Regulation

A Nirvana for Rogue Corporations

The SEC’s enforcement action against Theranos Inc. and its founder Elizabeth Holmes puts a new focus on the persistence of corporate crime in the healthcare sector after a period in which the business culprits getting the most attention were banks such as Wells Fargo and automotive companies such as Volkswagen and Takata.

Another reminder of the checkered history of health companies comes in a new report from Public Citizen on the trend in legal penalties imposed on pharmaceutical firms. The study, an update of three previous analyses on the subject done by the group, documents a disturbing trend: Although there is no reason to think that egregious drug company misbehavior has disappeared, aggregate criminal penalties against those firms have plunged.

Public Citizen finds that criminal penalties in 2016-2017 were just $317 million, down 88 percent from four years earlier. Combined federal criminal and civil penalties over the same period of time declined from $8.7 billion to $2.8 billion, a drop of more than two-thirds.

At the heart of this trend, the report finds, is a falloff in penalties from settlements of cases involving the unlawful promotion of prescription drugs. Those penalties are down by 94 percent from their peak in 2012-2013.

It is probably true that Big Pharma has toned down the brazen behavior that led to giant penalties such as the $3 billion imposed on GlaxoSmithKline, the $2.3 billion imposed on Pfizer, the $2.2 billion imposed on Johnson & Johnson, the $1.5 billion imposed on Abbott Laboratories, the $1.4 billion imposed on Eli Lilly, the $950 million imposed on Merck, etc.

One problem that has by no means disappeared is the improper distribution of opioids. Although Purdue Pharma was penalized $461 million in 2007 and various wholesalers and pharmacy chains have been hit with smaller fines since then, there is no indication that the misconduct is receding.

Part of the problem is that the president of the United States has directed little criticism against the drug industry while making inflammatory statements about illicit traffickers, including the suggestion of imposing the death penalty. He has also expressed his admiration for the extra-judicial executions of drug dealers in the Philippines.

The decline in drug industry fines is part of a larger tendency by the Trump Administration to scale back penalties against corporations in all industries. As I previously noted, the latest update to Violation Tracker through the end of Trump’s first 12 months shows a remarkable drop in penalties, especially for the very largest companies in the Fortune 100.

This can be seen as a form of stealth deregulation. Increasingly, Big Pharma and other industries benefit both from rolled-back rulemaking and from diminished financial consequences if they break the rules still on the books. It is truly a nirvana for rogue corporations.

The Other Problem Banks

Bipartisanship has returned to Washington, thanks to the overwhelming desire of Republicans and quite a few Democrats to roll back portions of the Dodd-Frank Act. Ten years after the onset of the financial meltdown and seven years after the law went into effect, the relentless efforts of the banking lobby seem to be paying off.

The legislation, S.2155, is being sold as much needed relief for smaller banks that were supposedly treated unfairly by Dodd-Frank. Some adjustment to the law might make sense for very small banks, but the bill has evolved into something that will benefit larger institutions that still merit close scrutiny.

Using relief for community banks as a stalking horse, proponents of the bill have added provisions that will reduce the degree of supervision that would be exercised on banks with assets up to $250 billion. Those with assets between $50 billion and $100 billion would benefit the most.

The two dozen banks (listed in a Congressional Research Service report) that would be affected by these provisions are hardly mom and pop financial institutions. And while the most harm to the economy was done by the likes of Bank of America, Citigroup, JPMorgan Chase and Wells Fargo, these mid-sized banks have records that are far from spotless.

Take the case of Credit Suisse, the Swiss bank whose U.S. operation has assets of about $215 billion. During the final days of the Obama Administration it had to pay $5.3 billion to settle a case involving the sale of toxic securities a decade ago. In 2014 it paid $1.8 billion in connection with criminal charges of helping U.S. taxpayers file false returns. In 2009 it paid $268 million to settle criminal allegations relating to economic sanctions. In all, Credit Suisse has more than $9 billion documented in Violation Tracker, ranking it tenth among all corporations.

Or consider Barclays, the British bank whose U.S. operation has assets of about $180 billion. In 2015 it pled guilty to criminal charges of conspiring to manipulate foreign exchange markets and was fined $710 million while also paying $400 million to settle related civil allegations. That same year it had to pay $325 million to settle a case brought by the National Credit Union Administration concerning Barclay’s sale of toxic securities a decade earlier. Its Violation Tracker total is more than $3 billion, putting it in nineteenth place among all corporations.

Other controversial foreign banks whose U.S. subsidiaries would benefit from S.2155 relaxed regulation include Deutsche Bank ($12 billion in Violation Tracker), BNP Paribas ($9 billion) and UBS ($5 billion).

Foreign banks are not the only bad actors on the list. Atlanta-based SunTrust, with about $200 billion in assets, has racked up more than $1.5 billion in penalties, including one case in which it had to provide $500 million in relief to underwater borrowers to resolve allegations that it engaged in deceptive and illegal mortgage servicing practices. Among the other items in its rap sheet is a $21 million payment to resolve allegations that it charged higher loan rates to black and Latino borrowers.

The S.2155 beneficiary list includes half a dozen additional domestic banks with $100 million or more in penalties: Ally Financial, American Express, Discover Financial Services, Fifth Third Bancorp, M&T Bank Corporation, and Regions Financial Corporation.

A bank does not have to be gigantic to be problematic. These culprits should not lumped together with community banks in deciding whether to tinker with Dodd-Frank.

Big Polluters and Big Penalties

At a moment when there is all too much talk in Washington about deregulation, a helpful counterpoint has arrived from the Political Economy Research Institute in the form of the latest edition of the Toxic 100, a compilation of the companies responsible for the highest volumes of industrial pollution.

The project, which has been providing this information since 2004, now has rankings on three kinds of pollution: air, water and greenhouse gases. The lists include environmental justice indicators that highlight the disproportionate effect on low-income and minority communities.

The companies on these lists represent some of the biggest threats to the physical well-being of the people of the United States.

The top tier of the air pollution list, which is based on data from the EPA’s Toxics Release Inventory, contains the kind of industrial giants one might expect: DowDuPont, General Electric, Royal Dutch Shell and Arconic (a spinoff of Alcoa). Yet number one is the less well known Zachry Group, an engineering company that operates dirty manufacturing facilities in North Carolina and Texas. Also in the top ten is Berkshire Hathaway by virtue of its ownership of companies such as Johns Manville, Pacificorp and MidAmerican Energy.

The top tier of the greenhouse gas list, based on other EPA data, is dominated by companies operating lots of fossil fuel power plants: Southern Company, Duke Energy, American Electric Power and NRG Energy. These are the companies Trump is aiding with his attack on the Obama Administration’s Clean Power Plan.

Berkshire Hathaway is the only parent company in the top ten on both the air and greenhouse gas lists; it ranks 21^st in water pollution.

I could not resist the temptation to check where the companies that rank high on the Toxic 100 lists show up in Violation Tracker. This is partly because Rich Puchalsky, who serves as the data management specialist for the Toxic 100, has also played an essential role in the construction and expansion of Violation Tracker.

Rich kindly created for me a spreadsheet combining rankings from the two projects. Looking first at the Toxic Air 100, I see there are unsurprising overlaps with the 100 most penalized companies in Violation Tracker—BP, Exxon Mobil, Royal Dutch Shell, Phillips 66, etc. Yet there are some very large air polluters that have faced much smaller penalties, including the Zachry Group cited above and TMS International, a steel industry service company. The EPA should take note.

As for the Greenhouse 100, there are expected overlaps with the Violation Tracker top 100—such as Duke Energy, American Electric Power, FirstEnergy, etc. But there are some discrepancies. Large CO2 emitters such as Energy Future Holdings, Great Plains Energy, and OGE Energy have not received substantial penalties. The EPA might want to check these as well.

Beyond the specifics of individual companies, there is a broader issue here: what is the connection between fines and emissions? Although the releases reported in the Toxic 100 are technically not illegal, those companies are likely to be creating unsanctioned emissions as well. Fines could bring about reductions in both categories. Yet many big polluters treat the penalties as a tolerable cost of doing business and fail to do enough to clean up their facilities. That suggests the need for newer and more effective forms of enforcement. Deregulation is not one of them.

The Gun Industry’s Missing Penalties

Violation Tracker collects data on enforcement activity by more than 40 federal regulatory agencies and the Justice Department. Missing from the list is the Bureau of Alcohol, Tobacco, Firearms and Explosives.

The database provides penalty totals for about 50 major industry groups. High on the list are controversial industries frequently involved in misconduct: banks, oil companies, pharmaceutical producers and the like. Missing from the list is the gun industry.

The ATF and the gun manufacturers are not being deliberately excluded from the database. The problem is that, unlike other federal agencies claiming to be involved in industry oversight, ATF has surprisingly little to report on its efforts. I’ve searched the ATF web pages thoroughly and cannot find the kind of information typically found on other agency sites on proceedings against companies for regulatory infractions. I’ve also searched the archive of the Government Accountability Office for reports about the agency’s enforcement actions against gun makers and gun sellers, to no avail.

ATF’s website has a statistical report on the gun industry and a list of rulings that appear to deal with general policy issues, including licensing, rather than individual company behavior. There is also a page pointing to the relevant provisions of the Code of Federal Regulations but the word “enforcement” hardly appears on the website, except for references to the law enforcement community.

The light touch of the federal government is also reflected in the SEC filings of publicly traded gun manufacturers. For example, the recently published 10-K annual report of Sturm, Ruger & Company has one perfunctory reference to ATF and gives the impression the agency is not much of a concern.

Gun manufacturers are, of course, subject to broad federal regulation covering all industries. Companies such as American Outdoors Brands (parent of Smith & Wesson), Beretta and Colt’s Manufacturing as well as Sturm, Ruger appear in Violation Tracker in connection with the penalties that have been imposed on them by agencies such as the EPA and OSHA. Smith & Wesson has an entry relating to a $2 million penalty imposed by the SEC for violating the Foreign Corrupt Practices Act. American Outdoor Brands and Sturm, Ruger have been penalized by the Commerce Department’s Bureau of Industry and Security for export violations.

Yet, aside from licensing requirements, the gun business is lacking significant industry-specific oversight relating to issues such as safety like that exercised by agencies such as the Food and Drug Administration or the Federal Railroad Administration. Special legislation has provided extraordinary protection to an industry whose products are so lethal.

The reality has just come to light in connection with President Trump’s statement that he ordered Attorney General Sessions to get ATF to find a way to restrict the bump stock accessory that allows semi-automatic weapons to function like illegal machine guns. But it appears ATF may not have the authority to take such action.

In truth, the ATF is a licensing body but not really an enforcement agency. The gun industry is essentially unregulated, and the National Rifle Association continues doing everything in its power to keep it that way.

Trump Goes Easy on Major Corporate Offenders

It’s unclear to what extent the Obama Administration’s practice of extracting unprecedented monetary penalties on miscreant companies proved to be an effective deterrent, but at least the billion-dollar fines and settlements served to highlight the ongoing problem of corporate crime.

The Trump Administration seems to be a lot less interested in cracking down on the most egregious corporate offenders. Although the enforcement arms of agencies such as OSHA and EPA are still operating along normal lines, there has been a sharp decline in the number of mega-penalty cases announced by the Justice Department.

This conclusion emerges from an analysis of the data recently added to the Violation Tracker database covering cases through the end of the Trump Administration’s first year in office on January 19.

Since the largest penalties are normally imposed on the largest corporations, I did an analysis focusing on the Fortune 100 list of the very largest U.S. publicly traded companies. I found that overall federal penalties imposed on these firms during Trump’s first 12 months totaled $1.1 billion, compared to an annual average of more than $17 billion during the Obama years.

The Obama totals, of course, reflected extraordinary settlements with the largest banks to resolve allegations relating to their role in bringing about the financial meltdown of a decade ago. These included, for example, the $16 billion settlement with Bank of America in 2014 and the $13 billion settlement with JPMorgan Chase the year before.

Those financial services sector settlements peaked during the middle years of the Obama era. Yet Trump’s $1.1 billion first-year total is still far below the annual average of more than $9 billion for the Fortune 100 during Obama’s final two years in office. It also trails behind the $3 billion total during Obama’s first year.

Looking at all corporate offenders, there were 44 cases with penalties of $1 billion or more during the Obama era yet only two during Trump’s first year, and he doesn’t really deserve credit for those. One is the $5.5 billion settlement reached by the Federal Housing Finance Agency with the Royal Bank of Scotland relating to the sale of toxic securities to Fannie Mae and Freddie Mac. That case had been filed in 2008, and the settlement had been negotiated under Obama. The other is the a $1.4 billion penalty against Volkswagen for its emissions cheating that appears in EPA records with a date of May 17, 2017 but was actually part of a larger $4.3 billion settlement announced by the Justice Department during the last days of the Obama Administration.

There is also an interesting pattern among Trump Administration penalties in the next tier down—those of $100 million or more. The parent companies involved in about two-thirds of these cases are foreign, especially those with the largest penalty totals. They include the Chinese telecom company ZTE, which was penalized for export control violations, and the Swedish telecom Telia, which was punished under the Foreign Corrupt Practices Act.

It appears that the Trump Administration is more likely to get tough with a corporate violator if the company is not based in the United States, while domestic companies get treated more leniently. I guess the slogan is: Make Domestic Corporate Criminals Great Again.

Note: you can do analyses of your own on Violation Tracker using our new feature allowing search results to be filtered by presidential administration.

Stopping the Growth of Rogue Corporations

The federal response to corporate misconduct over the past two decades has alternated between tougher monetary penalties and the promotion of voluntary measures to lure companies into behaving better. Neither has worked very well.

Companies came to saw the increased fines as a tolerable cost of doing business (especially when they were tax deductible), while voluntarism was never a match for corporate greed.

It was thus intriguing when the Federal Reserve recently adopted a new approach in dealing with Wells Fargo. That bank, of course, has become notorious for its brazen scheme of creating millions of accounts not requested by customers, in order to generate illicit fees. It paid a fine of $100 million, with a lot more expected to follow. This came after a series of other scandals, including mortgage abuses that resulted in a $5.3 billion settlement in 2012.

The Fed, on Chair Janet Yellen’s final working day in office, issued an unusually blunt press release saying that the board was taking steps in response to “widespread consumer abuses and other compliance breakdowns” at Wells.

In an unprecedented step, the Fed imposed a restriction on the bank’s ability to grow “until it sufficiently improves its governance and controls.” In an industry for which getting larger is the guiding principle, Wells will feel intense pressure to satisfy the Fed’s demands. In fact, concurrently with the Fed’s action Wells announced that it would replace one-quarter of its 16-person board of directors by the end of the year.

Bank-friendly politicians have not had much to say about the Fed’s action, but it is clear that the restriction placed on Wells represents a forceful rebuttal to those pressing for a weakening of financial industry regulation. The ouster of Yellen by President Trump was a coup for the deregulation crowd, but we can take some solace in reports that her successor Jerome Powell oversaw the Fed’s negotiations with Wells.

The Fed’s action should be promoted as an example of how regulatory agencies and the Justice Department need to get more creative in dealing with egregious and repeat violators. Rogue corporations will only change their behavior if the penalties really sting.

The restriction on growth begins to meet this requirement because it makes Wells more vulnerable. An inability to become larger through acquisitions means that the bank will lose ground to its big competitors. Wells is probably too big to be a potential takeover target itself, but it could come under pressure from activist investors to restructure or even sell off portions of itself.

Moreover, the restrictions will probably depress the bank’s stock price, and that will be felt personally by the executives who encouraged or overlooked the misconduct.

At the same time, the house-cleaning among directors is an important message to send to board members at other misbehaving companies. That message would be even more effective if directors are not just removed but held personally liable for allowing the corrupt practices to happen.

The Fed has not always been the most aggressive of regulators. Let’s hope its action on Wells inspires other agencies to get tougher with corporate miscreants.

The 2017 Corporate Rap Sheet

The year began with a burst of announcements by the Obama Administration of cases it rushed to resolve before leaving office. In the period between election day and the inauguration, the Justice Department and various agencies announced more than $30 billion in fines and settlements.

That flurry of activity disappeared once Donald Trump took office. Agency enforcement activity soon resumed, thanks to the efforts of career officials, but it appears that the volume of cases has declined compared to previous years. The same goes for the Justice Department, where high-profile prosecutions of large companies have continued but have become less frequent. Here is a rundown of selected major cases resolved during 2017, divided between the two administrations:

Obama Cases

Sale of Toxic Securities: Two of the year’s biggest penalties came in cases stemming back to the period leading up to the financial meltdown in 2008. During its final days the Obama Justice Department got Deutsche Bank to agree to pay $7.2 billion to resolve allegations that it misled investors in the sale of mortgage-backed securities. A day later it announced that Credit Suisse would pay $5.3 billion in a similar case. Moody’s reached an $864 million settlement with the federal government and 21 states for providing flawed credit ratings on what turned out to be toxic securities.

Money Laundering. In January Western Union agreed to forfeit $586 million and entered into agreements with the Justice Department and the Federal Trade Commission to resolve criminal allegations that it failed to maintain an effective anti-money-laundering system and that it abetted wire fraud.

Environmental Fraud: In January the Justice Department announced that Volkswagen would plead guilty to three felony counts and pay a $2.8 billion penalty to resolve the criminal charges brought against the automaker in connection with its scheme to use a device to cheat on emissions tests.

Auto Safety Fraud: In January Takata Corporation agreed to pay a $1 billion criminal penalty in the case brought against the Japanese company for fraudulent conduct in the sale of defective airbag inflators.

Trump Cases

Sale of Toxic Securities: In July the Federal Housing Finance Agency announced that Royal Bank of Scotland would pay $5.5 billion to settle allegations relating to the sale of mortgage-backed securities to Fannie Mae and Freddie Mac.

Export Control Violations: In March the Commerce Department’s Bureau of Industry and Security announced that the Chinese company ZTE would pay $661 million to resolve allegations that it shipped telecommunications equipment to Iran and North Korea in violation of U.S. export restrictions.

Bribery: In September the Swedish telecommunications company Telia was fined $457 million by the Securities and Exchange Commission for violating the Foreign Corrupt Practices Act through illicit payments to government officials in Uzbekistan.

False Claims Act: In August the pharmaceutical company Mylan agreed to pay $465 million to settle allegations that it misclassified its EpiPen devices as generic drugs to avoid paying rebates to Medicaid.

Illegal Drug Promotion/Distribution: In July the U.S. Attorney’s Office in Los Angeles announced that Celgene would pay $280 million to settle allegations that it illegally promoted two cancer medications for uses not approved by the Food and Drug Administration. In September AmeriSourceBergen pled guilty and agreed to pay a total of $260 million to resolve criminal liability for its distribution of oncology supportive-care drugs from a facility that was not registered with the FDA.

Foreign Exchange Violations: In July the Federal Reserve Board fined the French bank BNP Paribas $246 million for failing to prevent its foreign exchange traders from engaging in market manipulation. In September the Fed fined HSBC $175 million for the firm’s unsafe and unsound practices in its foreign exchange trading business.

Consumer Protection: In August the Consumer Financial Protection Bureau fined American Express $96 million for discriminating against consumers in Puerto Rico, the U.S. Virgin Islands, and other U.S. territories by providing them with credit and charge card terms that were inferior to those available in the 50 states.

Price-Fixing: In May the Justice Department’s Antitrust Division announced that Bumble Bee Foods would pay a criminal fine of $25 million in connection with price-fixing of shelf-stable tuna.

Workplace Harassment: In August the Equal Employment Opportunity Commission announced that Ford Motor would pay up to $10.125 million to workers affected by sexual and racial harassment at two company facilities in the Chicago area.

Fair Labor Standards Act: In March the Labor Department’s Wage and Hour Division announced that the Walt Disney Company would pay $3.8 million in back wages to workers affected by violations of minimum wage and overtime rules.

Environmental Violation: In October Exxon Mobil agreed to pay a penalty of $2.5 million and spend $300 million on air pollution controls to resolve allegations that it violated the Clean Air Act by failing to properly operate and monitor industrial flares at its petrochemical facilities.

Note: Additional details on all these cases can be found in Violation Tracker. During 2017 my colleagues and I expanded the database to 300,000 entries with total penalties of $400 billion. Coverage now includes cases from more than 40 federal regulatory agencies and all divisions of the Justice Department dating back to the beginning of 2000.

Portraying Corporate Villains as Victims

The world according to Trump is one of grievances and victimhood. During the presidential campaign he got a lot of mileage by appearing to empathize with the travails of the white working class and promising to be their champion in fighting against the impact of globalization and economic restructuring. At times he even seemed to be adopting traditional left-wing positions by criticizing big banks and big pharma.

Over the past ten months that stance has been steadily changing, and now the transformation is starkly evident. Trump is still obsessed with victimhood, but the focus on the legitimate economic grievances of white workers has been replaced by a preoccupation with the bogus grievances of large corporations. He would have us believe that today’s most oppressed group is Corporate America.

The desire to come to the rescue of big business is, when all the distracting tweets are put aside, at the core of the mission that Trump shares with Congressional Republicans: dismantling regulation and slashing corporate taxes.

It’s difficult to know whether this is what Trump planned all along and cynically manipulated his supporters or if he was turned by the Washington swamp he unconvincingly vowed to drain. In either event, his administration is engaging in one of the most egregious betrayals in American history.

Trump is not only neglecting the economic interests of his core supporters; he is siding with those who prey on them. This is playing out in many ways — from promoting anti-worker policies at the Labor Department to going easy on the drug companies responsible for the opioid epidemic — but one of the most revealing situations is taking place at the Consumer Financial Protection Bureau.

Putting aside the question of whether outgoing director Richard Cordray or President Trump has the right to name an acting director, the real issue is what is going to become of an agency that has been courageous and unrelenting in its enforcement actions against predatory financial firms.

The CFPB’s sin, from the point of view of the White House and Congressional Republicans, is that it has been doing its job too well. One of the dirty little secrets of Washington is that most regulatory agencies are in the pocket of the corporations they are supposed to police. Oversight is usually friendly or at least not onerous.

The CFPB was designed to, and in practice did, break that mold. It has not been chummy with the banks, payday lenders, mortgage brokers and credit agencies. As shown in Violation Tracker, since 2012 the CFPB has brought more than 100 enforcement actions and imposed more than $7 billion in penalties.

After he was named to take over the agency, Mick Mulvaney, who had long advocated its dismantlement, was quoted as saying that President Trump wanted him to get the CFPB “back to the point where it can protect people without trampling on capitalism.” The very thinly veiled message is that CFPB will cease to be an aggressive advocate for consumers, allowing banks and other financial companies to breathe easier.

Mulvaney was giving what amounted to a moral reprieve for all those companies pursued by the CFPB, including:

Wells Fargo, which was the target of one of the CFPB’s highest profile enforcement actions: the $100 million penalty imposed on the bank for secretly creating millions of extra accounts not requested by customers, in order to generate illicit fees.
Mortgage loan servicer Ocwen Financial, which the CFPB ordered to provide $2 billion in principal reduction to underwater borrowers, many of whom had been forced into foreclosure by Ocwen’s abusive practices.
Bank of America and FIA Card Services, which the CFPB ordered to provide $747 million in relief to card customers harmed by deceptive marketing of add-on products.
Corinthian Colleges Inc., the operator of dubious for-profit schools that was sued by the CFPB and ended up going out of business amid charges that it lured students into taking out private loans to cover expensive tuition costs by advertising bogus job prospects and career services.
Colfax Capital (also known as Rome Finance), which the CFPB ordered to pay $92 million in debt relief to some 17,000 members of the U.S. armed forces who had been harmed by the company’s predatory lending practices.
Or smaller operators such as Reverse Mortgage Solutions, which the CFPB fined for falsely telling customers, mainly seniors, that there was no risk of losing their home.

The Trump Administration has come to the rescue of financial scammers such as these by moving to defang the CFPB and restore the proper order of things in which it is not capitalists but rather consumers and workers who get trampled.

The Corporate Crook Conquest of the Executive Branch

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

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

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

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

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

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

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

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

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

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

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

Tax Dodgers and Regulatory Scofflaws

Large corporations in the United States like to portray themselves as victims of a supposedly onerous tax system and a supposedly oppressive regulatory system. Those depictions are a far cry from reality, but that does not stop business interests from seeking to weaken government power in both areas.

This year has been a bonanza. The Trump Administration and Congressional Republicans have taken aim at numerous Obama-era regulatory initiatives and now are serving up a banquet of business tax breaks.

At the same time, corporations take matters into their own hands by using every opportunity to circumvent tax obligations and regulatory safeguards. The newly released Paradise Papers are just the latest indications of how large corporations such as Apple (and wealthy individuals) use offshore havens to shield billions of dollars in profits from taxation.

The Institute on Taxation and Economic Policy has published a list of more than 300 Fortune 500 companies that hold some $2.6 trillion offshore, thereby avoiding about $767 billion in federal taxes. Of these, ITEP has found indications that 29 corporations keep their holdings not only outside the United States but in tax haven countries where they pay very little in local taxes.

It should come as no surprise that quite a few of these tax dodgers also show up high on the list of regulatory scofflaws documented in Violation Tracker. In fact, one of the 29 is Bank of America, which has racked up $57 billion in fines and settlements since 2000 — far more than any other corporation. ITEP reports that B of A has $17.8 billion in unrepatriated income.

Also on the ITEP list is Citigroup, with $47 billion in unrepatriated income. It ranks 5th on the Violation Tracker list, with more than $16 billion in fines and settlements. Wells Fargo has $2.4 billion in unrepatriated income and $11 billion in penalties, but that latter figure is likely to rise as various cases relating to the bank’s bogus account scandal are resolved.

Banks are not the only overlaps between the two lists. For example, pharmaceutical company Amgen has $36 billion in unrepatriated income and $786 million in penalties.

Major regulatory violators can also be found on the larger list of corporations that are known to have large offshore holdings but do not disclose enough information to allow ITEP to determine whether those holdings are in tax havens. Chief among these are other pharmaceutical giant such as Pfizer ($197 billion offshore and $4.3 billion in penalties), Johnson & Johnson ($66 billion offshore and $2.5 billion in penalties), Merck ($63 billion offshore and $2 billion in penalties) and Eli Lilly ($28 billion offshore and $1.4 billion in penalties).

Also on the list are petroleum majors such as Exxon Mobil ($54 billion offshore and $714 million in penalties) and Chevron ($46 billion offshore and $578 million in penalties).

The mindset that prompts corporate executives to use international tax dodging techniques seems to be related to the one that encourages them to break environmental, consumer protection and other laws at home. The logical course of action would be to tighten both tax and regulatory enforcement, but those currently in charge of federal policymaking instead want to make it even easier for large corporations to make out like bandits.