Regulation

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.

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.