From SCOTUS to Project 2025

There has never been any question that the Supreme Court’s conservative majority is solidly pro-corporate. Yet in a slew of audacious rulings at the end of the term, those Justices abandoned any pretense of even-handedness.

Chief Justice Roberts and his allies swept away a 40-year-old precedent that directed judges to defer to federal regulatory agencies in interpreting laws involving oversight of business. The decision is expected to result in a wave of lawsuits by corporate interests challenging all manner of regulations. Many of those cases will ultimately be decided by the Justices, and it is clear how that will go.

Along with its ruling in the Chevron deference case, the Court took several other whacks at regulators. It invalidated the Securities and Exchange Commission’s use of in-house administrative law judges, a move that could cripple the agency’s ability to resolve securities fraud cases and could undermine similar enforcement procedures at other regulators. At the same time, SCOTUS put on hold an Environmental Protection Agency plan to curtail air pollution that drifts across state lines. Finally, the Court gave corporations more time to challenge regulations by extending the statute of limitations.

All of this is bad enough, but it could turn out to be a prelude to a wider assault on federal oversight of corporate conduct. A large coalition of business-friendly conservative groups have come together under the banner of Project 2025 to provide a blueprint for how a second Trump Administration could start to dismantle the so-called administrative state.

The plan is set out in a 922-page compendium titled Mandate for Leadership and published by the Heritage Foundation, which produced a similar volume for the incoming Reagan Administration. It calls for radical changes across the executive branch to usher in what it calls a “return to self-governance to the American people” but is in reality a call to give corporations a freer hand.

Mandate is filled with strident anti-regulatory rhetoric. It accuses the EPA of engaging in “vendetta-driven enforcement” and “liberty-crushing regulation.” It describes the Consumer Financial Protection Bureau as being “assailed by critics as a shakedown mechanism” and claims that penalties collected by the agency “have “ended up in the pockets of leftist activist organizations.”

Many of the recommendations in the volume consist of weakening agencies by cutting their budgets and staffs while re-orienting them to the needs of business. The chapter on the EPA says the agency should “foster cooperative relationships with the regulated community,” a thinly veiled call to retreat from enforcement. There is also a call for more “state leadership,” presumably meaning those states antagonistic to the mission of the agency.

On Day One of a Trump Administration, Mandate argues, the president should issue an executive order creating “pause and review” teams at EPA that would, among other things, “identify existing rules to be stayed and reproposed.”

The only regulations viewed favorably in Mandate are those that would promote the conservative social agenda that also suffuses the volume. For example, the plan supports measures that would prevent companies from providing abortion-related healthcare coverage for employees.

After Project 2025 started to attract more attention, Trump recently tried to distance himself from the effort. Like most of what the presumptive Republican nominee says, that statement should not be taken too seriously.

In fact, the tone and substance of the Mandate volume are entirely consistent with the regulation-bashing that has been part of Trump’s shtick since he entered the national political arena. With help from the Supreme Court and Project 2025, a second Trump Administration could do a lot more to weaken public protections and make life comfortable for rogue corporations.

Reprehensible Corporate Behavior

Government officials are usually restrained in the way they talk about corporate behavior, even when a company is involved in a scandal. But Jennifer Homendy, chair of the National Transportation Safety Board, let loose against Norfolk Southern in a meeting about last year’s derailment and hazardous substances release in East Palestine, Ohio.

Homendy charged that the rail carrier “delayed or failed to provide critical investigative information to our team,” forcing her to have to threaten to issue subpoenas to compel disclosure. She described the company’s actions as “unconscionable” and “reprehensible.”

Homendy listed a series of company actions taken during the investigation she called unethical or inappropriate, including Norfolk Southern’s decision to retain a private company to conduct testing of vinyl chloride for inclusion in the NTSB record. Parties “are not permitted to manufacture their own evidence and develop their own set of facts outside of the NTSB investigative process, which is exactly what Norfolk Southern did,” Homendy said.

On top of that, Homendy said that a Norfolk Southern executive recently delivered what she and other NTSB employees interpreted as “a threat” by pressing the agency to dampen speculation about whether the company was responsible for the decision to incinerate toxic materials at the site of the derailment, a process known as vent and burn.

Those remarks came as the safety agency issued an abstract of a report on the incident in which Norfolk Southern is alleged to have “compromised the integrity of the decision to vent and burn the tank cars by not communicating expertise and dissenting opinions to the incident commander making the final decision. This failure to communicate completely and accurately with the incident commander was unjustified.”

The incineration of those toxic substances forced widespread evacuations, and even after people returned to their homes there have been lingering concerns about the potential long-term health impacts from the smoke that covered East Palestine.

It will be interesting to see whether the NTSB chair’s skewering of Norfolk Southern prompts Congress to take action on railroad safety. As documented in Violation Tracker, the Class I railroads have been fined thousands of times by the Federal Railroad Administration. Norfolk Southern was targeted more than 1,600 times by the FRA.

Yet most of these cases involve relatively minor matters. When it comes to major issues, the FRA has shown itself to be pretty ineffective. That varies somewhat from one presidential administration to another, but the industry has managed to avoid major reforms.

In fact, it has been brazen in pushing for changes that would enhance profits but increase the risk of derailments and other accidents. This is the industry, after all, which thinks it is okay to operate trains stretching for a mile or more with just one human being on board. There is even growing use of trains that are entirely remote-controlled—a practice that has already led to a rash of accidents.

Railroads have been flexing their corporate muscles since the mid-19th Century. It is time to subject them to some serious oversight.

Naming the Offenders

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

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

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

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

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

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

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

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

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

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

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

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

Corporate Criminals Await Sentencing

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

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

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

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

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

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

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

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

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

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

The $1 Trillion Cost of Corporate Misconduct

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

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

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

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

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

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

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

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

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

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

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

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

Eliminating the Late Fee Bonanza

A substantial number of working-class Americans have decided that the Biden Administration is not acting in their interest and is instead serving the elites. One area in which that notion most strongly conflicts with reality is the regulation of consumer financial services.

The Consumer Financial Protection Bureau is an agency that has consistently stood up to giant banks, payday lenders and mortgage servicers. In its latest move, the CFPB just issued a rule limiting the late fees large credit card companies can charge to $8 a month.

That’s compared to the current norm of around $32, which generates an estimated $14 billion annual profit for the issuers. The CFPB estimates the cap will deprive banks of more than two-thirds of this bonanza, which has grown despite federal legislation passed in 2009 designed to ban excessive charges.

It is thus no surprise that the credit card industry is up in arms. Trade associations are trotting out fatuous claims that the lower fees will actually harm consumers while preparing lawsuits to challenge the cap.

Banks are unlikely to win much public support in their counter-offensive. That is because they have a long history of mistreating cardholders every way possible.

The CFPB knows this only too well. Over the past dozen years, the agency has brought a series of cases challenging credit card abuses and imposing hefty penalties against the culprits. Here are some examples:

In 2015 the CFPB fined Citibank $35 million and ordered it to provide an estimated $700 million in relief to consumers harmed by allegedly illegal practices related to credit card add-on products and services. Roughly seven million consumer accounts were said to be affected by deceptive marketing, billing, and administration of debt protection and credit monitoring products. The agency also said a Citibank subsidiary deceptively charged expedited payment fees to nearly 1.8 million consumer accounts during collection calls.

Three years later, the CFPB concluded that Citibank was violating the Truth in Lending Act by failing to reevaluate and reduce the annual percentage rates (APRs) for approximately 1.75 million consumer credit card accounts consistent with regulatory requirements, and by failing to have reasonable written policies and procedures to conduct the APR reevaluations consistent with regulation. Citi was ordered to provide $335 million in restitution.

In 2012 the CFPB and the Federal Deposit Insurance Corporation ordered Discover Bank to refund approximately $200 million to more than 3.5 million consumers and pay a $14 million civil money penalty after an investigation found the bank misled consumers into paying for various credit card add-on products.

That same year, the CFPB ordered three American Express subsidiaries to refund an estimated $85 million to approximately 250,000 customers for illegal card practices. This was the result of a multi-part federal investigation which, according to the agency, “found that at every stage of the consumer experience, from marketing to enrollment to payment to debt collection, American Express violated consumer protection laws.” American Express was also required to pay a penalty of $14 million to the CFPB.

Last year, the CFPB ordered Bank of America to pay $90 million in penalties for a variety of abusive practices, such as withholding reward bonuses explicitly promised to credit card customers.

Some of these practices may have been changed, but the industry, with its exorbitant interest rates, is far from a paragon of corporate virtue. The cap on late fees, if it survives court challenges, will help to tip the scales back in favor of customers. The only question is whether they will pay attention to who brought this about.

Koch Industries and the Attack on Regulation

Donald Trump’s rants about the deep state are designed to deflect attention away from his own transgressions. An even more sinister attack on the legitimacy of the federal executive branch is taking place in the U.S. Supreme Court, and the result could strike a serious blow against corporate accountability.

The Court just heard oral arguments in two cases that were purportedly brought by commercial fishermen protesting their obligation to help pay for the cost of monitoring compliance with the Magnuson-Stevens Fishery Conservation and Management Act.

Instead of addressing that narrow issue, the cases are being used to challenge one of the bedrocks of federal regulation—the 40-year-old Chevron doctrine under which courts have given deference to agencies in interpreting laws relating to the environment, consumer protection, and the like.

It is standard procedure for Corporate America to use small businesses as a wedge for achieving changes that provide a lot more benefit to large companies. There was little doubt this was the dynamic at play in the fishing case.

The New York Times made this even more evident in an article revealing that the supposed public interest law firm bringing the fishing case is closely linked to billionaire Charles Koch, who has long sought to weaken government oversight of business as part of a broad rightwing agenda. Charles Koch and his late brother David bankrolled libertarian think tanks such as the Heritage Foundation and the Cato Institute as well as activist groups such as Americans for Prosperity.

This crusade has not been solely a matter of ideology. There is also a great degree of self-interest involved. That’s because Koch is the chairman of Koch Industries, a privately held industrial conglomerate that has for decades clashed with regulators and prosecutors.

In the period since January 2000, the company has, as documented in Violation Tracker, been involved in hundreds of federal, state and local regulatory cases and has had to pay more than $1 billion in fines and settlements.

Most of these penalties have been paid by Koch’s numerous subsidiaries, which do business in industries that often run afoul of environmental and workplace safety rules. These include Flint Hills Resources (petroleum), Georgia-Pacific (pulp and paper), Guardian Industries (glass and coatings), and Invista (polymers and fibers).

Koch Industries has long used its political influence to try to protect the company against the consequences of its regulatory infringements. For example, in 2000 a federal grand jury in Texas returned a 97-count indictment against the company and four of its employees for violating federal air pollution and hazardous waste laws in connection with benzene emissions at the Koch refinery near Corpus Christi.

The company was reportedly facing potential penalties of some $350 million, but in early 2001 it got the newly installed Bush Administration’s Justice Department to agree to a settlement in which many of the charges were dropped and the company pled guilty to concealing violations of air quality laws and paid just $10 million in criminal fines and $10 million for environmental projects in the Corpus Christi area.

Now Koch is trying to achieve a lot more through its friends on the Supreme Court. A decision that overturns the Chevron doctrine would severely weaken the ability of federal regulators to do their job and would be a boon to serial offenders such as Koch.

A New Emissions Cheating Scandal

Cummins Inc. waited until just before the Christmas holiday to announce that it had “reached an agreement in principle to resolve U.S. regulatory claims regarding its emissions certification and compliance process for certain engines primarily used in pick-up truck applications.” After insisting it cooperated fully with regulators, the company went on to claim it “has seen no evidence that anyone acted in bad faith and does not admit wrongdoing.”

That vague and tortuous statement was clarified when the U.S. Justice Department put out its own release saying that Cummins was close to signing an agreement with DOJ and the State of California under which it would pay $1.7 billion to settle allegations it violated the Clean Air Act by installing defeat devices on hundreds of thousands of engines.

Cummins, which produces engines for trucks and heavy equipment, has thus joined the roster of large companies accused of installing technology meant to yield deceptive results on emissions tests and thus conceal the true amount of pollution being generated. DOJ stated that the devices installed by Cummins allowed the engines to produce thousands of tons of excess emissions of nitrogen oxides, which are linked to respiratory conditions such as asthma.

The defeat device revelations began, of course, with Volkswagen. The German automaker has paid out over $20 billion in fines and settlements around the world since the accusations of emissions cheating first emerged in 2015.

Yet there are a number of other large companies that have faced similar allegations. In 2019 Fiat Chrysler (now Stellantis) reached an agreement with federal and California regulators under which it paid over $300 million in fines and spent about $200 million to recall vehicles and make them compliant.

In 2020 Daimler AG (now the Mercedes-Benz Group) reached a similar settlement under which it agreed to pay $945 million in penalties and spend $534 million on vehicle modifications.

Automotive suppliers have also gotten caught up in the controversy. Robert Bosch has paid several hundred million dollars in settlements for its role in producing the defeat devices for Volkswagen. In 2018 IAV GmbH, a German company that designs automotive systems, pled guilty to one criminal felony count and paid a $35 million criminal fine as a result of its work for VW.

After-market companies have also been targeted. The EPA has fined dozens of small firms around the country for illegally installing defeat devices, while the DOJ has gone after some medium-sized suppliers. For example, in 2022, Allied Exhaust Systems, which sells to individuals nationwide, agreed to pay a $1.1 million penalty.

Such cases suggest a remarkable willingness of companies large and small to violate environmental regulations. These are not situations in which firms accidentally exceeded emissions limits. From Volkswagen and Cummins down to the small automotive shops, the defendants were accused of deliberately thwarting emission controls.

The use of defeat devices does not simply involve infringement of abstract standards. They cause vast amounts of extra pollution to be spewed into the air and thus represent a corporate crime against the public’s health.

The 2023 Corporate Rap Sheet

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

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

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

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

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

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

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

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

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

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

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

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

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

The Other Problem with Airline Mergers

A proposed acquisition of Hawaiian Airlines by Alaska Airlines would be bad news for those traveling between the U.S. mainland and Hawaii. The combined company would have a huge share of that market and would thus be in a position to keep fares sky high.

Another negative feature of the deal is that it would enhance the position of a company with a checkered regulatory compliance record. As shown in Violation Tracker, Alaska Air and its subsidiaries have been cited more than 200 times by the Federal Aviation Administration for a variety of safety violations involving issues such as maintenance, hazardous waste and security practices.

All the airlines have such violations, and the larger carriers have been fined more times, reflecting their wider operations. But in relation to its size, Alaska Air’s record is worse than that of its counterparts. Its total of 220 FAA violations is not far behind that of Southwest’s total of 270, even though Southwest carries about four times as many passengers.

Alaska Air’s violations also tend to be more serious. Its 220 cases have generated more than $10 million in fines (the FAA’s penalty structure is not very onerous), while the total from the 539 fines paid by the much larger Delta Air Lines is below $9 million. (All the FAA statistics are limited to cases with fines of at least $5,000.)

Alaska Air has also racked up a series of penalties from the Transportation Department’s Aviation Consumer Protection Division. Including matters involving Virgin America, which Alaska Air acquired in 2016, there have been 13 of those cases with total fines of $777,500.

Then there is the issue of employment practices. Earlier this year, a federal judge in California ordered Alaska Air to pay nearly $31 million to a class of flight attendants who had sued Virgin for failing to pay proper overtime pay and failing to pay for break time as required under California law. The workers originally won $77 million in damages, but the company appealed and got part of the award overturned. Alaska Air also tried to get the U.S. Supreme Court to throw out the rest of the award but the high court declined to hear the case. The matter thus went back to the trial court, where the judge settled on the $31 million payout.

Hawaiian Airlines has a somewhat less egregious regulatory track record. It has been fined 31 times by the FAA and five times by the Transportation Department’s consumer division. There is every reason to suspect that if the merger goes through, its compliance practices would come to look more like that of its new parent.

When antitrust regulators review a proposed merger, they have to give primary consideration to the potential market impacts. Yet it is also worth keeping in mind that as companies grow larger, they often tend to become less mindful of safety matters and other regulatory obligations. Or if they already have a lax approach to compliance, that problem is likely to become worse. All this is just one more reason bigger is usually not better.