Regulation

DOJ’s Sputtering Case Against Volkswagen

There’s a scene in “The Wolf of Wall Street” in which a federal prosecutor tells Jordan Belfort (played by Leonardo DiCaprio) that the case against him for securities fraud was a “Grenada,” meaning that it was as unloseable as the 1983 U.S. invasion of that poorly defended Caribbean island.

The Justice Department has had another Grenada in recent months with the case against Volkswagen for systematically cheating on auto emissions tests. As the scope of the deception broadened to include millions of vehicles, VW effectively admitted guilt and put aside the equivalent of about $7 billion to resolve the issue, later acknowledging that sum would not be enough.

After three months of preparation, Justice has filed its case yet is failing to make full use of its leverage against the automaker. As a result, it could end up with only a modest win against one of the most egregious cases of corporate environmental fraud this country has ever seen.

The biggest disappointment is DOJ’s decision to forgo criminal charges and handle this solely as a civil matter. Admittedly, prosecutors were confronted with the fact that a little known loophole in the Clean Air Act exempts the auto industry from criminal penalties. Yet there appeared to be ways to get around this limitation by alleging fraud, for instance, given that there was apparently a deliberate effort to deceive the federal government about emissions. It’s not clear why DOJ rejected this approach and did not even use the frequent gambit of pursuing a criminal case and then offering the company a deferred- or non-prosecution agreement. Those options are problematic, but with them criminal charges are at least part of the picture rather than being left out entirely.

Also frustrating is the failure of Justice to bring charges (civil or criminal) against individual VW executives. This flies in the face of the department’s hyped announcement in September of a new policy of holding individuals accountable for corporate misconduct. Charging senior VW officers was all the more important in light of indications that the company has been seeking ways to place the blame on lower-level engineers.

It is disturbing to think that VW may have intimidated DOJ away from an aggressive prosecution. Although the scope of the scandal has widened, taking in more of the company’s brands in more countries, VW seems to be adopting a less conciliatory posture than it did earlier in the case. In fact, the DOJ complaint accuses the company of impeding and obstructing the investigation through “material omissions and misleading information” — accusations that make the absence of criminal charges all the more bewildering.

It is likely that VW will have to pay billions of dollars to resolve the charges against it. This is right and proper, but is it enough? Corporations from BP to Bank of America have gotten used to buying their way out of legal jeopardy, treating fines and settlements as (often tax deductible) costs of doing business. Those costs have been rising — BP has had to pay out more than $24 billion in connection with its Gulf of Mexico disaster — but there is little evidence that the penalties are having the intended deterrent effect.

Criminal charges are not a panacea. They’ve been brought against BP, several large banks and other companies yet no longer have the same bite. Several banks, for instance, have received waivers from SEC rules barring criminals from the securities business.

Yet at least there is the possibility of applying criminal penalties more aggressively. Going the purely civil route, as Justice is doing with VW, guarantees from the start that the case will be little more than a financial transaction. In a case of deliberate and widespread deception with severe environmental and health impacts, that’s simply not good enough.

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.

The Corporate Wrongdoers Sticking with ALEC

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

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

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

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

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

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

Pfizer is in the news because of its deal to merge with a smaller drug company and move its legal headquarters to Ireland, all to dodge federal taxes. It has amassed more than half a billion dollars in penalties in the past five years largely because of cases involving the illegal marketing of drugs for purposes not approved as safe by the Food and Drug Administration. In 2009, the year before Violation Tracker’s coverage begins, Pfizer had to pay $2.3 billion to settle Justice Department civil and criminal charges relating to the illegal marketing of the painkiller Bextra and three other medications. John Kopchinski, a former Pfizer sales representative whose complaint helped bring about the federal investigation, told the New York Times: “The whole culture of Pfizer is driven by sales, and if you didn’t sell drugs illegally, you were not seen as a team player.”

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

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

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

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

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

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

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

Introducing Violation Tracker

Violation Tracker , the first national database on corporate crime, has arrived. For me it is the culmination of nine months of work collecting enforcement data, matching some 25,000 companies in the agency records to their corporate parents and designing the site, all of this done with the help of Rich Puchalsky of Grassroots Connection.

My involvement in this kind of project actually goes back 35 years. While a young researcher for Fortune magazine, I was assigned to a story whose dubious premise was that lawbreaking was a lot more common among small businesses than large corporations. I had serious doubts about that notion and set out to collect as much information as I could about wrongdoing by the Fortune 500.

Even with a narrow definition of misconduct, I found that 117 of the companies that had appeared on the 500 list during the previous decade–including Fortune’s parent company Time Inc.–had been convicted (or signed a consent decree) for bribery, criminal fraud, illegal political contributions, tax evasion or criminal antitrust violations. My editors were not happy, but to their credit they published the full list (as part of an article written by Irwin Ross) in the December 1, 1980 issue of the magazine.

The urge to document and tabulate corporate crime has been with me ever since. I’ve given in to that urge numerous times, most notably in 2012, when I began producing Corporate Rap Sheets on many of the worst violators under the auspices of the Corporate Research Project of Good Jobs First.

Now I’m able to take it to the next step with Violation Tracker, a database that in its initial form covers all environmental, health and safety cases with penalties of $5,000 or more brought since the beginning of 2010 by 13 federal regulatory agencies, including those they referred to the Justice Department. Additional violation categories (bribery, price-fixing, financial offenses, wage & hour infractions, etc.) will be added in the future.

Violation Tracker uses the same parent-subsidiary matching system my colleagues and I at Good Jobs First created for our Subsidy Tracker database. In Violation Tracker the companies named in the individual violations are linked to more than 1,600 parent companies. The site has summary pages for each of the parents (along with the individual entries) as well as overviews by industry, agency and parent headquarters location.

Along with the database the Corporate Research Project is releasing a report entitled BP and Its Brethren summarizing what the information in Violation Tracker shows about the biggest violators (using a broad definition of penalties that includes both fines and other mandatory outlays such as supplementary environmental projects that are often part of settlements). Here are some highlights from the report:

The corporations with the most penalties are: BP ($25.4 billion), Anadarko Petroleum ($5.2 billion), GlaxoSmithKline ($3.8 billion), Johnson & Johnson ($2.4 billion), Abbott Laboratories ($1.5 billion), Transocean ($1.4 billion), Toyota ($1.3 billion) and Alliant Energy ($1.0 billion). The penalty total of all entries in Violation Tracker is about $60 billion.
BP’s $25 billion puts oil and gas at the top of the ranking of industries by total penalties. The pharmaceutical industry is second, due to a series of major cases involving the promotion of medications for uses not approved as safe by the Food and Drug Administration. Utilities rank third, due to cases involving power plant emissions. In fourth place is the auto industry, thanks mainly to a $1.2 billion penalty paid by Toyota and a $900 million fine against General Motors, both for safety issues. The chemical industry, with a wide range of violations, is fifth.
Large corporations are responsible for the vast majority of the penalties. Companies on the Fortune 500 and the non-U.S. portion of the Fortune Global 500 together account for 81 percent of Violation Tracker’s total penalty universe.
Foreign companies operating in the United States represent a large share of the violations. In fact, given that BP is one of those foreign parents, the penalty total for that group is larger than for U.S.-based firms: $34 billion vs. $21 billion. Even without BP, foreign parents account for $9 billion in penalties. Companies that have reincorporated abroad for tax reasons are excluded from this breakdown.
There are substantial overlaps between the companies penalized by the different agencies, especially between EPA and OSHA. Some companies show up on more than one of the lists of top-ten penalized firms by agency. BP shows up on four: EPA, OSHA, the Pipeline & Hazardous Materials Safety Administration, and multi-agency cases handled by the Justice Department.
A comparison of the 100 parents with the most penalties in Violation Tracker to the 100 most-subsidized in Subsidy Tracker finds 16 overlaps, mainly automakers such as Toyota and General Motors.
Along with actual foreign companies, the most penalized parents include some companies that have “inverted” (reincorporated or merged abroad) and thus claim to be foreign to dodge U.S. taxes. The tax runaway with the largest penalty total is Transocean, which leased the ill-fated Deepwater Horizon drilling rig to BP and which was fined a total of $1.4 billion in connection with the accident. “Inverted” firms have $2.9 billion in penalties.
Leading federal contractors are among the most-penalized companies. Of the 100 largest contractors in FY2014, ten are also among the biggest penalty parents in Violation Tracker, including: four pharmaceutical producers (GlaxoSmithKline, Merck, Pfizer and Sanofi); two oil giants (Royal Dutch Shell and Exxon Mobil) and three military contractors (Honeywell, General Electric and Boeing). Conglomerate Berkshire Hathaway is also on the list.

We’re living in an age of widespread corporate misconduct, illustrated most recently by the Volkswagen scandal. Violation Tracker is designed not only to help people keep track of which company was involved in which wrongdoing but also to serve as a tool for a wide range of campaigns promoting corporate accountability.

Volkswagen Deserves Its Day in Criminal Court

Volkswagen’s scheme to circumvent federal emissions regulations for millions of its cars cries out for tough prosecution. Yet it turns out that a little known loophole in the Clean Air Act exempts the automobile industry from criminal penalties.

EPA and Justice Department prosecutors are apparently considering whether criminal charges can be brought under other statutes, but it remains to be seen whether they will be successful. An inability to do so would be a major embarrassment for DOJ, which recently proclaimed its intention to move away from deferred prosecution agreements and get tougher with corporate culprits.

In case anyone questions the appropriateness of criminal charges in environmental cases, it is worth recalling that this approach has ample precedents. While it is true that many of the cases in the EPA’s criminal docket involve individuals at fly-by-night firms, that’s not always the case.

In fact, as part of the preparation for the Violation Tracker database my colleagues and I at Good Jobs First will release later this month, I’ve been going through the records. Here are some of the highlights:

The granddaddy of criminal environmental cases was the prosecution of BP for its role in the 2010 Deepwater Horizon disaster that killed 11 people and did untold damage to the Gulf of Mexico. In November 2012 BP pled guilty to environmental crimes (involving the Clean Water and Migratory Bird Treaty Acts) as well as felony manslaughter and obstruction of Congress. It was required to pay criminal fines and penalties of $4 billion.

In February 2013 Transocean, the company from which BP leased the ill-fated drilling rig, pleaded guilty to charges of violating the Clean Water Act in the period leading up to the accident and was sentenced to pay $400 million in criminal fines and penalties. Halliburton, which was responsible for cement work at the site, pleaded guilty to a charge of destroying evidence.

Oil companies are not the only defendants. In 2013 Wal-Mart Stores pleaded guilty to six counts of violating the Clean Water Act by illegally handling and disposing of hazardous materials at its retail outlets across the country. It had to pay $81 million in penalties.

This year, Duke Energy pleaded guilty to nine criminal violations of the Clean Water Act at several of its facilities in North Carolina and paid a $68 million criminal fine and was required to spend $34 million on environmental projects.

Volkswagen certainly belongs on this dishonor roll of environmental culprits. In fact, it probably deserves harsher punishment than even BP, given the brazen and intentional aspects of its behavior.

In reporting on the auto industry loophole, the Wall Street Journal quoted former Michigan Rep. John Dingell as justifying the provision by saying that civil penalties were “easier, speedier quicker” than criminal sanctions and warning regarding the latter: “The risk of them going out of business is very real.”

In cases such as this one, the convenience of prosecutors should not be a priority, and there are many people who may think that VW’s disappearance would not be a bad thing.

Think Irresponsible

volkswagen-clean-diesel-ad.w529.h352 In the competition among industries to see which can act in the most irresponsible manner, we have a new winner. After nearly a decade during which banks and oil giants like BP were the epitome of corporate misconduct, the big automakers are now on top.

The news that Volkswagen inserted devices in millions of its “clean diesel” cars to disguise their pollution levels is the latest in a series of major scandals involving car companies. It comes on the heels of criminal charges against General Motors for failing to report a safety defect linked to more than 100 deaths. The Justice Department, unfortunately, deferred prosecution of those charges in a deal that required GM to pay $900 million. That looks like a bargain compared to the possibility that the EPA could sock Volkswagen, which once employed an ad campaign called Think Small, with penalties of some $18 billion.

Last year, Justice announced a deferred prosecution agreement with Toyota that required the Japanese company to pay $1.2 billion to settle charges that it tried to cover up the causes of a sudden acceleration problem. Later that year, Hyundai and Kia had to pay $100 million to settle DOJ and EPA allegations that they understated greenhouse gas emissions from more than 1 million cars and trucks.

This past July, Fiat Chrysler was hit with by the National Highway Traffic Safety Administration with a fine of $105 million — a record for that agency, which long had a cozy relationship with the industry — for deficiencies in its recall of defective vehicles.

Even Honda, which once had a squeaky clean reputation, was fined $70 million earlier this year by NHTSA for underreporting deaths and injuries relating to defective airbags. Those airbags were produced by the Japanese company Takata, which resisted making changes in its production process despite incidents in which the devices exploded violently, sending shrapnel flying into drivers and passengers.

The ascendance of the auto industry to the top of the corporate wrongdoing charts is actually an encore for what was a long-running performance. During the 1960s, GM inadvertently gave rise to the modern public interest movement in its ham-handed response to the issues raised by a young Ralph Nader about the safety problems of its Corvair compact. The 1970s were the era of the Ford Pinto with its fragile fuel tanks that blew up in even mild rear-end collisions. The 1990s were marked by the scandal over defective tires produced by Bridgestone/Firestone.

Although carmakers were not in the forefront of corporate misbehavior during the past decade, the industry’s record was far from unblemished. In 2005 VW presaged its current problems when it paid $1.1 million to the Justice Department to settle allegations that it failed to notify regulators and correct a defective oxygen sensor in more than 300,000 Golfs, Jettas and New Beetles.

And to make matters worse, through these decades the auto giants kept up a drumbeat of criticism of supposed regulatory excesses and, in the cases of GM and Chrysler, did not hesitate to ask for large bailouts when their markets collapsed.

The American love affair with the automobile has also put us in bed with corporate irresponsibility on a major scale.

Bringing Regulatory Fines Into the 21st Century

In spite of perennial business complaints about regulatory overreach, for decades large corporations were able to break the law knowing that the potential financial penalties would inflict little pain. Typical fines were the commercial equivalent of parking tickets.

In recent years, the Justice Department has forced Corporate America to pay a higher price for its sins. Major banks, in particular, now have to consent to ten or eleven-figure settlements, such as Bank of America’s $16.7 billion payout last year.

DOJ, however, handles a limited number of cases. The question is whether the federal regulatory agencies are following suit in bringing penalty levels into the 21st Century.

I’ve been looking at the enforcement data for those agencies as part of the preparation for the Violation Tracker my colleagues and I will introduce this fall. The numbers are a mixed bag.

One agency that has apparently recognized the importance of substantial penalties is the National Highway Traffic Safety Administration. In July it imposed a civil penalty of $105 million on Fiat Chrysler for failing to carry out a recall of 11 million defective vehicles in a complete and timely manner. The penalty, the highest in the agency’s history, followed a $70 million penalty against Honda earlier in the year. In 2000 Chrysler (then owned by Daimler) was fined only $400,000 for a deficient recall.

By contrast, the Nuclear Regulatory Commission is still applying laughably low penalty amounts. The list of “significant enforcement actions” on its website shows only about three dozen cases in which any penalty at all was imposed in the period since 2009, and only five of those involved amounts above $50,000.

The NRC list appears not to have been updated recently, but a look at recent press releases by the agency show that penalty amounts continue to be modest. In April of this year, the agency fined a subsidiary of Dominion Resources all of $17,500 for security violations at a facility in Wisconsin.

Despite a series of significant accidents, the Pipeline and Hazardous Materials Safety Administration is still lagging in its penalty amounts. Since 2010 it has collected fines of $1 million or more in only three cases, and it still imposes penalties below $10,000 in some instances.

The Occupational Safety and Health Administration, which has a much larger jurisdiction than these other agencies, seems to have one foot in the past and a couple of toes in the present when it comes to penalty levels. As the AFL-CIO’s Death on the Job report points out, the average penalty per inspection is only about $10,000.

In a limited number of high-profile cases, OSHA brings out the big guns. When BP failed to live up to the terms of a settlement stemming from a massive explosion in 2005 at its Texas City refinery (photo) that killed 15 workers, the agency proposed penalties of $87 million (though it settled for $50 million after the company appealed).

Financial penalties by themselves are not a panacea for ending the corporate crime wave, but they are certainly part of the solution. And the bigger the better.

Addendum: Upon re-reading this post I realized I should have mentioned that agencies vary in the amount of discretion they have in setting penalties. In some cases maximum fines are determined by law. My point is that regulators should make full use of the power they have to set penalties as high as possible in cases of egregious offenses.

Big Coal’s War on Its Workers

helmets_wide-b8e68ac63c226846ea9705fcf6fc13535c1b2b2e-s800-c85 Fossil-fuel apologists have accused the Obama Administration of waging a war on coal in its effort to cut power plant greenhouse gas emissions. Yet the main source of the industry’s distress is the energy market, and the real war is the one coal companies have for years carried out against the health and safety of its workforce.

There’s no doubt that Big Coal is in trouble. One of the industry’s largest players, Alpha Natural Resources, recently filed for Chapter 11 bankruptcy protection, following the path taken by competitors such as James River Coal, Walter Energy and Patriot Coal. Financial weakness prompted the delisting of Alpha and Walter Energy from the New York Stock Exchange. Industry leader Peabody Energy has seen its share price tumble even before the current market tumult. It is now trading at around $2 a share, compared to $70 in 2011.

Given the outsize role played by coal in the climate crisis, it is difficult to work up much sympathy for the industry in its time of trouble. While it is tempting to simply let the dirty industry shrink towards disappearance, there needs to be a just transition for those who have risked their lives extracting the fossilized carbon from the ground.

The magnitude of that risk has been made clear to me recently in the preparatory work I’ve been doing for the Violation Tracker database my colleagues and I at Good Jobs First will release this fall. The initial version will cover penalties imposed by agencies such as the Environmental Protection Agency, the Occupational Safety & Health Administration and, most relevant to the current discussion, the Mine Safety & Health Administration.

Based on preliminary results, it now appears that coal mining companies will turn out to be among the corporations with the largest aggregate federal environmental, health and safety penalties during the past five years. The largest mining offender is Alpha Natural Resources, whose penalty tally will top $100 million.

That reflects the fact that Alpha is now home to two of the most controversial firms in U.S. mining history: Pittston Coal and Massey Energy. Pittston had a long record of environmental and safety violations before its operations were used in the creation of Alpha in 2002, but even more notorious was Massey, which was responsible, among other things, for the 2010 Upper Big Branch mining disaster in West Virginia that took the lives of 29 workers, the most fatalities in a U.S. coal accident in 40 years. In the wake of that disaster, which an independent report attributed to management failures, Alpha agreed to purchase Massey. We thus attribute Massey’s violations to it.

At least 20 other coal mining companies will show up in Violation Tracker with $1 million or more in total penalties. The largest amounts, in excess of $30 million each, will be linked to Murray Energy, whose head Robert Murray has vowed his firm will be the “last man standing” in the coal industry, and Patriot Coal.

Patriot, a spinoff from Peabody Energy, is a prime example of the vindictiveness of the coal industry toward miners. Its Chapter 11 filing earlier this year was its second in three years. In both cases the company has tried to use the bankruptcy court as a way to undermine its contractual commitments to United Mine Workers members and retirees, especially with regard to pension and health plan contributions. Its current move against worker benefits comes as the company, which is trying to sell off its assets, is awarding more than $6 million in executive bonuses.

A repeated health and safety violator and a raider of worker benefits. It’s hard to imagine anyone will be sad to see Patriot disappear.

The Limits of the Koch Charm Offensive

Charles and David Koch and their Koch Industries conglomerate, long known for an unapologetic defense of unfettered capitalism and hard-right politics, are said to be going soft. The brothers are taking pains to associate themselves with more progressive policies such as criminal justice reform, while their corporation has been running feel-good ads highlighting its purported commitment to enlightened principles such as sustainability.

At the same time, the Kochs are depicting themselves as backers of supposedly responsible Republican presidential candidates and shunning iconoclastic front-runner Donald Trump.

The Koch charm offensive does have its limits. A slew of groups funded by the billionaires are at the forefront of the campaign against the Obama Administration’s Clean Power Plan and are doing their best to defend fossil fuels. When it comes to environmental policy, the Kochs are still in the stone age.

That position is not merely a matter of ideology. Their opposition to environmental and other safety regulations amounts to a defense of the way the Kochs do business.

This was made clear to me in some work I’ve been doing on a new research tool called Violation Tracker that my colleagues and I at Good Jobs First are preparing. Patterned on our Subsidy Tracker, the new resource will take company-specific data on regulatory violations and link the individual entries to the parent corporations of the culprits. This will allow us to present violation totals for large firms and show which of them are the most frequent offenders.

The initial version of Violation Tracker, which will be released this fall, will cover data from the Environmental Protection Agency, the Occupational Safety & Health Administration and a few other federal health and safety agencies. Coverage on wage and hour violations, financial sector transgressions and other forms of corporate misconduct will come later.

A preliminary tally of EPA and OSHA data from the past five years indicates that units of Koch Industries have been hit with more than $3.5 million in penalties. The biggest amount comes from Flint Hills Resources, the conglomerate’s oil refining arm. For example, in 2014 the company had to pay $350,000 and sign a consent decree to resolve EPA allegations that it was violating the Clean Air Act through flaring and leaking equipment.

Georgia-Pacific, the Koch Industries forest products company, received more than $600,000 in penalties during the five-year period. These included $60,000 in penalties proposed in January by OSHA in connection with worker exposure to formaldehyde and other dangerous substances.

In 2013 the fertilizer company Koch Nitrogen had to pay $380,000 to settle allegations that its facilities in Iowa and Kansas violated the Clean Air Act.

Regulatory violations by Koch businesses began before the five-year period that will be initially covered in Violation Tracker.

For instance, in 2000 the Justice Department and the EPA announced that Koch Industries would pay what was then a record civil environmental fine of $30 million to settle charges relating to more than 300 oil spills. Along with the penalty, Koch agreed to spend $5 million on environmental projects in Texas, Kansas and Oklahoma, the states where most of its spills had occurred. In announcing the settlement, EPA head Carol Browner said that Koch had quit inspecting its pipelines and instead found flaws by waiting for ruptures to happen.

Later in 2000, DOJ and the EPA announced that Koch Industries would pay a penalty of $4.5 million in connection with Clean Air Act violations at its refineries in Minnesota and Texas. The company also agreed to spend up to $80 million to install improved pollution-control equipment at the facilities.

In a third major environmental case against Koch that year, 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 the newly installed Bush Administration’s Justice Department negotiated 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.

In 2002 Koch Petroleum Group, the Koch entity involved in most of these environment problems, was renamed Flint Hills Resources. That name change was as cosmetic as the current charm offensive.

If the Kochs really want to improve their reputation, they should go beyond public relations and make fundamental alterations in their business practices.

Preventing Death on the Job

dupont_laporte The Occupational Safety & Health Administration recently put DuPont on its list of severe violators and proposed fines totaling $273,000 in connection with last year’s chemical leak at a pesticide plant in La Porte, Texas that killed four workers. OSHA called the deaths preventable and accused DuPont of having “a failed safety program.”

This was a severe blow to a company that prides itself on having a “world-class” safety system and which thinks so highly of its skills in this area that it provides safety consulting services to other companies. DuPont expressed disappointment at OSHA’s actions.

The gap between (self) image and reality is nothing new at DuPont. The company’s claims to be a safety leader are not recent measures to address the fallout from the deadly accident in Texas. In his 1984 book America’s Third Revolution: Public Interest and the Private Role, former DuPont CEO Irving Shapiro called the company’s safety record “extraordinary” and made the preposterous claim that its employees “are safer on the job than at home.”

These statements flew in the face of safety problems at DuPont that extended back at least to the 1920s, when numerous workers were poisoned, some fatally, in connection with the production of tetraethyl lead for gasoline.

During the early 1970s, evidence began to emerge of high levels of bladder cancer among DuPont production workers, especially at the Chambers Works in New Jersey. Since at least the 1930s there had been evidence linking beta-nephthylamine (BNA), a chemical used in dye bases, to cancer. Yet the company went on producing BNA at Chambers until 1955, and after it was dropped DuPont went on making benzidine, another carcinogen, for ten more years.

In the years since Shapiro’s book, the safety problems have continued. In 1987 a New Jersey Superior Court jury found that DuPont officials and company doctors deliberately concealed medical records that showed six veteran maintenance workers had asbestos-related diseases linked to their jobs. Also in 1987, the company agreed to pay fines totaling $11,100 as part of a settlement of OSHA charges relating to record-keeping at plants in Dallas and Niagara Falls, New York.

In 1995 oil company Conoco, then owned by DuPont, agreed to pay $1.6 million to settle OSHA charges related to an explosion and fire the year before that killed a worker at a refinery in Louisiana.

In 1999 OSHA announced that DuPont would pay $70,000 to settle charges that it failed to record more than 100 injury and illness cases at its plant in Seaford, Delaware.

In 2010 OSHA criticized DuPont for exposing employees to hazardous chemicals at its plant in Belle, West Virginia, where a worker had died after a ruptured hose released a large quantity of phosgene gas. The following year, OSHA cited DuPont for dangerous conditions after a contract welder was killed when sparks set off an explosion in a slurry tank at a plant in Buffalo, New York. In 2012 the U.S. Chemical Safety and Hazard Investigation Board added its criticism of the company in connection with the Buffalo accident.

In short, the accident at La Porte, which had a history of previous violations, is far from an anomaly for DuPont. The only surprising aspect of the story is why OSHA did not come down on the company much harder.

Rena Steinzor, a University of Maryland law professor and author of the book Why Not Jail?, has posted an article criticizing OSHA for not seeking criminal charges against DuPont. The Corporate Crime Reporter notes that OSHA chief David Michaels, asked about Steinzor’s critique at a recent press conference, dismissed her piece but did not explain why the DuPont case did not merit a criminal referral to the Justice Department.

OSHA has long been reluctant to go the criminal route, relying instead on civil proceedings and ridiculously low financial penalties. In its latest Death on the Job report, the AFL-CIO notes that since the agency was created fewer than 100 criminal enforcement cases have been pursued. During this same period there have been more than 390,000 workplace fatalities.

The agency’s willingness to put a large company like DuPont on the severe violators list, which is dominated by smaller firms, especially in the construction industry, is a step forward. But OSHA will need to do a lot more to address the ongoing tragedy of workplace fatalities and disease.