Product Safety

3M’s Sticky Legal Situation

For the past decade, Johnson & Johnson has symbolized the deterioration of a well-regarded consumer products corporation into the target of multiple lawsuits over alleged disregard for product safety. Now another familiar company is following the same path.

3M, best known as the producer of Scotch Brand adhesive tape and Post-it sticky notes, has been embroiled in two major lawsuits that will probably result in the payment of billions of dollars in settlements. The litigation does not involve office supplies but rather two of the thousands of other products produced by a company originally known as Minnesota Mining and Manufacturing Company.

In one of the cases, 3M has been sued by some 250,000 military veterans who accuse the company of producing foam earplugs that failed to protect them from service-related hearing loss. This stems from a 2018 False Claims Act case brought by the U.S. Justice Department in which the company paid a penalty of $9.1 million. Last year, in what is called a bellwether case, a jury awarded a single plaintiff $50 million in damages.

In an attempt to limit its wider liability, 3M filed for bankruptcy for the subsidiary, Aearo Technologies, that produced the earplugs. Lawyers for the plaintiffs cried foul, and earlier this month a federal bankruptcy judge dismissed the filing, calling it premature. 3M is appealing the dismissal, but the Wall Street Journal reports that the company is in settlement talks.

3M is also said to be deeply involved in negotiating a settlement of its other major legal woe: lawsuits accusing the company of being responsible for the contamination of water supplies with per- and polyfluoroalkyl (or PFAS) chemicals used in the production of its firefighting foam. These substances, which have been linked to numerous adverse health effects, have become known as forever chemicals because they do not break down in the human body or the environment.

A federal judge in South Carolina, where the PFAS cases have been consolidated, recently halted a bellwether trial after the parties in the wider litigation reported that a settlement seemed imminent. This was just after DuPont and its spinoff companies Chemours and Corteva announced they had agreed to pay more than $1 billion to settle their own PFAS cases.

3M’s record apart from these two cases has not been entirely unblemished. In 2018 the company paid $850 million to the Minnesota Attorney General’s office to settle allegations that its disposal of perflourochemicals, or PFCs, over many years had damaged drinking water and natural resources in the Twin Cities area.

It has also been accused of antitrust violations. In 2006 the company paid over $28 million to settle litigation alleging it monopolized the market for adhesive tape. In 2011 3M paid $3 million to settle an age discrimination case brought by the Equal Employment Opportunity Commission. Violation Tracker contains more than 100 other penalties the company has paid in environmental, workplace safety, and employment cases.

With the earplug and PFAS cases, it appears that the company’s aggregate penalty total will soon reach a much higher level. 3M is going to have to sell a lot more Post-its.

Update: Plaintiffs’ attorneys reported that 3M has agreed to pay over $12 billion to public water systems to resolve the PFAS litigation.

Exercising Enforcement

It is not surprising that Peloton Interactive Inc. thought it could refuse to tell the Consumer Product Safety Commission the identity of a child who was killed in an accident involving one of the company’s treadmills. And it was not surprising that Peloton was shocked when the CPSC unilaterally issued a press release urging owners of the Tread+ to stop using the machine in homes with small children or pets.

The reason is that the CPSC has long been one of the more toothless of the federal regulatory agencies. As shown in Violation Tracker, over the past decade it has brought only about 50 enforcement actions involving monetary penalties. During the Trump Administration, the agency almost faded away, bringing only seven actions. There were none at all during the final two years of Trump’s tenure.

Instead, the CPSC has relied on the willingness of manufacturers to reveal safety problems on their own and voluntarily recall defective products. Peloton did disclose the fatal accident on its website and to the CPSC, but by withholding key details it thwarted the agency’s ability to investigate the matter. It also softened the negative impact of the announcement by making the disingenuous claim that it was protecting the privacy of the family involved.

Peloton also applied more of its own spin in the announcement by suggesting it was enough for users to “make sure” that the space around the equipment is clear. By contrast, the CPSC press release, which the company denounced as “inaccurate and misleading,” noted that it was aware of 39 incidents involving the Tread+, including at least one that occurred while a parent was running on the treadmill. The agency said this indicated that the risks were not limited to situations in which a child has unsupervised access to the treadmills, which cost more than $4,000.

Issuing the release without the company’s consent was a remarkable step for the CPSC, given that a provision of the Consumer Product Safety Act known as Section 6(b) restricts the ability of the agency to reveal company-specific information.

The agency is also limited in its ability to impose mandatory recalls. To do so, the CPSC would need a court order, meaning that a recalcitrant manufacturer could tie up the matter in protracted litigation, all while continuing to sell the dangerous product.

All of this is to say that the less than dazzling enforcement record of the CPSC is to some extent the result of structural impediments. Past attempts to remove those restrictions were not successful, but the Peloton dispute has prompted a renewal of those efforts. U.S. Senator Richard Blumenthal (D-CT) and U.S. Representatives Jan Schakowsky (D-IL) and Bobby L. Rush (D-IL) recently introduced legislation that would repeal Section 6(b).

Corporate lobbyists have worked so hard to promote the idea of over-regulation that many people will be surprised to hear the extent to which an agency such as the CPSC is prevented from taking strong action. The Peloton case is a reminder that the real problem is often not too much regulation but too little.

A Reputation for Purity is Now in Tatters

For the tens of millions of baby boomers in the United States, the first large corporation whose products they encountered was probably Johnson & Johnson. That’s because the vast majority of parents in the postwar period used the company’s baby shampoo, oil and powder on their precious bundles of joy. Carefully cultivating an image of purity, J&J established itself as an indispensable part of infant care.

That image is now in tatters. The company just disclosed that it is being investigated by the Justice Department, the Securities and Exchange Commission and Congress in connection with possible asbestos contamination of its baby powder and other talc-based products. These probes were prompted by investigative reporting in outlets such as the New York Times alleging that J&J executives raised internal concerns about the asbestos issue decades ago but the company never acknowledged these publicly.

These revelations gave more credence to thousands of lawsuits filed against J&J in recent years by women, including many who used the company’s baby powder on themselves as well as their infants, charging that the products caused them to develop ovarian cancer. J&J has been losing a lot of these cases, including one in which a jury awarded $4.7 billion in damages to a group of 22 women.

Rarely has a product’s reputation fallen so far, and rarely has a company once held in such high esteem come to be regarded as morally equivalent to cigarette manufacturers. Yet a closer look at J&J’s track record shows that its immaculate reputation has been deteriorating for quite some time.

Over the past decade the company has been involved in a series of scandals and has been forced it to pay out large 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.

For example, 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.

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 its 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, in the subsequent crises it mainly has itself to blame. Off-label marketing, faulty production practices and foreign bribery are bad, but the current scandal over asbestos contamination and the alleged cover-up pose a threat to the survival of the company.

Exporting Hazards or Globalizing Regulation?

Americans may have initially felt a bit smug upon learning that the combustible material responsible for the Grenfell Tower disaster in London is largely banned in the United States. Perhaps our regulatory system is not as deficient as we thought.

That moral superiority went out the window when it came to light that the deadly cladding was purchased from an American-based company. Some of the outrage being exhibited toward public officials in Britain should also be aimed at Arconic, a company created from the break-up of the aluminum giant Alcoa. Arconic has announced that it will suspend sales of the cladding, known as Reynobond PE, for high-rises, but that does little good for the scores of people killed in the Grenfell fire or the thousands of others who have been forced to leave other apartment houses now found to contain the material.

Although most of the attention is on Arconic’s cladding and its role in spreading the conflagration, it turns out that fire itself was caused by another American product, a refrigerator made by Whirlpool under its Hotpoint brand. The appliance had a back made out of flammable plastic rather than the metal typically used in models sold in the United States. The London Fire Brigade had long lobbied, to no avail, to require new appliances to have fire-resistant backing.

The sale of banned products in offshore markets is, unfortunately, a longstanding practice among U.S-based multinational corporations. What’s unusual in this case is that the offshore market is a wealthy country such as Britain, whereas the dumping is normally done in poor countries.

As Russell Mokhiber points out in his 1988 book Corporate Crime and Violence, one of the earliest examples was that of the now defunct company A.H. Robins, which in the 1970s sold thousands of its Dalkon Shield intrauterine contraceptive devices in 42 countries even after it became apparent that thousands of U.S. women were experiencing severe and sometimes deadly ailments linked to the IUDs.

In 1972 the U.S. Environmental Protection Agency prohibited most uses of the insecticide DDT, yet American producers continued to sell in foreign markets for years until most other countries adopted their own bans.

U.S. companies also continued to export dangerous products such as asbestos, flammable children’s pajamas and lead-based house paint after being barred from selling them in domestic markets.

These practices illustrate the perverse way that most large companies regard the regulation of their business. They are not willing to admit that restrictions are legitimate — even when imposed in the wake or injuries and deaths — and will adhere to them only to the extent absolutely necessary. If they can continue to sell products they have been told are harmful to some customers, they will do so.

This mindset seems to result from both a knee-jerk ideological opposition to all regulation and an amoral pursuit of profits. The persistence of corporate crime suggests that attempting to reform big business from within — the dubious promise of corporate social responsibility — is far from adequate. Just as markets have superseded borders, so must regulation be globalized.

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.

Johnson & Johnson’s Self-Inflicted Wounds

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.

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.”

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.

—————————-

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

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.

The 2015 Corporate Rap Sheet

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Violation Tracker and Toy Safety

The holidays are nearly upon us, and that means that millions of parents are facing the annual ordeal of shopping for toys. Along with designating children as naughty or nice, shoppers may want to pay attention to the track record of the companies producing and selling the items that show up on wish lists.

Violation Tracker, the new database of corporate misconduct, can help identify which companies have the worst safety records when it comes to toys and other items for children. Among the agencies from which the database has collected environmental, health and safety enforcement data is the Consumer Product Safety Commission, which pays close attention to hazards in items used by young people.

The CPSC maintains a database of voluntary recalls and sends letters to companies asking for corrective action, but it also imposes civil penalties in cases of egregious violations. The following list, taken from Violation Tracker, shows the companies with the largest CPSC penalties since the beginning of 2010.

Techtronic Industries, headquartered in Hong Kong, was, via its subsidiary One World Technologies, fined $4.3 million for violating CPSC reporting rules in connection with its Baja Motorsports mini-bikes and go-carts. The CPSC said that gas caps on the vehicle could leak or detach from the fuel tank, posing fire and burn hazards, and that sticky throttles could result in sudden acceleration.

Discount clothing retailer Ross Stores was fined $3.9 million in connection with the sale of thousands of children’s garments with neck or waist drawstrings that posed a strangulation risk. The CPSC had previously determined that such garments created a “substantial product hazard.”

Phil & Teds, a manufacturer of strollers and related baby gear, was fined $3.5 million for failing to report that its MeToo clip-on high chair could detach from a table and cause an infant to fall to the ground. If only one side of the high chair detached, a child’s fingers could become crushed between the bar and the clamping mechanism, resulting in amputation. The company had received multiple reports of such accidents, including two amputation cases, but did not report them to the CPSC in a timely manner.

The American subsidiary of Japan’s Daiso Industries was fined $2.05 million and had to stop importing children’s products and toys into the United States. The CPSC had determined that the company was distributing and selling toys with illegal levels of lead content, lead paint and phthalates; toys intended for young children containing small parts that posed choking hazards; and products that lacked required warning labels.

Michigan-based retailer Meijer was fined $2 million for selling a dozen different recalled consumer products, most of which were for children. Among these were SlingRider Baby Slings (risk of suffocation), Refreshing Rings Infant Teethers/Rattles imported by Sassy (ingestion hazard), and the Harmony High Chair manufactured by Graco Children’s Products (fall hazard).

Burlington Coat Factory, owned by Bain Capital, was fined $1.5 million for the same violation as Ross Stores: selling children’s clothing with drawstrings deemed to be a strangulation hazard. Among the garments were hooded jackets and sweatshirts involved in a 2010 recall announced by the CPSC in cooperation with the company. Macy’s was fined $750,000 in another drawstring case.

Spin Master Inc. was fined $1.3 million for failing to reports hazards associated with its product called Aqua Dots, a children’s craft kit and toy that consisted of tiny beads of different colors that stuck together when sprayed with water. According to the CPSC, Spin Master had received reports that children (and a dog) had become ill and received emergency medical treatment after ingesting Aqua Dots, which contained a substance that could damage kidneys and the central nervous system.

Henry Gordy International, a subsidiary of Exx Inc., was fined $1.1 million for failing to report that its toy dart gun sets contained parts that could be inhaled into a child’s throat and cause suffocation. The CPSC also alleged that the company made a material misrepresentation to agency staffers during their investigation.

Violation Tracker data currently goes back only to the beginning of 2010, but toy safety problems began well before that. One perennial problem was the sale of items containing lead or lead paint, especially by the dollar store chains. In 2009 Dollar General was fined $100,00 and Family Dollar (now owned by Dollar Tree) $75,000 as part of a CPSC crackdown on the dangerous practice.

Santa Claus may put lumps of coal in some children’s stockings, but unscrupulous corporations can do a lot worse.

Hiding Hazards

blinders When Stanley Works and Black & Decker announced merger plans in late 2009, the two firms made sure to describe themselves as producers of quality tools while claiming that their marriage would produce “significant cost synergies.” More than five years later, the combined company, Stanley Black & Decker, seems to be making progress on costs (and profits), but new revelations put into question its commitment to quality.

The federal Consumer Product Safety Commission and the Justice Department recently announced that the firm’s Black & Decker unit would pay $1.575 million to settle allegations that it “knowingly violated federal reporting requirements with respect to cordless electric lawnmowers that started spontaneously and that continued to operate after consumers released the lawnmower handles and remove the safety keys.” In other words, Black & Decker has been selling products with uncontrollable spinning blades.

While CPSC press releases are normally neutral in tone, the statement on Black & Decker was unusually harsh. Agency chairman Elliott Kaye was quoted as saying: “Black & Decker’s persistent inability to follow these vital product safety reporting laws calls into question their commitment to the safety of their customers.”

What had apparently ticked off Kaye was that this was the fifth time the commission had cited Black & Decker for reporting violations. The previous case was in 2011, when the company had to pay $960,000 to settle allegations that it failed to report a defect in one of its Grasshog trimmer/edgers that could cause parts to loosen and become projectiles.

Most CPSC civil penalties are brought against companies that fail to report defects and accidents in a timely manner: “That means within 24 hours, not months or years as in Black & Decker’s case,” Kaye stated with obvious annoyance. Assistant Attorney General Benjamin Mizer was also blunt: “Not for the first time, Black & Decker held back critical information from the public about the safety of one of its products.” The company was said to have received more than 100 consumer complaints and accident reports from lawnmower customers over a period of years before it decided to share the information and recall the products.

Black & Decker is not the only large “quality” manufacturer that has been accused of essentially covering up dangerous defects in its products. Earlier this year, General Electric had to pay the CPSC $3.5 million — one of the largest civil penalties in the commission’s history — to settle allegations that it failed to report “an unreasonable risk of serious injury” relating to some of its ranges containing connectors that could overheat and cause fires.

Large companies these days profess to be committed to transparency and accountability, but some are still inclined to hide their dirty (and dangerous) secrets.

————————-

New in Corporate Rap Sheets: Barrick Gold and its environmental and human rights controversies on five continents.