Archive for the ‘Pharmaceutical industry’ Category

The Corporate Crook Conquest of the Executive Branch

Thursday, November 16th, 2017

It appears that the Trump Administration will not rest until every last federal regulatory agency is under the control of a corporate surrogate. The reverse revolving door is swinging wildly as business foxes swarm into the rulemaking henhouses.

Among the latest predators is Alex Azar II, who was just nominated by Trump to head the Department of Health and Human Services, a position Tom Price had to vacate amid the uproar over his excessive use of chartered jets for routine government travel. Until earlier this year Azar was the president of the U.S. division of pharmaceutical giant Eli Lilly.

Azar apparently shares Price’s abhorrence of the Affordable Care Act, but he also brings the perspective of a top executive for a drug company with a particularly sordid track record. For the past 40 years Lilly has been embroiled in a series of scandals involving unsafe products and the marketing of drugs for unapproved uses. Among the many cases were some that involved criminal charges.

In 1985 Lilly pleaded guilty to charges that it failed to notify federal regulators about deaths and illnesses linked to Oraflex.  The company’s former chief medical officer entered a plea of no contest to similar individual charges. A Justice Department report put the number of deaths the company had covered up at 28.

In 2009 the U.S. Justice Department announced that Lilly had agreed to pay a $515 million criminal fine as part of the resolution of allegations relating to the illegal marketing of its schizophrenia drug Zyprexa.

The company has also faced bribery allegations. In December 2012 the U.S. Securities and Exchange Commission announced that Lilly would pay a total of $29.4 million to resolve charges that some of its subsidiaries violated the Foreign Corrupt Practices Act by making improper payments to win business in Russia, Brazil, China and Poland.

Violation Tracker’s tally on Eli Lilly amounts to $1.49 billion in penalties since 2000.

Meanwhile, the Senate has confirmed (along party lines) the Trump Administration’s nomination of coal mining executive David Zatezalo to head the Mine Safety and Health Administration. For seven years Zatezalo served as chairman of Rhino Resource Partners, where he clashed with MSHA over the company’s safety problems. The agency issued two rare “pattern of violation” warnings against the company. Violation Tracker contains 160 cases involving Rhino with total penalties of more than $2 million.

And given the headlong rush by Congressional Republicans to pass their tax legislation, it should be noticed that the Trump Administration’s interim head of the Internal Revenue Service (following the resignation of John Koskinen, who had been named by Obama) is David Kautter, who spent most of his career at the accounting firm Ernst & Young, which now prefers to be called EY.

Kautter was in charge of the tax compliance department at Ernst, which to a great extent meant helping clients dodge their fiscal obligations. In 2013 the firm had to pay $123 million to settle federal criminal charges of wrongful conduct in connection with illegitimate tax shelters (it was offered a non-prosecution agreement).

The phrase regulatory capture used to refer to tendency of agencies to gradually become more sympathetic to the needs of the industries they were supposed to oversee. Under Trump that process has been accelerated, with regulatory posts being given to individuals who are already corporate insiders or shills for the worst the business world has to offer. More than regulatory capture, it is the corporate crook conquest of the executive branch.

Getting Tough on the Corporations Behind the Opioid Crisis

Thursday, October 19th, 2017

The withdrawal of Tom Marino’s nomination as national drug czar is a reminder of the power of whistle-blowing and aggressive investigative reporting, while the fact that he was named in the first place is a reminder of the hollowness of the Trump’s Administration’s commitments to draining the swamp and to seriously addressing the opioid epidemic.

Yet there is much more to be done beyond denying a high-profile job to the Congressman who did the pharmaceutical industry’s bidding in weakening the Drug Enforcement Administration’s ability to thwart illicit distribution of prescription painkillers.

The first step, of course, is for Congress to undo the damage caused by Marino’s bill, which Democrats and Republicans alike allowed to be enacted with little scrutiny. Also needed are reforms to the revolving door system, which the excellent reporting by the Washington Post and 60 Minutes and the revelations of DEA whistle-blower Joseph Rannazzisi (photo) showed to play a key role in the story as former DEA officials working for the drug industry or its law firms helped to draft and promote the legislation.

If the scourge of opioids is to end, there will have to be much stronger enforcement of the Controlled Substances Act (CSA), the law that forms the basis of U.S. drug control policy. For a long time, it appeared the problem was that the CSA was being enforced too strictly, at least when it was applied to drug users and low-level drug sellers.

Starting about a decade ago, federal officials and prosecutors began to pay attention to the pernicious role played by the supposedly legitimate drug industry. In 2007, Purdue Pharma’s Purdue Frederick Inc. unit and several of its executives pleaded guilty to criminal charges of misleading the public about the addictive nature of its OxyContin pain medication and paid more than $634 million in penalties. That case was brought by the office of the U.S. Attorney for the Western District of Virginia in cooperation with the Food and Drug Administration, not the DEA.

During the following years, the DEA began to bring its own enforcement actions under the CSA or referred cases to the Justice Department for prosecution. According to data I have collected for Violation Tracker (some of which has not yet been posted on the site), there have been about 80 CSA actions against drug companies, distributors or healthcare providers since 2008.

The penalties collected in the cases total about $605 million. The biggest amounts were imposed on the distributor McKesson ($176 million in three cases); CVS ($130 million in nine cases); Walgreens ($80 million); and a second big distributor, Cardinal Health ($68 million in three cases).

It’s notable that the penalties in these 80 cases combined amount to less than that imposed on Purdue alone. Moreover, all of the cases were brought as civil rather than criminal actions. I found one corporate CSA criminal cases but it was not brought against a healthcare company or retailer but rather against United Parcel Service, in connection with its role in delivering shipments from illegal online pharmacies. And in that case UPS was offered a non-prosecution agreement that essentially nullified the criminal charge.

Given the size of the industry and the profitability of the companies involved, all these cases amounted to little more than a slap on the wrist. The gravity of the opioid crisis requires stronger action against the companies involved, as well as their executives and, in cases like the Sackler Family behind Purdue Pharma, their individual owners.

Federal Watchdog Agencies Still On Guard

Thursday, September 7th, 2017

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

Thursday, August 17th, 2017

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.

The Other Trump Collusion Scandal

Tuesday, June 6th, 2017

For months the news has been filled with reports of suspicious meetings between Trump associates and Russian officials. Another category of meetings also deserves closer scrutiny: the encounters between Trump himself and top executives of scores of major corporations since Election Day. What do these companies want from the new administration?

During the presidential campaign, Trump often hinted that he would be tough on corporate misconduct — especially the offshoring of jobs — and this won him a significant number of votes. After taking office, however, much of the economic populism has disappeared in favor of a shamelessly pro-corporate approach, especially when it comes to regulation. Big business has put aside whatever misgivings it had about Trump and now seeks favors from him.

There is always a fine line between deregulation and the encouragement of corporate crime and misconduct. We should be concerned about the latter, given the roster of executives who have made pilgrimages to the White House.

Public Citizen has just published a report looking at the track record of the roughly 120 companies whose executives have met publicly with Trump since November 8 and finds that many of them “are far from upstanding corporate citizens.”

Using data from Violation Tracker (which I and my colleagues produce at the Corporate Research Project of Good Jobs First), Public Citizen finds that more than 100 of the visitors were from companies that appear in the database as having paid a federal fine or settlement since the beginning of 2010.

In its tally of these penalties, which includes those associated with companies such as Goldman Sachs and Exxon Mobil whose executives were brought right into the administration, Public Citizen finds that the total is about $90 billion.

At the top of the list are companies from the two sectors that have been at the forefront of the corporate crime wave of recent years: banks and automakers. JPMorgan Chase, with penalties of almost $29 billion, is in first place. Also in the top dozen are Citigroup ($15 billion), Goldman Sachs ($9 billion), HSBC ($4 billion) and BNY Mellon ($741 million). Volkswagen, still embroiled in the emissions cheating scandal, has the second highest penalty total ($19 billion). Two other automakers make the dirty dozen: Toyota ($1.3 billion) and General Motors ($936 million).

The rest of the dirty dozen are companies from another notorious industry: pharmaceuticals. These include Johnson & Johnson ($2.5 billion),  Merck ($957 million), Novartis ($938 million) and Amgen ($786 million).

All these companies have a lot to gain from a relaxation of federal oversight of their operations. While it remains unclear whether the Trump campaign used its meetings with Russian officials to plan election collusion, there is no doubt that the administration has been using its meetings with corporate executives to plan regulatory rollbacks that will have disastrous financial, safety and health consequences.

False Claims and Other Frauds

Monday, September 26th, 2016

ViolationTracker_Logo_Development_R3The False Claims Act sounds like the name of a Donald Trump comedy routine, but it is actually a 150-year-old law that is widely used to prosecute companies and individuals that seek to defraud the federal government. It is also the focus of the latest expansion of Violation Tracker, the database of corporate crime and misconduct we produce at the Corporate Research Project of Good Jobs First. The resource now contains 112,000 entries from 30 federal regulatory agencies and all divisions of the Justice Department. The cases account for some $300 billion in fines and settlements.

Through the addition of some 750 False Claims Act and related cases resolved since the beginning of 2010, we were able to identify the biggest culprits in this category. Drug manufacturers, hospital systems, insurers and other healthcare companies have paid nearly $7 billion in fines and settlements. Banks, led by Wells Fargo, account for the second largest portion of False Claims Act penalties, with more than $3 billion in payments. More than one-third of the 100 largest federal contractors have been defendants in such cases during the seven-year period.

Among the newly added cases involving healthcare companies, the largest is the $784 million settlement the Justice Department reached last April with Pfizer and its subsidiary Wyeth to resolve allegations that they overcharged the Medicaid program. DaVita HealthCare Partners, a leading dialysis provider, was involved in the next two largest cases, in which it had to pay a total of $800 million to resolve allegations that it engaged in wasteful practices and paid referral kickbacks while providing services covered under Medicare and other federal health programs.

Wells Fargo accounts for the largest banking-related penalty and the largest False Claims Act case overall in the new data: a $1.2 billion settlement earlier this year to resolve allegations that the bank falsely certified to the Department of Housing and Urban Development that certain residential home mortgage loans were eligible for Federal Housing Administration insurance, with the result that the government had to pay FHA insurance claims when some of those loans defaulted.

Thirty-five of the 100 largest federal contractors (in FY2015) have paid fines or settlements totaling $1.8 billion in False Claims Act-related cases since the beginning of 2010. The biggest contractor, Lockheed Martin, paid a total of $50 million in four cases, while number two Boeing paid a total of $41 million in two cases.

The database has also added new search features, such as the ability to search by 49 different types of offenses, ranging from mortgage abuses to drug safety violations. Users can view summary pages for each type of offense, showing which parent companies have the most penalties in the category. Penalty summary pages for parents, industries and agencies now also contain tables showing the most common offenses. Users can add one or more offense type to other variables in their searches.

Among types of offenses, the largest penalty total comes from cases involving the packaging and sale of toxic securities in the period leading up to the financial meltdown in 2008. The top-ten primary case types are as follows:

  1. Toxic securities abuses: $68 billion
  2. Environmental violations: $63 billion
  3. Mortgage abuses: $43 billion
  4. Other banking violations: $18 billion
  5. Economic sanction violations: $14 billion
  6. Off-label/unapproved promotion of medical products: $12 billion
  7. False Claims Act cases: $11 billion
  8. Consumer protection violations: $9 billion
  9. Interest rate benchmark manipulation: $7 billion
  10. Foreign Corrupt Practices Act cases: $6 billion

We also added a feature allowing for searches limited to companies linked to parent companies with specific ownership structures such as publicly traded, privately held, joint venture, non-profit and employee-owned. That’s in addition to updating the data from the agencies already covered and increasing the size of the parent company universe to 2,165.

The uproar over the Wells Fargo sham accounts scandal is heightening the discussion of corporate crime. Violation Tracker hopes to be a tool in efforts to turn that discussion into lasting change.

Grandstanding Without Results

Thursday, September 22nd, 2016

John Stumpf of Wells Fargo

Members of Congress subjected the CEOs of a pair of rogue corporations to much-deserved castigation in recent days, but the executives will probably turn out to be the victors. John Stumpf of Wells Fargo and Heather Bresch of Mylan endured the barbs knowing that they will not lead to any serious consequences.

The periodic grilling of business moguls amid corporate scandals is a longstanding feature of Congressional oversight. In the 1930s the Senate Banking Committee, led by investigator Ferdinand Pecora, questioned Wall Street titans such as J.P. Morgan about the causes of the stock market crash. In the late 1950s Sen. Estes Kefauver asked pharmaceutical executives about rising drug prices. In the 1960s Sen. Abraham Ribicoff, with the help of a young lawyer named Ralph Nader, interrogated auto industry executives about their seemingly cavalier attitude toward safety.

Jumping to the recent past: In 2010 the CEO of BP was hauled before a House hearing to testify about the Deepwater Horizon disaster. In 2013 the Senate’s Permanent Subcommittee on Investigations questioned Apple CEO Tim Cook about his company’s international tax avoidance. And so forth.

Yet there is a big difference between the older and the more recent hearings. In the 20th Century these events were preludes to legislative reform. The Pecora hearings led to the passage of the Glass-Steagall Act separating speculative activities from commercial banking. Kefauver tried but failed to pass price restrictions but was able to enact stricter drug manufacturing and reporting rules. The Ribicoff hearings led to the passage of the National Traffic and Motor Vehicle Safety Act and the Highway Safety Act.

Those earlier hearings may have been political theatre, but they were followed by serious regulatory changes. Today’s hearings, on the other hand, seem to be nothing more than theatre. For many members of Congress, they are opportunities to pretend to be concerned about corporate misconduct while having no intention to do anything about it.

That’s not surprising, given that the party in control of both chambers of Congress is rabidly anti-regulation. The 2016 Republican National Platform is filled with critical comments about regulation, including an assertion that the Obama Administration “triggered an avalanche of regulation that wreaks havoc across the economy.”

The Consumer Financial Protection Bureau, the lead regulator in the Wells Fargo fake accounts case, is a favorite target of conservative lawmakers. Right after the CFPB’s Wells Fargo announcement, Speaker Paul Ryan sent out a tweet claiming that the agency “tries to micromanage your everyday life.” Senate Banking Committee Chair Richard Shelby tried to block the appointment of Richard Cordray to head the CFPB and subsequently sought to weaken the agency. And during his opening statement at the hearing, he took a pot shot at CFPB for not being aggressive enough in pursuing the case.

Congressional grandstanding against corporate miscreants has been going on for decades, but what was once a device to build public support for real legislative change now serves mainly to conceal the fact that too many legislators are in office to do the bidding of corporations, even the most corrupt ones.

Generic Price Gouging

Thursday, August 25th, 2016

Price gouging by the producer of EpiPens has been creating a hardship for those suffering from severe allergies, but it is also revealing the truth about the one segment of the drug industry that was thought to have some decency.

Mylan, the corporation behind the EpiPen scandal, is best known as a leader in the production of generic drugs, which were supposed to weaken the stranglehold of the pharma giants. Building on the 1984 Hatch-Waxman Act, Mylan and the other generic firms began to have an impact. Mylan introduced cheaper versions of brand-name medications for Parkinson’s disease, depression, arthritis and other ailments.

In the past decade or so, however, Mylan began to stray from its mission. The company became preoccupied with growth and was soon appearing in the business news more in connection with mergers than with product announcements. In the early 2000s it got entangled in a drawn-out dispute with investor Carl Icahn over the attempted purchase of King Pharmaceuticals.

While that deal did not go through, Mylan made a string of other deals, including the 2007 purchase of the generics businesses of Germany’s Merck KGaA, among which was EpiPen producer Dey L.P.. Mylan was also acquiring legal problems. In 2010 the Justice Department announced (in a press release that did not mention Mylan) that Dey would pay $280 million to settle False Claims Act allegations. DOJ said the case resolved claims that Dey “engaged in a scheme to report false and inflated prices for numerous pharmaceutical products, knowing that federal health care programs relied on those reported prices to set payment rates. The actual sales prices for the Dey products were far less than what Dey reported.”

Mylan went on with its dealmaking, even to the point of giving up its identity as a U.S. company. In 2014 Mylan — led by CEO Heather Bresch, daughter of West Virginia Senator Joe Manchin — arranged to merge with a foreign subsidiary of Abbott Laboratories and used the deal to reincorporate itself in the Netherlands to lower its tax liabilities.

Last year, the new Mylan launched a takeover bid for its rival Perrigo and then found itself targeted by yet another generic producer, Teva Pharmaceuticals, which had its own legal problems. Neither of these deals panned out, but this year Mylan acquired the Swedish company Meda for some $10 billion.

Among its other businesses, Meda is the European distributor of EpiPens. It is unclear to what extent Mylan’s recent EpiPen price hikes are meant to pay for the Media acquisition. They may also be designed to cover the steep increases in executive compensation at the company. In 2012, when Bresch became CEO, she was paid annual compensation of just under $10 million and realized more than $6 million in paper profits from the exercise of stock awards and options.

In 2015 Bresch’s annual compensation jumped to nearly $19 million and her profits from the exercise of stock awards and options soared to nearly $32 million, putting her total compensation for the year at more than $50 million.

Perhaps Mylan and the other generic drug companies never were real crusaders, but now it is difficult to distinguish them from the worst rogues of Big Pharma.

Johnson & Johnson’s Self-Inflicted Wounds

Thursday, May 5th, 2016

Baby powder, the product along with Band-Aids that for decades gave Johnson & Johnson a benign image, is now the latest symbol of its deterioration into one of the most unreliable of large corporations. Juries have recently awarded a total of $127 million to women with ovarian cancer who charge that their disease was caused by the talc in the company’s powder.

J&J, which disputes the allegations and is appealing the verdicts, faces some 1,400 additional similar lawsuits brought by plaintiffs’ lawyers armed with company documents they say show that J&J was concerned about a link between talcum powder and ovarian cancer as early as the 1970s. It is unclear what will happen with the litigation, but the lawsuits are part of a long string of scandals that have plagued the giant medical products firm during the past decade and forced it to pay out vast sums in civil settlements and criminal fines.

The most serious of those cases involved allegations that several of its subsidiaries marketed prescription drugs for purposes not approved as safe by the Food and Drug Administration, thus creating potentially life-threatening risks for patients.

In 2010 J&J subsidiaries Ortho-McNeil Pharmaceutical and Ortho-McNeil-Janssen had to pay $81 million to settle charges that they promoted their epilepsy drug Topamax for uses not approved as safe. The following year, J&J subsidiary Scios Inc. had to pay $85 million to settle similar charges relating to its heart failure drug Natrecor.

In 2013 the Justice Department announced that J&J and several of its subsidiaries would pay more than $2.2 billion in criminal fines and civil settlements to resolve allegations that the company had marketed it anti-psychotic medication Risperdal and other drugs for unapproved uses as well as allegations that they had paid kickbacks to physicians and pharmacists to encourage off-label usage. The amount included $485 million in criminal fines and forfeiture and $1.72 billion in civil settlements with both the federal government and 45 states that had also sued the company.

At a press conference announcing the resolution of the case, U.S. Attorney General Eric Holder said the company’s practices ”recklessly put at risk the health of some of the most vulnerable members of our society — including young children, the elderly and the disabled.”

Other J&J problems resulted from faulty production practices. During 2009 and 2010 the company had to announce around a dozen recalls of medications, contact lenses and hip implants. The most serious of these was the massive recall of liquid Tylenol and Motrin for infants and children after batches of the medication were found to be contaminated with metal particles.

The company’s handling of the matter was so poor that J&J subsidiary McNeil-PPC became the subject of a criminal investigation and later entered a guilty plea and paid a criminal fine of $20 million and forfeited $5 million.

J&J also faced criminal charges in an investigation of questionable foreign transactions. In 2011 it agreed to pay a $21.4 million criminal penalty as part of a deferred prosecution agreement with the Justice Department resolving allegations of improper payments by J&J subsidiaries to government officials in Greece, Poland and Romania in violation of the Foreign Corrupt Practices Act. The settlement also covered kickbacks paid to the former government of Iraq under the United Nations Oil for Food Program.

All of this has been a humiliating comedown for a company that was once regarded as a model of corporate social responsibility and which set the standard for crisis management in its handling of the 1980s episode in which a madman laced packages of Tylenol with cyanide. While the company was then being victimized, the more recent crises have been largely of its own making.

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Note: This piece is drawn from my new Corporate Rap Sheet on Johnson & Johnson, which can be found here.

The Corporate Wrongdoers Sticking with ALEC

Thursday, December 3rd, 2015

ALECexposedLogo_400x400vt_logo-full_1If a group of major drug dealers, identity thieves and bank robbers were to put out a statement calling for relaxation of the criminal code, no one would take it very seriously.

Yet complaints about the regulatory system coming from large corporations — including many with repeated environmental and safety violations — are regarded as important pronouncements by too many policymakers and political candidates. Corporate interests don’t simply complain. They use their money and influence to urge lawmakers to alter the rules in their favor.

One of the main vehicles by which big business pushes its deregulatory agenda is the American Legislative Exchange Council. ALEC, which is currently holding one of its periodic gatherings of corporate lobbyists and legislators, takes aim at agencies such as the EPA, which it likes to call a “regulatory train wreck.”

Since my colleagues and I at the Corporate Research Project of Good Jobs First released our Violation Tracker database recently, I’ve been comparing notes with the ALEC watchers at the Center for Media and Democracy. What we’ve found is a substantial overlap between the corporations that remain loyal to ALEC (more than 100 have left in response to public pressure) and the companies in Tracker with the largest penalty totals. Mary Bottari of CMD has posted a piece that focuses on the energy companies in the two groups. Here I look at the full overlap.

The current list of ALEC corporate members includes 11 corporations that rank in the Violation Tracker top 100 (in a few cases the membership is held by a subsidiary). These parents and their subsidiaries have racked up a total of $1.7 billion in federal environmental, health and safety penalties and settlements since the beginning of 2010:

  • Pfizer: $563,357,650
  • Novartis: $422,569,368
  • WEC Energy Group: $310,621,475
  • Duke Energy: $112,150,534
  • Honeywell International: $93,641,829
  • Berkshire Hathaway: $46,810,063
  • Exxon Mobil: $46,285,706
  • Energy Transfer: $25,467,251
  • Dominion Resources: $14,168,658
  • Norfolk Southern: $11,675,325
  • Chevron: $11,373,376

Pfizer is in the news because of its deal to merge with a smaller drug company and move its legal headquarters to Ireland, all to dodge federal taxes. It has amassed more than half a billion dollars in penalties in the past five years largely because of cases involving the illegal marketing of drugs for purposes not approved as safe by the Food and Drug Administration. In 2009, the year before Violation Tracker’s coverage begins, Pfizer had to pay $2.3 billion to settle Justice Department civil and criminal charges relating to the illegal marketing of the painkiller Bextra and three other medications. 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.”

Novartis has also been accused of illegal marketing of drugs and has had to pay more than $400 million in penalties. Not yet included in Violation Tracker is a case in which federal prosecutors are seeking $3 billion in penalties from the company for paying illegal kickbacks to get pharmacies to encourage use of expensive drugs for kidney-transplant patients covered by Medicare and Medicaid.

WEC Energy Group, whose subsidiaries North Shore Gas and Peoples Gas are ALEC members, is on the top violators list mainly because of a $307 million settlement another subsidiary, Wisconsin Public Service Corporation, reached with the Justice Department and the EPA to resolve Clean Air Act violations at two of its power plants. Most of the settlement involves mandatory spending on new pollution control technology at the facilities.

Duke Energy earned its spot on the top violators list mainly because of a case from earlier this year in which three of its subsidiaries pled guilty to criminal violations of the Clean Water Act and paid $102 million in penalties in connection with a massive coal ash spill into the Dan River in North Carolina.

The largest portion of Honeywell International‘s $93 million in penalties comes from a 2013 case in which it agreed to pay a $3 million civil penalty and spend $66 million on new pollution control equipment to resolve Clean Air Act violations at its plant in Hopewell, Virginia.

Conglomerate Berkshire Hathaway is on the list because one of its major subsidiaries, BNSF Railway, is an ALEC member. While it has not been involved in any large cases like those above, since 2010 BNSF has accumulated more than 600 violations from the Federal Railroad Administration with total penalties of $7 million (the FRA’s fines tend to be less than onerous). BNSF was also pressured by OSHA to change its practices that the agency said discouraged workers from reporting on-the-job injuries.

Exxon Mobil‘s penalty total comes largely from its subsidiary XTO Energy, which focuses on fracking. For example, in 2013 XTO had to pay $20.1 million to the EPA to settle Clean Air Act violations linked to the discharge of wastewater in Pennsylvania.

These cases illustrate the track record of the companies that are sticking with ALEC, presumably with the hope that the organization can bring about policy changes that will allow them to continue business as usual and pay less in the way of penalties. ALEC may be correct that the regulatory system is a “train wreck,” but that’s because the rules are too weak, not too stringent.