial deregulation that allowed Wall Street to create a slew of complex investment products backed by shaky home mortgages. When the housing market softened and many of those mortgages became delinquent, the value of residential mortgage-backed securities plunged. They came to be known as toxic securities.

The country avoided a complete financial collapse, but those toxic securities brought about significant legal and monetary consequences for the financial institutions held responsible for devising and marketing them. They found themselves the target of major lawsuits brought by the federal government, state governments, institutional investors and others. We estimate that the banks ended up paying more than $148 billion in fines and settlements, making this the most expensive of the mega-scandals.

The legal fallout from the financial crisis was also felt by the financial institutions that originated those shaky home mortgage loans behind the toxic securities. In some cases, they were part of the same banks that marketed the securities. Banks were sued both for luring low-income consumers into unsustainable mortgages and for misleading investors about those practices.

Far and away, the biggest payout in this category came from Bank of America, whose $53 billion total resulted from giant settlements with the U.S. Justice Department, state attorneys general, the loan guarantee agency Fannie Mae and others. JPMorgan Chase and Wells Fargo each racked up close to $9 billion in payouts. Overall, the mortgage abuse cases resulted in fines and settlements of more than $80 billion.

It was not long after the financial crisis that the next corporate mega-scandal burst onto the scene. It began on April 20, 2010 when an explosion occurred at the Deepwater Horizon drilling rig operated by BP in the Gulf of Mexico (photo). The accident killed 11 crew members and released a vast amount of oil into the gulf. It turned out to be the largest oil spill in history.

BP—along with the owner of the rig, Transocean, and Halliburton, which helped construct it—faced a wave of litigation alleging deficiencies in their actions before, during and after the accident. They ended up paying about $36 billion in settlements, with most of that coming from BP.

The pharmaceutical industry is responsible for several mega-scandals, the worst of which is the role drugmakers played in bringing about the opioid epidemic. Much of the blame has fallen on Purdue Pharma, which was relentless in promoting pain killers such as oxycodone, downplaying the risks of addiction even as overdose deaths soared. Purdue finally consented to a settlement in which it agreed to pay $8 billion and effectively go out of business, though the deal has been caught up in controversy over the effort of the Sackler family, which controlled the company, to shield itself from liability.

Other companies such as drug wholesalers and pharmacy chains have also faced major litigation over their alleged failure to question the enormous volume of prescriptions coming from dubious sources such as shady pain clinics known as pill mills. The Violation Tracker tally on the opioid mega-scandal estimates that total payouts have now surpassed $70 billion.

Among the other mega-scandals are:

The emissions cheating controversy centering on Volkswagen: $32 billion.
The wildfire liability controversy centering on PG&E: $18 billion.
The bogus bank account controversy centering on Wells Fargo: $8 billion.

More on these and other mega-scandals can be found on the Violation Tracker Summaries Page. Mega-scandals are also now included in the Offense Type dropdown on the Advanced Search page and thus can be combined with other variables.

The 2023 Corporate Rap Sheet

The splashiest corporate crime prosecutions in 2023 came in the crypto sector. Binance pleaded guilty to charges of violating anti-money-laundering regulations and paid over $4 billion in criminal and civil penalties; its founder and CEO Changpeng Zhao was also charged personally and admitted guilt. The Justice Department won a conviction on fraud and conspiracy charges of crypto mogul Sam Bankman-Fried in connection with the collapse of his FTX exchange.

Otherwise, the DOJ has not had many blockbuster cases this year, and many of its bigger successes have involved foreign-based corporate defendants. Among the latter are a $1.4 billion settlement with the Swiss bank UBS in a toxic securities case that originated during the financial crisis a decade ago and a $629 million settlement with British American Tobacco involving a scheme to evade economic sanctions against doing business with North Korea.

While major convictions and settlements lag, DOJ has stepped up its dubious policy of corporate leniency. This includes frequent use of non-prosecution and deferred prosecution agreements under which companies are allowed to sidestep criminal pleas by agreeing to pay monetary penalties and promising to change their behavior—promises that are often broken.

During this year, DOJ has offered companies NPAs and DPAs at least 17 times. Among these are the British American Tobacco case cited above, a price-fixing case against Teva Pharmaceuticals, and a foreign bribery case against the chemical company Albemarle. A DPA was also used by the Occupational Safety and Health Administration to resolve a case against a construction company called Skinner Tank on charges of willfully ignoring safety regulations and creating conditions that led to the death of a worker.

DOJ is also making increasing use of another form of leniency known as a declination. Companies that self-report illegal behavior that occurred under their roof are given a guarantee they will not be prosecuted and are allowed to pay a reduced fine. A DOJ webpage lists three declinations for this year, but a report by Public Citizen suggests that the department may be agreeing to keep some of these deals confidential.

Among most other federal agencies, this year has seen only a sprinkling of large case resolutions against major companies. For example, the Commerce Department’s Bureau of Industry and Security fined Seagate Technology $300 million for export control violations in its sale of disk drives to China’s Huawei Technologies. The Federal Reserve fined Deutsche Bank $186 million for failing to comply with previous consent orders involving sanctions compliance and anti-money-laundering practices.

Although most of its penalties are below $100 million, the Consumer Financial Protection Bureau has brought a steady stream of cases against financial predators. These include a $90 million penalty against Bank of America for imposing unfair overdraft fees, withholding reward bonuses explicitly promised to credit card customers, and misappropriating sensitive personal information to open accounts without customer knowledge or authorization.

The Securities and Exchange Commission has kept up its case volume, but the number of large resolutions in 2023 has been down from the previous year. And a larger portion of those major cases involve civil add-ons to criminal bribery cases brought by the Justice Department under the Foreign Corrupt Practices Act. There are also signs that the SEC is joining the leniency bandwagon. Recently, the agency waived a $40 million penalty against the drug company Mallinckrodt in a case related to its failure to disclose loss contingencies linked to an investigation of its Medicaid billing practices.

The Federal Trade Commission has also tended toward smaller settlements this year, though that agency handles many matters—including merger reviews—that may not involve monetary penalties. The biggest fine it imposed this year was $25 million in a case against Amazon.com for violating the Children’s Online Privacy Protection Act Rule.

The Environmental Protection Agency has held steady in 2023. Its largest settlement has been a $242 million deal with BP in which the oil giant paid a $40 million penalty and agreed to spend $197 million on emission control upgrades at its Whiting refinery in Indiana.

Major cases have been down at the state level. There have been about two dozen resolutions involving penalties of $50 million or more, compared to the previous year’s total of 50, which included numerous opioid-related settlements. This year there has been one such settlement involving a $1.4 billion deal with supermarket chain Kroger.

Year to year changes do not tell the whole story, yet it is discouraging to see a drop-off in successful major enforcement actions. Let’s hope that in 2024 both federal and state regulators and prosecutors find the means to step up the pressure on rogue corporations.

Note: Details on the cases cited above and many more are in Violation Tracker.