Discrimination

Federal Watchdog Agencies Still On Guard

Donald Trump likes to give the impression that he has made great strides in dismantling regulation. While there is no doubt that his administration and Republican allies in Congress are targeting many important safeguards for consumers and workers, the good news is that those protections in many respects are still alive and well.

This conclusion emerges from the data I have been collecting for an update of Violation Tracker that will be posted later this month. As a preview of that update, here are some examples of federal agencies that are still vigorously pursuing their mission of protecting the public.

Federal Trade Commission. In June the FTC, with the help of the Justice Department, prevailed in litigation against Dish Network over millions of illegal sales calls made to consumers in violation of Do Not Call regulations. The satellite TV provider was hit with $280 million in penalties.

Drug Enforcement Administration. The DEA is a regulatory entity as well as a law enforcement agency. In July it announced that Mallinckrodt, one of the largest manufacturers of generic oxycodone, had agreed to pay $35 million to settle allegations that it violated the Controlled Substances Act by failing to detect and report suspicious bulk orders of the drug.

Federal Reserve. The Fed continues to take action against both domestic and foreign banks that fail to exercise adequate controls over their foreign exchange trading, in the wake of a series of scandals about manipulation of that market. The Fed imposed a fine of $136 million on Germany’s Deutsche Bank and $246 million on France’s BNP Paribas.

Consumer Financial Protection Bureau. Last month the beleaguered CFPB ordered American Express to pay $95 million in redress to cardholders in Puerto Rico and the U.S. Virgin Islands for discriminatory practices against certain consumers with Spanish-language preferences.

Securities and Exchange Commission. In May the SEC announced that Barclays Capital would pay $97 million in reimbursements to customers who had been overcharged on mutual fund fees.

Equal Employment Opportunity Commission. The EEOC announced that the Texas Roadhouse restaurant chain would pay $12 million to settle allegations that it discriminated against older employees by denying them front-of-the-house positions such as hosts, servers and bartenders.

Justice Department Antitrust Division. The DOJ announced that Nichicon Corporation would pay $42 million to resolve criminal price-fixing charges involving electrolytic capacitors.

Federal agencies are also finishing up cases dating back to the financial meltdown. For example, in July the Federal Housing Finance Agency said that it had reached a settlement under which the Royal Bank of Scotland will pay $5.5 billion to settle litigation relating to the sale of toxic securities to Fannie Mae and Freddie Mac. And the National Credit Union Administration said that UBS would pay $445 million to resolve a similar case.

It remains to be seen whether federal watchdogs can continue to pursue these kinds of cases, but for now they are not letting talk of deregulation prevent them from doing their job.

Note: The new version of Violation Tracker will also include an additional ten years of coverage back to 2000.

Corporate America Doesn’t Qualify for Moral Leadership Either

It may turn out that Donald Trump’s greatest contribution to American business is allowing the chief executives of tainted corporations to take a morally superior posture toward a presidency that seems to be completely devoid of principle. Their brands are boosted as his becomes increasingly toxic.

It is a good thing that big business is taking steps to separate itself from Trump. The collapse of the two advisory councils is not only a rebuke to Trump’s offensive comments on the events in Charlottesville but also an overdue retreat from entities that were set up mainly to foster the illusion that this administration is taking serious steps to reform the economy.

Yet it is dismaying that the moral vacuum created by Trump is being filled by the likes of Walmart chief executive Douglas McMillon, who got himself featured on the front page of the New York Times for a statement criticizing Trump.

For years the giant retailer was a national symbol of discriminatory practices. In 2009 it had to pay $17.5 million to settle a lawsuit alleging that it discriminated against African-Americans in the recruitment and hiring of truck drivers. The company was also widely accusing of gender discrimination. In 2010 the company was required to pay $11.7 million to settle a case brought by the U.S. Equal Employment Opportunity Commission, and it was facing potential damages in the billions from a class action suit brought on behalf of more than 1 million female employees until the Supreme Court came to its rescue and threw out the case for what amounted to technical reasons.

In addition to discrimination, Walmart has been at the center of countless controversies involved wage theft, union-busting, tax avoidance, bribery and much more.

After Merck CEO Kenneth Frazier led the way among business critics of Trump’s embrace of white nationalism, the president struck back with a tweet referring to “ripoff drug prices.” While Trump was just being vindictive, it’s true that Merck’s reputation is far from untarnished.

In 2011 the drugmaker agreed to pay a $321 million criminal fine and a $628 million civil settlement to resolve allegations that it illegally promoted and marketed the painkiller Vioxx. This came after Merck had to remove the drug from the market in the wake of reports that the company for years covered up evidence of serious safety issues surrounding its blockbuster product. This is just one of a long list of its cases involving illegal marketing, overbilling, false claims and anti-competitive practices.

Another of the CEOs who spoke out in response to Trump’s comments was JPMorgan Chase’s Jamie Dimon. Earlier this year, the bank had to pay $53 million to settle a case brought by the U.S. Attorney in Manhattan accusing it of engaging in discrimination on the basis of race and national origin in its mortgage business.

JPMorgan Chase was one of the parties that helped bring about the financial collapse of a decade ago, and in 2013 it agreed to a $13 billion settlement of federal and state allegations relating to the packaging and sale of toxic mortgage-backed securities.

In 2015 JPMorgan had to pay a $550 million criminal fine to resolve federal charges that it and other large banks conspired to manipulate foreign exchange markets. There are many more entries in the corporate rap sheet of this company, which since the beginning of 2010 has had to pay out more than $28 billion in fines and settlements.

It would be difficult to find any members of the disbanded advisory councils whose companies have not engaged in serious misconduct of one sort or another.

Such is the peril of looking for paradigms of virtue in the business world. Corporate executives should, along with many others, speak out against Trump’s reprehensible comments, but they cannot lay claim to moral leadership.

Regulation is Not Dead Yet

Donald Trump tries to give the impression that his crusade against business regulation is moving ahead rapidly. While several rules have been rescinded and more are threatened, it turns out that for now the enforcement systems at most agencies are functioning normally.

In preparing a forthcoming update of the Violation Tracker database, I’ve found that since the inauguration federal regulatory agencies have announced more than 160 case resolutions with fines and settlements totaling more than $1.6 billion. This two-month dollar amount does not compare to the $20 billion collected by the Obama Administration during its final tens weeks in office. Yet it does show that the so-called administrative state is not dead yet.

A large portion of the Trump collections come from enforcement actions against a single company that are in line with the new president’s views. The Chinese telecommunications company ZTE was penalized $1.2 billion for violating economic sanctions against Iran and North Korea by supplying them with prohibited items. The Commerce Department’s Bureau of Industry and Security imposed a $661 million civil penalty and the Treasury’s Office of Foreign Assets Control collected another $106 million while the Justice Department got ZTE to plead guilty and pay $430 million in fines and criminal forfeiture.

The remaining $422 million was collected in cases brought by 21 different agencies and four divisions of the Justice Department. Among the larger actions:

The Commodity Futures Trading Commission reached an $85 million settlement with the Royal Bank of Scotland to resolve allegations that it attempted to manipulate interest-rate benchmarks.
The Federal Energy Regulatory Commission reached an $81 million settlement with GDF Suez to resolve allegations that it manipulated energy markets.
TeamHealth Holdings agreed to pay $60 million to settle Justice Department allegations that its subsidiary IPC Healthcare Inc. violated the False Claims Act by overbilling Medicare, Medicaid, the Defense Health Agency and the Federal Employees Health Benefits Program.
Offshore oil driller Wood Group PSN was ordered to pay a total of $9.5 million to resolve criminal charges that it falsely reported over several years that its personnel had performed safety inspections on offshore facilities and that it negligently discharged oil into the Gulf of Mexico.
Keurig Green Mountain agreed to pay $5.8 million to settle allegations by the Consumer Product Safety Commission that it failed to report a defect in its Mini Plus Brewing System that had caused scores of serious burn injuries.
The Consumer Financial Protection Bureau imposed a $3 million penalty on Experian for deceptively marketing credit scores.

The list also includes: 14 settlements with the Equal Employment Opportunity Commission by employers in cases involving gender, pregnancy and disability discrimination; six cases in which private sponsors of Medicare Advantage plans violated consumer protection rules; two cases in which companies were charged with violating the Controlled Substances Act by failing to properly monitor opioid prescriptions; and much more.

On the other hand, the situation remains puzzling at the Labor Department, where agencies such as OSHA have not announced a single enforcement action since Trump took office. [UPDATE: It’s been pointed out to me that despite the absence of OSHA press releases the agency is still posting enforcement actions on its website on this page, which shows numerous cases since Inauguration Day.]

It is likely that most of the 160 cases were initiated while the Obama Administration was in office, but it is heartening that they have gotten resolved under the new management. The career officials in the various agencies should be commended for continuing to do their job in difficult circumstances. Let’s hope they can convince their new bosses that there is a value to protecting consumers, workers and the public against corporate misconduct in its many forms.

Documenting the Last Hurrah of Regulatory Enforcement

Since the beginning of 2010 the Equal Employment Opportunity Commission has resolved more than 200 cases of workplace discrimination based on race, religion or national origin and imposed penalties of more than $116 million on the employers involved.

During that same period, the Department of Housing and Urban Development — now in the hands of Ben Carson — settled more than two dozen discrimination cases against banks and mortgage companies, collecting more than $200 million in penalties.

The Occupational Safety and Health Administration has handled more than 50 cases of whistleblower retaliation since 2010. These have involved both cases in which workers complained about physically unsafe conditions as well as ones involving complaints about corporate financial misconduct. The latter, stemming from authority given to OSHA under the Sarbanes-Oxley Act, include cases brought against banks such as JPMorgan Chase and Bank of America.

Eight large pharmacy chains and drug distributors have been penalized more than $400 million by the Drug Enforcement Administration during the past seven years for various violations of the Controlled Substances Act.

These are examples of the kind of information that can be found in latest expansion of Violation Tracker, which adds case data from nine additional federal regulatory agencies, bringing the total to 39 agencies and the Justice Department.

In addition to the new agencies, the expansion includes updated information for the existing ones. That includes the final burst of cases seen during the closing weeks of the Obama Administration. Between election day and the inauguration, the Justice Department and agencies such as the Consumer Financial Protection Bureau announced several dozen case resolutions with total fines and settlements in excess of $20 billion.

These include 16 cases with penalties of $100 million or more; four in excess of $1 billion: Deutsche Bank ($7.2 billion), Credit Suisse ($5.3 billion), Volkswagen ($4.3 billion) and Takata ($1 billion).

Banks and other financial services companies account for the largest portion by far of the recent cases, racking up nearly $15 billion in fines and settlements with DOJ, the CFPB, the SEC and banking regulators. Automotive companies like Volkswagen and Takata are second with about $5.5 billion, while pharmaceutical and healthcare firms account for about $1.2 billion.

Given the Trump Administration’s focus on deregulation rather than enforcement, the Obama Administration’s final wave of settlements may represent Uncle Sam’s last hurrah against business misconduct for some time. The data in Violation Tracker, which show widespread misconduct and high levels of recidivism, should give pause to those pushing for less oversight.

With the update and coverage expansion, Violation Tracker now contains more than 120,000 entries with total penalties of more than $320 billion, most of that connected to some 2,300 large parent companies whose disparate individual entries are linked together in the database. Coverage currently begins in 2010 but will be extended back to 2000 later this year.

Individual entries include links to official online information sources. The new version of Violation Tracker supplements those with links to archival copies of those sources preserved on our server.

Having completed the update, the expansion and the creation of the archive, we will return to our effort to collect comprehensive data on wage theft cases — both those brought by the Labor Department’s Wage and Hour Division and related private litigation. We expect that to be ready later this year.

We can only wonder what will be left of the regulatory system by that point.

Companies Fighting the Travel Ban Should Also Oppose the Labor Department Nominee

Trump’s scandal-ridden choice for Labor Secretary, Andrew Puzder, is yet another of this administration’s nominees who don’t believe in the mission of the agency they intend to lead.

The website through which he is promoting his nomination is headlined: “Job creation is what I stand for.” That’s fine but it has little to do with the primary purpose of the Department of Labor: worker protection. The rest of that website, which has nothing to say about that purpose, instead clearly signals that Puzder will seek to weaken or dismantle the regulations DOL is supposed to enforce.

We can expect that will include rollbacks in protections relating to occupational safety and wage theft, but in light of the current debates on discrimination, it is worth remembering that DOL is also home to the Office of Federal Contract Compliance Programs (OFCCP), the agency charged with fighting racial and other forms of bias in the workplaces of companies doing business with Uncle Sam.

OFCCP has long been targeted by the regulation-bashers, and now there are reports that an effort to abolish the agency that began during the Reagan Administration may get revived. This would go along with the move to reverse the Obama Administration executive order on Fair Pay and Safe Workplaces.

I’ve been thinking about the OFCCP because it is one of the agencies (along with the Equal Employment Opportunity Commission) included in an expansion of Violation Tracker that my colleagues and I will release soon. We’ll be including entries for the more than 200 cases OFCCP has resolved since the beginning of 2010. The companies involved, which together have paid fines or settlements of about $51 million, include well-known firms such as Tyson Foods (six cases), FedEx, Cargill, Bank of America, General Electric and Comcast.

In the case with the biggest settlement amount, FedEx had to pay $3 million in 2012 to settle allegations that it engaged in discrimination on the bases of sex, race and/or national origin against specific groups identified at 23 facilities in 15 states.

The OFCCP has been showing a growing interest in the practices of high-tech companies. Last year it got Hewlett Packard Enterprise to pay $750,000 to settle allegations of racial discrimination in hiring at a facility in Arkansas. In the closing days of the Obama Administration, the OFCCP brought suit against Oracle for discriminatory practices shortly after it filed an action against Google for refusing to provide compensation data for its Silicon Valley headquarters during what the agency called a routine compliance evaluation.

Google is among the scores of high-tech companies that have come out in opposition to Trump’s travel ban. That is laudable, but if these companies are serious about their opposition to discrimination they should also make sure they are in compliance with the OFCCP and speak out just as forcefully against any effort to undermine the agency.

Note: A state court in California just postponed until June the starting date of a trial in a case in which Puzder’s company CKE Restaurants is accused of age and disability discrimination.

The 2016 Corporate Rap Sheet

The two biggest corporate crime stories of 2016 were cases not just of technical lawbreaking but also remarkable chutzpah. It was bad enough, as first came to light in 2015, that Volkswagen for years installed “cheat devices” in many of its cars to give deceptively low readings on emissions testing.

Earlier this year it came out that the company continued to mislead U.S. regulators after they discovered the fraud. VW has agreed to pay out more than $15 billion in civil settlements but it is not yet clear what is going to happen in the ongoing criminal investigation.

Brazenness was also at the center of the revelation in August that employees at Wells Fargo, presumably under pressure from managers, created more than one million bogus accounts in order to generate fees from customers who had no idea what was going on. The story came out when the Consumer Financial Protection Bureau announced that the bank would pay $100 million to settle with the agency and another $85 million in related cases.

But that was just the beginning of the consequences for Wells. CEO John Stumpf was raked over the coals in House and Senate hearings, and he subsequently had to resign. Criminal charges remain a possibility.

The other biggest corporate scandal of the year involved drugmaker Mylan, which imposed steep price increases for its EpiPens, which deliver lifesaving treatment in severe allergy attacks. The increases had nothing to do with rising production costs and everything to do with boosting profits. The company’s CEO was also grilled by Congress, which however could do little about the price gouging.

Here are some of the other major cases of the year:

Toxic Securities. There is still fallout from the reckless behavior of the banks leading up to the 2008 financial meltdown. Goldman Sachs paid more than $5 billion to settle a case involving the packaging and sale of toxic securities, while Morgan Stanley paid $2.6 billion in a similar case.

Mortgage Fraud. Wells Fargo had to pay $1.2 billion to settle allegations that during the early 2000s it falsely certified that certain residential home mortgage loans were eligible for Federal Housing Administration insurance. Many of those loans later defaulted.

False Claims Act. Wyeth and Pfizer agreed to pay $784 million to resolve allegations that Wyeth (later acquired by Pfizer) knowingly reported to the government false and fraudulent prices on two of its proton pump inhibitor drugs.

Kickbacks. Olympus Corp. of the Americas, the largest U.S. distributor of endoscopes and related equipment, agreed to pay $623 million to resolve criminal charges and civil claims relating to a scheme to pay kickbacks to doctors and hospitals in the United States and Latin America.

Misuse of customer funds. Merrill Lynch, a subsidiary of Bank of America, agreed to pay $415 million to settle Securities and Exchange Commission allegations that it misused customer cash to generate profits for the firm and failed to safeguard customer securities from the claims of its creditors.

Price-fixing. Japan’s Nishikawa Rubber Co. agreed to plead guilty and pay a $130 million criminal fine for its role in a conspiracy to fix the prices of and rig the bids for automotive body sealing products installed in cars sold to U.S. consumers.

Accounting fraud. Monsanto agreed to pay an $80 million penalty and retain an independent compliance consultant to settle allegations that it violated accounting rules and misstated company earnings pertaining to its flagship product Roundup.

Consumer deception. Herbalife agreed to fully restructure its U.S. business operations and pay $200 million to compensate consumers to settle Federal Trade Commission allegations that the company deceived customers into believing they could earn substantial money selling diet, nutritional supplement, and personal care products.

Discriminatory practices. To resolve a federal discrimination case, Toyota Motor Credit Corp. agreed to pay $21.9 million in restitution to thousands of African-American and Asian and Pacific Islander borrowers who were charged higher interest rates than white borrowers for their auto loans, without regard to their creditworthiness.

Sale of contaminated products. B. Braun Medical Inc. agreed to pay $4.8 million in penalties and forfeiture and up to an additional $3 million in restitution to resolve its criminal liability for selling contaminated pre-filled saline flush syringes in 2007.

Pipeline spills. To resolve allegations relating to pipeline oil spills in Michigan and Illinois and 2010, Enbridge agreed to pay Clean Water Act civil penalties totaling $62 million and spend at least $110 million on a series of measures to prevent spills and improve operations across nearly 2,000 miles of its pipeline system in the Great Lakes region.

Mine safety. Donald Blankenship, former chief executive of Massey Energy, was sentenced to a year in prison for conspiring to violate federal mine safety standards in a case stemming from the 2010 Upper Big Branch disaster that killed 29 miners.

Wage theft. A Labor Department investigation found that Restaurant Associates and a subcontractor operating Capitol Hill cafeterias violated the Service Contract Act by misclassifying employees and paying them for lower-wage work than they actually performed. The workers were awarded more than $1 million in back pay.

False advertising. For-profit DeVry University agreed to pay $100 million to settle Federal Trade Commission allegations that it misled prospective students in ads touting the success of graduates.

Trump University. Shortly after being elected president, Donald Trump agreed to pay $25 million to settle fraud allegations made by the New York State Attorney General and others concerning a real estate investment training course.

Remember: thousands of such cases can be found in the Violation Tracker database my colleagues and I at the Corporate Research Project of Good Jobs First produce. Look for expanded coverage in 2017.

A Culture of Corruption

The chief executive of Wells Fargo would have us believe that more than 5,000 of his employees spontaneously became corrupt and decided to create bogus accounts for customers who were then charged fees for services they had not requested.

John Stumpf has earned himself a place in the corporate hall of shame for putting the blame on underlings for carrying out a fraud that must have been sanctioned by top officials at the bank, which has a reputation for pushing new products on customers. He may have been inspired by Volkswagen, whose senior people have been claiming that they knew nothing about systematic cheating on auto emissions tests.

After the announcement that Wells would pay $185 million to settle the case, Stumpf did a self-protective interview with the Wall Street Journal in which he insisted that the misconduct was in no way encouraged by management and was inconsistent with the bank’s internal culture. Few seem to be buying that argument, and Wells is facing various federal investigations.

The notion that Wells had been a paragon of virtue is preposterous. The dishonesty begins with its name, which evokes the legendary stagecoach line. The company is actually the descendant of Norwest, a bank holding company based in Minneapolis which changed its name after acquiring the old Wells Fargo in 1998.

Four years later, the combined company had to pay a penalty of $150,000 to settle SEC charges of improperly switching customers among mutual funds. In 2005 the securities industry regulator NASD (now FINRA) fined Wells $3 million for improper sales of mutual funds.

When Wells acquired Wachovia Bank amid the financial meltdown of 2008 it acquired a bunch of legal problems, including a municipal securities bid rigging case that required a $148 million settlement.

Recent years have seen a long list of additional scandals and settlements. In 2009 Wells had to agree to buy back $1.4 billion in auction-rate securities to settle allegations by the California attorney general of misleading investors. In 2011 it agreed to pay $125 million to settle a lawsuit in which a group of pension funds accused it of misrepresenting the quality of pools of mortgage-related securities. That same year, the Federal Reserve announced an $85 million civil penalty against Wells Fargo for steering customers with good qualifications into costly subprime mortgage loans during the housing boom.

In 2012 Wells Fargo was one of five large mortgage servicers that consented to a $25 billion settlement with the federal government and state attorneys general to resolve allegations of loan servicing and foreclosure abuses. Later that year, the Justice Department announced that Wells Fargo would pay $175 million to settle charges that it engaged in a pattern of discrimination against African-American and Hispanic borrowers in its mortgage lending during the period from 2004 to 2009. Also in 2012, Wells agreed to pay $6.5 million to settle SEC charges that it failed to fully research the risks associated with mortgage-backed securities before selling them to customers such as municipalities and non-profit organizations.

In 2013 Wells was one of ten major lenders that agreed to pay a total of $8.5 billion to resolve claims of foreclosure abuses; it settled a lawsuit alleging that it neglected the maintenance and marketing of foreclosed homes in black and Latino areas by agreeing to spend at least $42 million to promote home ownership and neighborhood stabilization; and it agreed to pay $869 million to Freddie Mac to repurchase home loans the bank had sold to the mortgage agency that did not conform to the latter’s guidelines.

Jumping to 2016: the Justice Department announced that Wells would pay $1.2 billion to resolve allegations that the bank certified to the Department of Housing and Urban Development that certain residential home mortgage loans were eligible for Federal Housing Administration insurance when they were not, resulting in the government having to pay FHA insurance claims when some of those loans defaulted.

And a few weeks before the CFPB revealed its sham accounts penalty against Wells, the agency fined the bank $3.6 million plus $410,000 in restitution to customers to resolve allegations that it engaged in illegal student loan servicing practices.

Contrary to Stumpf, the sham accounts were much in line with the culture of Wells, which has been corrupt for years. As long as the bank’s top management denies the reality, it seems unlikely anything will change.

Note: This post draws from my newly updated Corporate Rap Sheet on Wells Fargo.

Racism in Corporate America

Recent events have brought increasing attention to the persistence of racism in American life. While policing and criminal justice are currently in the spotlight, there are many more institutions that continue to exhibit systemic bias and must be held accountable.

Among them is Corporate America, which usually says the right things but often harbors dirty secrets. For example, African-American motorists stopped by police for dubious reasons – sometimes with deadly consequences – may have already been victims of racism when they purchased the vehicle they are driving. During the past few years, several major auto financing companies have paid tens of millions of dollars to resolve accusations that they routinely charged higher interest rates to minority customers.

In 2013 the Consumer Financial Protection Bureau (CFPB) announced that Ally Financial (formerly GMAC) would pay $80 million in consumer relief and an $18 million penalty to settle such a case involving more than 235,000 minority borrowers. In similar cases in 2015, American Honda Finance Corporation agreed to pay $24 million in restitution and Fifth Third Bank was required to pay $18 million.

Racial discrimination in commerce is not limited to auto loans. It’s well known that major mortgage lenders steered minority borrowers into predatory mortgages in the period leading up to the financial meltdown and that many of those customers ended up losing their homes. In 2011 Countrywide Financial (which by that time had been taken over by Bank of America) had to pay $335 million to resolve allegations of racial discrimination. The following year, Wells Fargo paid $234 million and SunTrust $21 million in their own mortgage discrimination cases.

Since the beginning of 2010, ten additional banks and mortgage brokerage firms have settled racial discrimination cases brought by the CFPB and the Civil Rights Division of the Justice Department. Race accounted for nearly all of the high-penalty discrimination cases included in the recent expansion of Violation Tracker. There are also dozens of cases involving discrimination based on nationality, gender, age, disability, etc. Among the major corporations involved in such cases in recent years are McDonald’s, IBM, Carnival cruise lines, Continental Airlines (now part of United Continental) and Greyhound bus lines. These don’t cover workplace discrimination cases, which we are still collecting.

Along with matters explicitly involving racial bias, the CFPB has brought numerous cases against payday lenders and other predatory financial services firms whose unsavory practices disproportionately harm African-Americans and other minorities.

While corporate discrimination does not involve the life and death issues of unequal policing, it is another aspect of systemic racism that must be eradicated.

Trump’s Corporate Rap Sheet

For more than 30 years, Donald Trump has been almost continuously in the public eye, portraying himself as the epitome of business success and shrewd dealmaking.

He took a business founded by his father to build modest middle-class housing in the outer boroughs of New York City and transformed it into a high-profile operation focused on glitzy luxury condominiums, hotels, casinos and golf courses around the world. Operating through the Trump Organization, his family holding company, Trump also capitalized on his reality-TV-enhanced name recognition in a wide range of licensing deals.

Trump’s decision to enter the race for the Republican presidential nomination in 2015 has brought a great deal of new attention to his wide range of business activities and the controversies associated with many of them. Those controversies — involving issues such as alleged racial discrimination, lobbying violations, investor and consumer deception, tax abatements, workplace safety violations, union avoidance and environmental harm — are summarized in my new Corporate Rap Sheet on the Trump Organization. Here are some highlights:

In 1973 the Justice Department filed a suit in federal court accusing Donald Trump and his father Fred Trump of discriminating against African-Americans in apartment rentals, mostly in Brooklyn and Queens. Donald Trump vigorously disputed the charges and filed a $100 million countersuit while complaining that the government was trying to pressure him to rent to “welfare clients.” Trump claimed that doing so would be unfair to other tenants and warned that it would result in “massive fleeing.” In 1975 the Trumps signed an agreement with the Justice Department in which they did not admit to past discrimination but promised not to discriminate against African-Americans and other minorities in the future.
In 1991 the New Jersey Division of Gaming Enforcement announced that the Trump Castle Casino Resort, then owned by Donald Trump, would pay $30,000 as part of a settlement of a case in which Trump’s father was found to have improperly lent $3.5 million to the Atlantic City casino by purchasing gambling chips not intended to be used for bets. The transaction, designed to help the casino’s cash-flow problems, was allowed to proceed when Fred Trump agreed to apply for a license allowing him to lend money to the business.
In 1998 the Trump Taj Mahal, then still controlled by Trump, was fined $477,000 for currency transaction reporting violations. The Taj Mahal subsequently received numerous warnings about such issues, and in 2015, by which time it was controlled by Carl Icahn, the Atlantic City casino was fined $10 million for “willful and repeated violations of the Bank Secrecy Act.”
In 2000 Trump and some of his associates had to pay $250,000 and issue a public apology to resolve a case brought by the New York Temporary State Commission on Lobbying over the failure to disclose that they had secretly financed newspaper advertisements opposing casino gambling in the Catskills. Trump was said to have been concerned that Catskills casinos would siphon business from the Atlantic City casinos he owned at the time.
In 2002 the Securities and Exchange Commission announced that Trump Hotels and Casino Resorts had “recklessly” misled investors in a 1999 earnings release that used pro forma figures to tout the company’s purportedly positive results but failed to disclose that they were primarily attributable to an unusual one-time gain rather than ongoing operations. No penalty was imposed on the company, which consented to the SEC’s cease-and-desist order.
In 2013 New York Attorney General Eric Schneiderman filed a civil lawsuit against the Trump Entrepreneur Initiative (formerly known as Trump University), its former president and Donald Trump personally “for engaging in persistent fraudulent, illegal and deceptive conduct.” Schneiderman alleged that the business “misled consumers into paying for a series of expensive courses that did not deliver on their promises.” The suit asked for “full restitution for the more than 5,000 consumers nationwide who were defrauded of over $40 million in the scheme, disgorgement of profits, as well as costs and penalties and injunctive relief prohibiting these types of illegal practices going forward.” The case is pending.
In 2006 Donald Trump and the Los Angeles developer Irongate announced plans for a luxury condominium and hotel project in North Baja, Mexico, south of San Diego. Two years later, the San Diego Union-Tribune reported that the project still had not received all of its required permits and was falling behind schedule. In 2009, as the delayed continued, Trump removed his name from the project, which soon failed. Purchasers sued Trump, saying they were misled into thinking they were buying into a Trump development rather than one that simply licensed his name. In 2013 Trump reached a settlement with the plaintiffs; the details were not disclosed.
After dealers at the Trump Plaza voted overwhelmingly to join the United Auto Workers union in 2007, the management of the casino filed a challenge with the National Labor Relations Board. The UAW called the move an effort to delay collective bargaining. The stance of Trump management may have been a factor in the UAW’s narrow loss in a subsequent representation election at the Trump Marina. The vote at Trump Plaza was certified, but the UAW had difficulty negotiating a contract, even after the NLRB ordered the company to bargain in good faith. It appears that Trump managers dragged out the legal dispute until the Trump Plaza closed in 2014. In December 2015 the management of the non-casino Trump International Hotel Las Vegas challenged a vote by workers to be represented by the Culinary Workers Union Local 226 and the Bartenders Union Local 165 (photo). A hearing officer for the NLRB rejected the challenge, and the unions were certified in April 2016.
In April 2016 the U.S. Consumer Product Safety Commission announced that about 20,000 Ivanka Trump-branded women’s scarves made in China were being recalled because they did not meet federal flammability standards for clothing textiles, thus posing a burn risk. The importer of the scarves, GBG Accessories, has a licensing arrangement with Ivanka Trump, daughter of Donald Trump and an executive at the Trump Organization.

The full Corporate Rap Sheet on the Trump Organization can be found here.

A Great Place for Wage Theft

Restaurant giant Darden, which is being pressured by hedge funds to sell off both its Red Lobster and Olive Garden chains, got some good news recently when it appeared once again on Fortune magazine’s list of the 100 companies that are supposedly the best places to work.

That designation, for a company that has been the subject of numerous allegations of labor abuse, is even more puzzling than the idea that Darden would be better off without the outlets through which it grew into an $8 billion industry powerhouse.

For more than a decade, Darden has been accused by groups such as ROC United of using various means to shortchange its workers on their paychecks, a practice known as wage theft. In 2005 the company agreed to pay $9.5 million to more than 20,000 current and former servers at Red Lobster and Olive Garden outlets in California to settle a lawsuit claiming that the restaurants violated state labor regulations by preventing workers from taking required breaks and by requiring them to purchase and maintain their uniforms.

Three years later, Darden disclosed that it had paid $4 million to settle two class-action lawsuits alleging that it had violated California law in requiring servers and bartenders to make up for cash shortages at the end of their shifts. Also in 2008, Darden reported that it had paid $700,000 to settle another California suit claiming several types of wage and hour violations, including a failure to provide itemized wage statements and timely pay when an employee was terminated.

In 2011, following a U.S. Labor Department investigation that found workers were not being paid for all their hours, Darden agreed to pay $25,000 in back wages to 140 current and former servers at an Olive Garden in Mesquite, Texas. The company was also fined $30,800. That same year, the company consented to pay $27,000 in back pay and was fined $23,980 in connection with a similar federal investigation at a Red Lobster in Lubbock, Texas.

In the wake of the two Texas cases, suits were brought against Darden in several other states. For example, in early 2012 ROC United filed a class action case on behalf of Darden workers at another of the company’s chain, Capital Grille. For technical reasons, the action was later divided into separate actions in five jurisdictions (all are still pending).

An even larger legal challenge to the company came in September 2012, when a class action suit was filed in federal court in Miami on behalf of all current and former employees (back to 2009) at five of Darden’s chains. The 54 named plaintiffs in the case stated that the company did not pay them for the period between the beginning of their shifts and the time customers began to arrive, thereby forcing them to do prep work off the clock. Darden was also accused of failing to pay time-and-a-half for those working more than 40 hours per week and for improperly applying the lower subminimum wage for tipped workers when they were engaged in non-serving tasks.

The complaint in the case — which described the company as having “a steadfast, single minded focus on minimizing its labor costs” by arranging to have “as many tasks as possible performed by as few employees as possible” — also alleged that two of the named plaintiffs had suffered retaliation from management because of their participation in the case. Some 13,000 current and former Darden servers have joined the suit, which is pending.

The ROC United wage theft actions against Capital Grille also allege that the chain has engaged in a pattern of racial discrimination, including the denial of better-paid server and bartender jobs to non-white workers.

In 2009 the U.S. Equal Employment Opportunity Commission announced that Darden’s Bahama Breeze chain would pay $1.26 million to settle allegations that managers at its restaurant in Beachwood, Ohio had subjected 37 black workers to repeated overt racial harassment. In addition to the monetary relief, the chain signed a three-year consent decree requiring it to improve its anti-discrimination practices throughout the country.

In September 2013 the EEOC filed suit against Red Lobster, alleging that female workers at its restaurant in Salisbury, Maryland have been subjected to “pervasive sexual harassment.” According to the agency, the harassment was committed by a manager, whose superior was said to have failed to take prompt action on the matter despite complaints from at least one of the affected workers.

Darden has also sought to lower its labor costs by becoming more active in the public policy arena. Until 2007 Darden spent less than $250,000 a year on federal lobbying. Beginning in 2008 that amount jumped to well over $1 million annually.

The company is a prominent participant in the National Restaurant Association (NRA), which promotes policies that enhance the bottom line of chains such as Darden. It has opposed living wage initiatives, worked to keep the minimum wage for tipped workers at $2.13 an hour (where it has remained since 1991) and resisted efforts by labor groups to enact mandatory paid sick days, often by promoting state laws that pre-empt local ordinances on the issue. Darden is reported to have helped write the pre-emption bill in Florida.

All of this somehow escaped the attention of Fortune and the organization, the Great Place to Work Institute, which compiles the list. Or perhaps the Institute doesn’t worry about real working conditions. A 2011 investigative report raised serious questions about its methodology, suggesting it is mostly interested in selling consulting services to the companies it is rating. As a recent Alternet piece notes, the lack of an arm’s-length relationship with those companies is also seen in the fact that Darden CEO Clarence Otis has been a speaker at Institute events.

The designation as a “great place to work” is featured by Darden on its website, but the dubious honor cannot change the company’s dismal labor track record.

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