Regulation

Trump’s Misguided Crusade Against the EPA

Executives at Volkswagen must be cursing the bad timing. If only they had been able to keep their emissions cheating scheme quiet for a while longer, they could have avoided a lot of grief. That’s because the U.S. Environmental Protection Agency’s enforcement capacity may soon be crippled.

This is a likely consequence of the Trump Administration’s plans, just reported by the Washington Post, to cut the staff of the agency by one-fifth and eliminate dozens of programs. It’s not yet known exactly what functions are being targeted, but cuts of this magnitude will certainly make it more difficult for the EPA to pursue the kind of investigations that led to the filing of civil and criminal charges against VW.

In January, shortly before Trump took office, the company agreed to plead guilty to three federal felony counts and pay a criminal penalty of $2.8 billion along with another $1.5 billion to settle civil claims. VW previously reached a settlement with the EPA and other agencies under which it committed to spend more than $14 billion to buy back cars containing “defeat devices” and undertake projects to mitigate the extra pollution generated by those vehicles.

VW is one of the thousands of polluters whose activities have been thwarted by the EPA. As shown in Violation Tracker, since the beginning of 2010 the agency (on its own or with the Justice Department) has collected more than $43 billion in fines and settlements in more than 15,000 cases. That does not include billions more from companies such as BP in cases in which the EPA joined with other agencies in joint referrals to the DOJ. Apart from VW and BP, here are the biggest EPA penalty cases over the past seven years:

In 2015 a $5 billion settlement with the EPA and the DOJ went into effect under which Anadarko Petroleum agreed to pay for the clean-up of toxic waste sites across the country linked to Tronox Inc., a spinoff of Anadarko’s subsidiary Kerr-McGee.

In 2013 Wisconsin Power and Light Company, a subsidiary of Alliant Energy, agreed to spend over $1 billion on new equipment to substantially reduce air pollution generated by three coal-fired power plants.

In 2013 Transocean agreed to pay a $1 billion civil penalty to the EPA in connection with its role in the Deepwater Horizon disaster in the Gulf of Mexico three years earlier.

In a 2015 settlement with the EPA, fertilizer giant Mosaic agreed to establish a $630 million trust fund to pay for the future closure of and treatment of hazardous wastewater at four facilities in Florida and Louisiana. The company also agreed to spend $170 million on environmental mitigation at its operations.

In 2011 Hovensa, now owned by ArcLight Capital, agreed to spend more than $700 million on new air pollution controls at its massive petroleum refinery in the U.S. Virgin Islands.

Not all the companies are from the industrial and energy sectors. Retail behemoth Wal-Mart Stores has had to pay more than $90 million in EPA fines and settlements to resolve cases involving improper disposal of hazardous waste and other violations.

Data collected for an extension of Violation Tracker coverage back an additional ten years to 2000 includes EPA cases with total fines and settlements of more than $20 billion. Among these are a 2007 agreement by utility giant American Electric Power to spend an estimated $4.6 billion to reduce toxic air emissions at its power plants and a $50 million criminal penalty BP paid for environmental violations at its refinery in Texas City, Texas (now owned by Marathon Petroleum) where 15 workers were killed in an explosion in 2005.

These various examples do not include the many Superfund cases brought by EPA against multiple parties in connection with long-term toxic dumping or cases brought against government entities; nor do they include all the work EPA does apart from enforcement.

Trump’s assault on the EPA is based on the once common but now widely debunked notion that there is an inherent conflict between jobs and environmental protection. Today there is greater recognition that workers also need to breathe clean air and drink clean water, and that there are many business and employment opportunities associated with environmental clean-up and sustainable practices.

Decimating the EPA will serve only to empower rogue corporations such as Volkswagen. There is nothing to be gained from making polluters great again.

Documenting the Last Hurrah of Regulatory Enforcement

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

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

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

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

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

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

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

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

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

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

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

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

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

Trump’s Other Ban

Trump’s travel ban and his rightwing Supreme Court pick are troubling in themselves, but they are also serving to deflect attention away from the plot by the administration and its Republican allies to undermine the regulation of business.

Surprisingly little is being said about Trump’s January 30 executive order instructing federal agencies to identify two prior regulations for elimination for each new rule they seek to issue. It also dictates that the total incremental cost of new rules (minus the cost of repealed ones) should not exceed zero for the year.

While Trump’s appointees will probably not propose much in the way of significant new rules that would have to be offset, the order amounts to a ban on additional regulation. It boosts the long-standing effort by corporate apologists to delegitimize regulation by focusing on the number of rules and their supposed cost while ignoring their social benefits.

Meanwhile, the regulation bashers are also busy on Capitol Hill. Republicans have resurrected the rarely used Congressional Review Act as a mechanism for undoing the Obama Administration’s environmental regulations as well as its Fair Pay and Safe Workplaces executive order concerning federal contractors.

Both Trump and Congressional Republicans are also targeting the Dodd-Frank law that enhanced financial regulation after the 2008 meltdown. Calling the law a “disaster,” Trump recently said “we’re going to be doing a big number on Dodd-Frank,” adding: “The American dream is back.”

If Trump was referring to the aspirations of the wolves of Wall Street, then that dream may indeed be in for a resurgence. For much of the rest of the population, the consequences would be a lot less pleasant.

To take just one example, an attack on Dodd-Frank would certainly include an assault on the Consumer Financial Protection Bureau that was created by the law and which has aggressively gone after financial predators. As Violation Tracker shows, during the past five years the agency has imposed more than $7 billion in penalties in around 100 enforcement actions against banks, payday lenders, credit card companies and others. Its $100 million fine against Wells Fargo last September brought attention to the bank’s bogus-account scheme.

The CFPB has not let the election results impede its work. Since November 8 it has announced more than a dozen enforcement actions with penalties totaling more than $80 million. The largest of those involves Citigroup, two of whose subsidiaries were fined $28.8 million for keeping borrowers in the dark about options to avoid foreclosure and burdening them with excessive paperwork demands when they applied for foreclosure relief.

Citigroup, one of the companies that has the most to gain from restrictions on the CFPB and Dodd-Frank in general, has shown up often as I have been collecting data on recent enforcement cases from various agencies for a Violation Tracker update that will be released soon.

The Securities and Exchange Commission recently announced that Citigroup Global Markets would pay $18.3 million to settle allegations that it overcharged at least 60,000 investment advisory clients with unauthorized fees. In a separate SEC case, Citi had to pay $2.96 million to settle allegations that it misled investors about a foreign exchange trading program.

Around the same time, the Commodity Futures Trading Commission filed and settled (for $25 million) allegations that Citigroup Global Markets engaged in the illicit practice of spoofing — bidding or offering with the intent to cancel the bid or offer before execution — in U.S. Treasury futures markets and that it failed to diligently supervise the activities of its employees and agents in conjunction with the spoofing orders.

Citi’s record, along with that of other rogue banks, undermines the arguments of Dodd-Frank foes and in fact makes the case for stricter oversight. Yet the reality of financial misconduct is about to be overwhelmed by a barrage of alternative facts about the magic of deregulation.

Update: After this piece was written, Congress voted to repeal another provision of Dodd-Frank known as Cardin-Lugar or Section 1504, which required publicly traded extractive companies to report on payments to foreign governments in their SEC filings. The disclosure was meant as an anti-corruption measure.

Corporate Crime and the Trump Administration

With all that’s happening in the chaotic Trump transition, less attention is being paid to the announcement that Volkswagen is pleading guilty to felony charges and paying more than $4 billion in penalties while a half dozen of its executives face individual criminal indictments.

A development of this sort should represent a turning point in the prosecutorial handling of the corporate crime wave that has afflicted the United States for years. Yet because of its timing, it may end up being no more than a parting gesture of an administration that has struggled for eight years to find an effective way of dealing with widespread and persistent misconduct by large companies. And it may be followed by a weakening of enforcement in a new administration led by a president whose attacks on regulation were a hallmark of his electoral campaign.

First, with regard to the Obama Administration: The treatment of Volkswagen is what should have been dished out against the banks that caused the financial meltdown, against BP for its role in the Deepwater Horizon disaster, against Takata for its production of deadly airbags, and against the other corporations involved in major misconduct ranging from large-scale oil spills and contracting fraud to market manipulation and wage theft.

Instead, the Obama Justice Department continued the Bush Administration’s practice of avoiding individual prosecutions and offering many corporations deferred and non-prosecution deals in which they essentially bought their way out of jeopardy, albeit at rising costs. These arrangements, which are catalogued in Violation Tracker, imposed a financial burden but appear to have had a limited deterrent effect.

In a few instances, companies did have to enter guilty pleas, but the impact was softened when, for examples, the large banks that had to take that step in a case involving manipulation of the foreign exchange market later got waivers from SEC rules that bar firms with felony convictions from operating in the securities business.

It remains to be seen how much VW’s guilty plea affects its ability to continue doing business as usual. Yet the bigger question is how corporate criminals will fare in the Trump Administration.

Trump the candidate said little or nothing about VW, Wells Fargo and the other big corporate scandals of the day and instead parroted Republican talking points about the supposedly intrusive nature of regulation. Corporations that have supposedly been put on notice about moving jobs offshore or seeking overly lucrative federal contracts apparently are to have a free hand when it comes to poisoning the environment, maiming their workers or defrauding customers.

Although some have speculated that Jeff Sessions will be tough on corporate crime, a Public Citizen report on his time as Alabama’s attorney general in the 1990s provides evidence strongly to the contrary.

While Sessions took pains during his confirmation testimony to claim that he would not be a “rubber stamp” for the new Administration, he has strong political ties to Trump and worked hard to legitimize some of his more extreme positions during the campaign. Trump is unlikely to pay much heed to the traditional independence of the Justice Department, and Sessions is unlikely to adopt policies that rub Trump the wrong way.

Despite the inclinations of Sessions, the appointment of anti-regulation foes to head many federal agencies will mean that fewer cases will get referred to the Justice Department. And if Trump’s deregulatory legislative agenda gets enacted, the enforcement pipeline will dry up even more.

Corporate misconduct may very well decline during the Trump era because much of that conduct will become perfectly legal.

A Mandate for Corporate Misconduct?

Many analysts of the presidential election are depicting it as a victory for workers, at least the disaffected white portion of the labor force. It remains to be seen whether Trump can deliver much in the way of concrete economic benefits for them.

Trump’s triumph may actually turn out to be a bigger boon for corporations. Although his candidacy was not actively supported by much of big business, which remains nervous about his posture on trade, Trump put forth other arguments that evoke less a populist uprising than the lobbying agenda of the U.S. Chamber of Commerce , which has just issued a statement embracing the election results for preserving “pro-business majorities” in the Senate and the House.

Trump’s position on big business has been difficult to pin down. He has often criticized crony capitalism but it has usually been part of attacks on Hillary Clinton or the Obama Administration. He has criticized some companies for sending jobs offshore yet has made tax proposals that would be a windfall for Corporate America.

One area in which Trump’s position has been unambiguously pro-corporate is the issue of regulation, where his stance has been indistinguishable from the Chamber and its allies. Trump has expressed a broad-brush condemnation of federal rules as job-killing, using the usual bogus numbers on their economic costs while ignoring the benefits. He has vowed both to eliminate many of the Obama Administration’s initiatives and to put a moratorium on most new rules. Trump has called for slashing the budget of the Environmental Protection Agency and for repealing much of Dodd-Frank, which could mean the demise of the Consumer Financial Protection Bureau.

Trump’s embrace of traditional Republican regulation bashing is all the more troubling as it comes at a time when corporate misconduct remains rampant. It is remarkable that so little attention was paid during the campaign to the scandals involving companies such as Volkswagen, whose emissions fraud has been pursued by the EPA, and Wells Fargo, which was fined $100 million by the CFPB for creating millions of bogus accounts. By threatening these agencies , Trump is undermining future cases against other corporate miscreants.

It’s possible that Trump’s attacks on regulation are nothing more than campaign rhetoric, but he is now allied with those pro-business majorities in Congress that are dead serious about dismantling as much of the federal regulatory framework as possible. Corporate lobbyists must be salivating at what lies ahead.

Is that what Trump supporters signed up for? Do residents of oil and gas states whose water supplies have been contaminated want the EPA to dwindle? Do blue collar workers confronted by predatory lending practices want the CFPB to disappear? Do families with serious health problems want to go back to a system in which insurance companies can discontinue their coverage? Do victims of wage theft want to see funding cut for the Wage & Hour Division of the Labor Department?

Trump has promised to drain the swamp in Washington, yet when it comes to regulation at least he has jumped into the muck feet first and is already becoming part of the problem rather than the solution.

Note: For a reminder of the myriad ways in which the Trump Organization itself has run afoul of federal, state and local regulations, see my Corporate Rap Sheet on the company.

Corporate Criminals and Public Office

Donald Trump’s candidacy is based to a great extent on the notion that a successful businessman would make an effective President. Democrats have shot holes in Trump’s claims of success, but they have not done enough to attack the underlying claim that private sector talents are applicable to the public realm.

The conflation of business and government acumen is all the more dangerous at a time when the norm in the corporate world is increasingly corrupt. The observation by Bernie Sanders during the primaries that “the business model of Wall Street is fraud” applies well beyond the realm of investment banking. Have those calling for government to operate more like business been paying attention to Wells Fargo, Volkswagen and EpiPen-producer Mylan?

It used to be that the main threat was that unscrupulous corporations would use investments in the political and legislative process to bend policymaking to favor their interests. Trump has shown that a corporate miscreant can use a pseudo-populist platform to try to take office directly.

Trump is not unique in this regard. Take the case of West Virginia, where a controversial billionaire coal operator is leading the polls in the state’s gubernatorial race. Jim Justice brags that he is a “career businessman” not a career politician, yet that career includes racking up some $5 million in fines imposed by the Mine Safety and Health Administration, according to Violation Tracker. To make matters worse, NPR and Mine Safety News reported in 2014 that Justice resisted paying these fines. An NPR update says that $2.6 million in MSHA fines and delinquency penalties remain unpaid even as the Justice mining operations continue to get hit with more safety violations.

On top of this, NPR estimates that the Justice companies face more than $10 million in federal, state and county liens for unpaid corporate income, property and minerals taxes. About one-third of the total is owed to poor West Virginia counties. Like Donald Trump, Justice has failed to follow through on charitable commitments yet has managed to pump several million dollars into his campaign.

Did I mention that Justice is the Democratic candidate? He is not, however, supporting Hillary Clinton though he is tight with conservative Democrat Sen. Joe Manchin. Justice’s Republican opponent is state senate president Bill Cole, whose super PAC received a $100,000 contribution from a super PAC funded by the Koch brothers. This was after Cole spoke at the Koch’s private conservative donors conference in Palm Springs last February, reportedly using his remarks to emphasize his commitment to getting a “right to work” law passed in West Virginia. While in the legislature Cole has also been cozy with the American Legislative Exchange Council and has pushed the crackpot supply-side economic prescriptions of Arthur Laffer. Cole is also an enthusiastic supporter of Trump.

It is difficult to know which is worse: a candidate in the pocket of unscrupulous corporate special interests or one who is himself one of those corporate miscreants. It is troubling to think that our elections increasingly come down to such an untenable choice.

Grandstanding Without Results

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.

Imposing the Ultimate Punishment

The outcome of most cases of serious corporate misconduct is the same: the company pays a fine that is not too onerous and no one ends up behind bars. That’s what makes the fate of ITT Educational Services all the more significant.

This for-profit educational outfit just shut down pretty much all its facilities in the wake of a recent announcement by the U.S. Department of Education that the company would no longer be able to enroll new students using federal financial aid funds. In other words, the feds effectively put ITT out of business.

Before anyone begins complaining about overreaching bureaucrats, keep in mind that the company has a dismal track record. It faced accusations from state regulators of misleading students about the quality of its programs and their prospects for employment after graduation. In 2014 the Consumer Financial Protection Bureau sued ITT for predatory lending. CFPB Director Richard Cordray stated at the time: “We believe ITT used high-pressure tactics to push many consumers into expensive loans destined to default. Today’s action should serve as a warning to the for-profit college industry that we will be vigilant about protecting students against predatory lending tactics.”

ITT is not the first dubious for-profit educator to be pushed into oblivion. In 2015 Corinthian Colleges announced the cessation of operations amid a spate of state and federal investigations, including a CFPB case that resulted in a default judgment of $530 million.

To its credit, the Obama Administration has stood fast in its tough treatment of scam schools, building on the 2010 move by Congress to push commercial banks out of the federal student loan business.

The willingness to put sleazy operators out of business is seen little outside the educational sector. It’s true that the Bureau of Prisons announced plans to phase out the use of private prison operators, but the likes of CCA will be kept alive by their state government customers.

Among federal regulators, the one agency that focuses more on shutting down rogue operators rather than imposing monetary fines is the Food and Drug Administration. It must be noted, however, that the shutdowns are often temporary (remaining in effect only while the company corrects unsafe processing plant conditions) and usually involve smaller firms. Other agencies may take action that results in the closing of fly-by-night firms, but it is rare for regulators or prosecutors to take steps that could end up in the demise of an established company, no matter how corrupt it may have become.

This hesitation seems to stem from backlash against the Justice Department’s case against accounting firm Arthur Andersen for its role in the Enron accounting scandal. In the wake of its 2002 conviction for obstruction of justice, the firm had to dismantle its auditing business and was unable to resurrect it after the Supreme Court overturned the conviction three years later. Nonetheless, the Enron accounting fraud was real, and Arthur Andersen enabled it in some way.

It is time for the DOJ and other regulatory agencies to follow the Education Department’s lead in taking the most aggressive kind of action against big companies that misbehave in a major way. A prime candidate for such treatment is Volkswagen, which engaged in a brazen scheme to cheat auto emissions tests and thus exacerbated air pollution to a shocking extent. The company is paying billions in settlement costs but apparently will remain in business. In fact, it just announced a substantial investment in Navistar to boost its position in the U.S. truck business.

A move to mandate the shutdown of a large company like VW should include arrangements for the sale of its assets and other protections for its workers. There would still be disruptions but it would send a strong signal to other large corporations that they should not expect to buy their way out of severe legal liability.

The Amazing Variety of Bank Misconduct

Since the beginning of 2010 major U.S. and foreign-based banks have paid more than $160 billion in penalties (fines and settlements) to resolve cases brought against them by the Justice Department and federal regulatory agencies. Bank of America alone accounts for $56 billion of the total and JPMorgan Chase another $28 billion. Fourteen banks have each accumulated penalty amounts in excess of $1 billion, and five of those are in excess of $10 billion.

These are among the key findings revealed by Violation Tracker 2.0, the second iteration of an online database produced by the Corporate Research Project of Good Jobs First. The database, which initially focused on environmental and safety cases, has now been expanded to include a wide variety of offenses relating to the financial sector along with cases against companies of all kinds involving price-fixing, defrauding of consumers and foreign bribery. Banks and other financial companies account for about half of the new cases but more than 90 percent of the penalties.

With the expansion Violation Tracker now covers 110,000 cases from 27 regulatory agencies and the DOJ with total penalties of some $270 billion.

Along with the new database, we are releasing a report called The $160 Billion Bank Fee that focuses on a subset of the data: mega-cases — those with penalties of $100 million or more — brought against major banks by the Justice Department and agencies such as the Consumer Financial Protection Bureau, the Federal Reserve, the Office of the Comptroller of the Currency and the Securities and Exchange Commission. Private litigation is not included.

We found 144 of these mega-cases that had been brought against 26 large U.S. and foreign banks. Along with Bank of America and JPMorgan Chase, those banks with $10 billion or more in penalties include: Citigroup ($15.4 billion), Wells Fargo ($10.9 billion), and Paris-based BNP Paribas ($10.5 billion).

Many of the mega-cases address the toxic securities and mortgage abuses that gave rise to the 2008-2009 financial meltdown but there are also numerous other offenses that have received less attention. The cases and penalties break down as follows:

Toxic securities and mortgage abuses: $118 billion
Violations of rules prohibiting business with enemy countries: $15 billion
Manipulation of foreign exchange markets; $7 billion
Manipulation of interest rates: $5 billion
Assisting tax evasion: $2.4 billion
Credit card abuses: $2.2 billion
Failure to report suspicious behavior by Bernard Madoff: $2.2 billion
Inadequate money-laundering controls: $1.3 billion
Discriminatory practices: $939 million
Manipulation of energy markets: $898 million
Other major cases: $3.8 billion
TOTAL: $160 billion

Of the 144 mega-cases, 120 were brought solely as civil matters. The other 24 involve criminal charges, though in two-thirds of those cases the banks were able to avoid prosecution. The latter include 10 cases with deferred prosecution agreements and six with non-prosecution agreements. The banks that have pleaded guilty to criminal charges include: Citigroup, JPMorgan Chase, Barclays, BNP Paribas, Credit Suisse and Royal Bank of Scotland.

While these cases serve to illustrate the magnitude and amazing variety of bank misconduct, it remains to be seen whether they have succeeded in their intended purpose: to get the banks to clean up their act.

Too Big to Be Honest

breakingup For a long time the big financial institutions of the United States had an unrelenting urge to grow bigger. Acting on the principle that only the big would survive, banks and related entities spent the 1990s and the early 2000s gobbling up one another at a furious pace. The result was a small group of mega-institutions such as Citigroup and Bank of America that nearly brought down the whole financial system in 2008.

Federal regulators declined to break up the giants, which in recent years have grown only larger. But now some of the rules put in place in the wake of the meltdown are having the desired effect. Some major financial players are deciding to split themselves up in the hope of evading the more stringent capital requirements imposed on companies designated as systemically important (SiFi) institutions.

The latest firm to bow to this pressure is insurance behemoth MetLife, which just announced it is exploring a spinoff of its retail life and annuity business in the U.S. into a new presumably non-SiFi company. The move comes in the wake of moves by General Electric to dismantle large parts of its huge GE Capital business. Among the businesses that contributed to GE Capital’s heft was the banking operation it purchased from MetLife in 2011 as part of a previous move by the insurer to reduce its regulatory oversight.

Now other large insurers such as Prudential Financial and American International Group, the latter the recipient of a $180 billion federal bailout, may take similar steps. Apart from the regulatory pressures, AIG has been dealing with breakup calls from investors such as John Paulson and Carl Icahn, who dubbed it “too big to succeed.”

It remains to be seen whether the big banks will succumb to the breakup. For the moment they are resisting, but that’s the stance MetLife had long maintained. Their sagging stock prices make them susceptible to a move by someone like Icahn.

It’s gratifying to see regulation working as designed to make the country less vulnerable to large reckless institutions and a bit less enthralled with financialization. GE’s announcement that it is moving its headquarters to Boston is part of its retreat from finance.

Yet more still needs to be done to get the banks to clean up their act. Stricter capital rules are fine, but the likes of B of A and JPMorgan Chase need to feel more pressure to obey the law. They’ve had to cough up larger and larger financial settlements and in a few cases have even had to plead guilty to criminal charges. Yet they haven’t gotten the message.

Perhaps what’s needed are “honesty requirements” to go along with the more stringent capital requirements. In other words, banks that break the law would have to sell off the businesses involved in the misconduct. This would accelerate the move away from overly large financial institutions and hopefully put more operations in the hands of firms that are willing to play by the rules.

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Note: the Dirt Diggers Digest Enforcement page, which provides links to the compliance data posted by more than 50 federal regulatory agencies, has just been updated and expanded.