Regulation

The 2021 Corporate Rap Sheet

After four years of Trump’s regulation bashing, the expectation was that the Biden Administration would adopt a much more aggressive posture toward corporate misconduct.

There have been some encouraging signals, such as those given by Deputy Attorney General Lisa Monaco in an October speech, but few blockbuster federal case resolutions have been announced during the past eleven months.

According to data my colleagues and I have collected for Violation Tracker, no individual company has paid a settlement or fine of $250 million or more to the Biden DOJ. In fact, there have been only two case resolutions of that size announced by any federal agency during this period.

In September, the Securities and Exchange Commission announced a $539 million settlement with entities linked to Chinese businessman Guo Wengui relating to illegal sale of stock and digital assets. That same month, the Office of the Comptroller of the Currency fined Wells Fargo $250 million for ongoing risk management deficiencies.

By contrast, numerous mega-cases have been resolved by state attorneys general. Since last January, they have announced nine settlements of more than $250 million, including five worth $1 billion or more. Those are the giant cases against pharmaceutical manufacturers and distributors for their role in the opioid crisis.

The largest case was the settlement worth an estimated $10 billion with the biggest opiate villain of all, Purdue Pharma, which is now in bankruptcy and will effectively go out of business. Many argue that the Sackler family got off too easy in the case, but the company is paying a substantial price for its misdeeds. The other ten-figure settlements of the year involved McKesson ($8 billion), AmeriSourceBergen ($6.5 billion), Cardinal Health (also $6.5 billion) and Johnson & Johnson ($5 billion). Also substantial was the $573 million settlement McKinsey reached with states over its role in advising opioid producers in improper marketing practices.

There were also significant state settlements on issues other than opioids. Duke Energy signed an $855 settlement with the North Carolina AG relating to coal ash pollution. Boston Scientific Corporation reached a $188 million settlement with a group of states to resolve allegations it engaged in deceptive marketing of a transvaginal surgical mesh device.

While the Biden DOJ has yet to roll out blockbuster cases, it did announce some substanial resolutions during the year. For example, the U.S. Attorney’s Office in Cincinnati announced a $230 million settlement of criminal charges against utility company FirstEnergy for making improper payments to public officials to get them to pursue nuclear power legislation benefiting the company. Taro Pharmaceuticals agreed to pay $213 million to settle price-fixing charges. In a case that also involved UK and Swiss regulators, Credit Suisse paid $175 million to the DOJ to resolve criminal charges relating to a fraudulent project in Mozambique.

The year also saw the resolution of some major class action and multi-district lawsuits against large corporations. After the U.S. Supreme Court declined to hear its appeal of a court verdict, Johnson & Johnson paid more than $2 billion in damages to a group of women who claimed they developed ovarian cancer from using the company’s talcum powder.

Hyundai Motor agreed to pay up to $1.3 billion to settle a consolidated class of claims that it and its subsidiary Kia sold vehicles with defective engines that could catch fire. Facebook paid $650 million to settle a class action over its harvesting of facial data.

Facebook was also at the center of a controversy that not yet been fully resolved by regulatory or court action. A former manager leaked a large collection of internal documents indicating that the company, which now calls itself Meta Platforms, was aware of the harmful effect its services were having on some users, especially younger ones, but did little about it. The revelations prompted widespread criticism among members of Congress but no significant legislation or litigation so far.

Another widely criticized corporation that has yet to face full consequences for its conduct is Amazon.com. The e-commerce behemoth has been reproached for the way it treats employees, the small merchants who make use of its platform, and the communities in which it operates. Yet it continues to expand at a rapid pace and has seen an enormous growth of profits during the pandemic.

During the Facebook disclosures, there was growing speculation as to whether the big tech firms were now facing a situation similar to that of the tobacco companies, which were the subject of their own scandalous revelations and eventually had to pay out many billions of dollars in settlements and sharply curtail their marketing activities.

The key word there is “eventually.” The dangers of smoking were known for decades, yet the big cigarette companies adamantly denied the reality—the same way the fossil fuel companies have denied their role in climate change. We should not expect Meta, Amazon and the other tech giants to give in without a long and bitter fight.

Populism Real and Ridiculous

Some analyses of Trumpism and Republican populism have claimed to detect a strain of anti-corporate sentiment. It is true that today’s right-wingers are willing to criticize big tech companies for supposedly treating them unfairly, but most of the times the GOP continues to serve the interests of big business.

That was clear during an important hearing just held by the House Judiciary Committee’s subcommittee on antitrust, commercial and administrative law. Subcommittee chair David Cicilline, vice chair Pramila Jayapal, other Democratic members and the witnesses all raised serious questions about the current regulatory system, focusing on issues such as disclosure and social equity.

The Republicans, on the other hand, did their best to change the subject or spoke in favor of less rather than more oversight. Ranking member Ken Buck used his opening remarks to attack “executive overreach” and praise the Trump Administration’s wholesale attack on regulation.

Jim Jordan spent his time attacking what he claimed was a plan by the Justice Department to treat parents critical of school boards as domestic terrorists. One of the witnesses, NAACP climate justice director Jacqueline Patterson, was asked by Dan Bishop whether she was a revolutionary. She was also chastised for a facetious tweet about vaccines. The comments of GOP members on regulation were mainly limited to attacks on “woke bureaucrats.”

Despite these antics, there was a serious exchange between the Democrats and the witnesses on the failures of the current regulatory system. These issues are also addressed in the Stop Corporate Capture Act introduced by Rep. Jayapal. The legislation would create more transparency in rulemaking, reduce corporate influence over the process and create a framework for considering social equity. It would fine companies that lie about the impact of public interest rules. It would also create a Public Advocate to provide for more robust public participation.

It turns the usual discussion on its head. Rejecting the idea of executive overreach, the bill correctly diagnoses the problem as a situation of what one might called regulatory anemia. Agencies are not aggressive enough in tackling serious problems relating to the environment, the workplace and the marketplace. The parties meant to be targeted instead are playing an outsized role in creating the rules. Hence the reference in the bill’s title to regulatory capture.

Jayapal’s proposal is what one might call a populist approach to reforming the regulatory system—one that is not likely to receive support from corporate lobbyists. When they are not simply kicking up dust, Republicans, by contrast, are doing the bidding of big business by continuing the Trump Administration’s drumbeat against regulation.

This is one of those areas in which the conventional labels of U.S. politics continue to baffle me. Why are those working to benefit giant corporations called populist, while those who are seeking to rein in that power called elitist?

Violation Tracker UK has Arrived

The United Kingdom, which holds the presidency of this year’s United Nations climate conference, made the wise decision to bar fossil fuel companies from being corporate sponsors of the event. This is not to say, however, that the UK is generally tough on industries that harm the environment.

That’s one of the findings from the data collected in Violation Tracker UK, a database of business misconduct my colleagues and I at the Corporate Research Project of Good Jobs First have just launched. We assembled 63,000 cases dating back to 2010 from more than 40 regulatory agencies. Among those are the Environment Agency, Natural Resources Wales, the Scottish Environment Protection Agency, and the Northern Ireland Environment Agency.

Altogether, we identified nearly 6,000 cases in which a company was found to have committed an environmental offense. Yet in more than half of these, the culprits were not required to pay any sort of monetary penalty and instead were let off with a caution.

Among those environmental cases with a fine or settlement, the aggregate penalties were just £312 million. The penalties exceeded £1 million in just a dozen cases; in only 135 instances were they above £100,000. Many of the larger environmental penalties involved privatized water companies, which should be fined even more heavily, given the frequency with which they break the rules.

These numbers stand in stark contrast to the totals for competition-related offenses and financial offenses. There are fewer cases in those categories—a total of about 2,200—but the penalties have been substantially higher, totaling £5.2 billion for competition cases and £2.8 billion for financial ones. In those categories combined there have been 285 penalties of £1 million or more, and 716 above £100,000.

The UK’s use of monetary penalties also lags when it comes to safety-related offenses, including workplace safety as well as product, healthcare and transportation safety. This category accounts for just £413 million in penalties. The aggregate fines and settlements for environmental and safety offenses combined is only one-tenth that of competition and financial offenses. The other categories covered by Violation Tracker UK—employment-related offenses and consumer protection cases—fall in between.

Like the U.S. Violation Tracker on which it is modeled, Violation Tracker UK identifies which of the entities named in the individual cases are linked to larger parent companies. The UK parent universe numbers more than 650, both publicly traded and privately held. The parents are headquartered in more than 30 countries. After the UK, parents based in the United States account for the largest number of cases and the highest penalty total.

As in the United States, the list of companies with the highest penalty totals in Violation Tracker UK contains numerous big banks, both domestic and foreign. Three of those banks are the only corporations to appear among the ten most penalized companies on both trackers: JPMorgan Chase, Deutsche Bank and UBS. Other types of large, publicly traded corporations also feature prominently in the UK rankings. Companies in the FTSE 100 account for more than one-quarter of the Violation Tracker UK monetary penalty total.

Big business does not behave any better in Britain than it does in the United States.

Fronting for Rogue Corporations

Only days before the world gathers in Glasgow to discuss the climate crisis, Greenpeace has leaked a trove of documents suggesting that some countries are coming to that gathering with sinister motives. According to the environmental group, several leading coal, oil, beef and animal feed-producing nations are trying to water down the International Panel on Climate Change’s findings to protect their domestic industries.

Among the countries said to be involved are Saudi Arabia, Australia and Brazil. It seems clear these efforts reflect not only the inclinations of their political leaders but also the interests of major corporations headquartered in those nations.

Saudi Arabia is, of course, the home to the Saudi Aramco—one of the world’s largest oil and gas producers and thus one of the biggest contributors to greenhouse gas emissions. Australia is the home to mining companies such as BHP Group, the world’s largest producer of coal. Brazil is the headquarters of meat-producing giant JBS.

Along with their outsized role in CO2 emissions, these companies damage the environment in other ways and have run afoul of regulatory requirements. Take the case of Saudi Aramco. As documented in Violation Tracker, its U.S. subsidiary Motiva Enterprises has racked up more than $170 million in penalties over the past two decades for violations of the Clean Air Act and other environmental laws. In addition to cases brought by the EPA, Motiva has been the target of lawsuits and enforcement actions by attorneys general and environmental regulatory agencies in states such as Texas and Louisiana.

In its U.S. operations, BHP has been cited for violations both by the EPA and by the Bureau of Safety and Environmental Enforcement, the federal agency that oversees offshore oil and gas drilling. It has also paid fines to environmental agencies in Louisiana and Arkansas.

JBS, which has taken over several major beef and poultry producers in the United States, has been cited 59 times for environmental violations, paying a total of $5.6 million in penalties. Earlier this year, its Pilgrim’s Pride poultry subsidiary pleaded guilty and was been sentenced to pay approximately $107 million in criminal fines for its participation in a conspiracy to fix prices and rig bids for broiler chicken products.

JBS will also show up in Violation Tracker UK, which will be launched next week. Its Moy Park Limited subsidiary has been fined over £1.2 million since 2010, most of which came from workplace safety violations but also included £82,000 in nine environmental cases.

These examples suggest that the behind-the-scenes efforts of Saudi Arabia, Australia and Brazil are not just a matter of differences in climate policy. By resisting stronger controls on greenhouse gas emissions, these countries are serving the interests of corporations that repeatedly violate environmental regulations and other laws that serve the public good.

Note: Violation Tracker UK will go public on October 26. It will contain information on more than 60,000 cases brought by over 40 UK regulators such as the Environment Agency and the Health and Safety Executive. The database aggregates cases linked to more than 650 parent corporations based in the UK and over 30 other countries.

The Wolves of Wall Street

Morgan Stanley and Merrill Lynch are two of the oldest names on Wall Street. Morgan long focused on serving corporations with investment banking services, while Merrill was more of a retail brokerage. Both got caught up in the transformation of the financial services sector. Morgan purchased brokerage firms Dean Witter and Smith Barney, while Merrill was taken over by Bank of America during the 2008 financial crisis.

During the past dozen years, both Morgan and Merrill have seen their reputations tarnished by a series of legal controversies. When Violation Tracker began collecting data on financial offenses in 2015, BofA appeared atop the list of banks that had paid more than $1 billion in fines and settlements, thanks mainly to cases involving Merrill. Morgan ranked 7^th.

The database, now with information extending back to 2000, shows BofA with total penalties of over $80 billion, far more than any other parent company. Morgan has paid out more than $9 billion.

Morgan and Merrill also feature prominently in the newest category of data to be added to Violation Tracker: penalties imposed on securities firms by the Financial Industry Regulatory Authority. Unlike the other agencies whose cases are compiled in Violation Tracker, FINRA is not a government entity. It is, however, authorized by Congress to acted as an industry self-regulator and is overseen by the SEC.

By reviewing all press releases issued since 2000 by FINRA and its predecessor, the National Association of Securities Dealers, we have assembled 726 cases with total penalties of more than $1 billion. And when we matched the firms named in the cases to their corporate parents, we found that roughly half of the actions were linked to the giants of Wall Street. Those companies account for an even larger share of the penalty dollars.

Morgan Stanley and Bank of America (mostly via Merrill Lynch) are tied for first place in terms of the number of cases, with 38 each. Morgan leads in penalty dollars, with a total of $150 million, followed by BofA with $134 million. The other firms with the highest total penalties include Credit Suisse, Citigroup, Wells Fargo, Deutsche Bank, and UBS. (The Morgan and BofA totals on Violation Tracker’s FINRA summary page do not match the amounts cited here because they have been adjusted avoid double-counting of some penalties linked to cases handled jointly with the SEC.)

Because the penalties imposed by FINRA are relatively low, the case numbers are perhaps more significant. What does it say about Morgan and Merrill that they have each been cited more than three dozen times for violating rules meant to protect investors? In one case, Merrill was cited for failing to prevent one of its representatives in Texas from operating a Ponzi scheme.

And what does it say about FINRA that it allows the big players to commit violations over and over again without doing more than imposing additional modest fines?

It should be noted that the cases we collected from the FINRA press releases make up only a portion of the organization’s actions, with thousands more against firms and individuals contained in a proprietary database. In other words, the level of recidivism among the large Wall Street firms is probably even worse than what is suggested by the press releases.

Moreover, just a few days ago, after we finished processing the FINRA data, the organization imposed a new $3.25 million fine on Merrill Lynch and ordered it to pay $8.4 million in restitution to customers.

Neither government action nor industry self-regulation seems to be very effective at curbing financial misconduct.

Note: Along with the new FINRA cases, Violation Tracker has just been updated with information from the more than 300 federal, state and local agencies covered by the database. The Tracker now contains 490,000 entries with total penalties of $669 billion.

Gently Regulating Corporate Election Involvement

A recent announcement by the Federal Election Commission that it was fining the National Enquirer’s parent company was unusual in two ways.

The first had to do with which parties were targeted by the FEC and which were not. The agency imposed a penalty of $187,500 against A360 Media LLC (formerly known as American Media Inc.) for making a payment to Karen McDougal in 2016 to suppress her story about having had an affair with Donald Trump.

Watchdog group Common Cause alleged that the payment – which was facilitated by Trump’s former personal lawyer Michael Cohen– amounted to an illegal in-kind contribution to Trump’s campaign by American Media. The FEC agreed, but it chose not to sanction the beneficiary of the payment. In other words, this was another example of how Trump manages to avoid personal consequences for misconduct for which he was ultimately responsible.

The FEC action was also out of the ordinary because it entailed a penalty directed at a company. It has become so rare for the FEC to bring cases against corporations themselves (as opposed to their political action committees), that I have not been including the agency among those federal regulators from whom I collect data for Violation Tracker.

Seeing the A360 decision, I decided it was time to add the FEC, but I didn’t know how many corporate cases could be found. I knew that the heyday of prosecuting corporations for election finance violations came in the 1970s as an outgrowth of the Watergate investigations. Those cases would have to be left out, since Violation Tracker coverage begins in 2000.

I also knew that there were likely to be few cases after January 2010, when the U.S. Supreme Court’s Citizens United decision wiped away most limitations on campaign spending by corporations as well as other entities. The ban on the direct use of corporate funds for campaign contributions remained in place.

The other factor has to do with the FEC itself, which often deadlocks along partisan lines and has difficulty imposing penalties against corporations or other entities and individuals.

As I dove into the case archives on the FEC website, I focused on what the agency calls Matters Under Review and ignored its administrative fines brought against PACs and campaign committees for matters such as late filing of reports.

I ultimately found a total of 31 cases in the period since January 2000 in which a corporate entity was fined $5,000 or more for an election violation. There were only four penalties above $100,000 – including one for $1 million – and the overall average was just $77,000.

Most of these cases involved allegations that the corporation improperly reimbursed employees for their individual donations to try to get around the ban on the use of corporate funds.

It is difficult to believe that fewer than three dozen corporations broke this rule and other remaining regulations during the past two decades. Instead, the low case count is another symptom of underregulation of corporate activities with regard to elections and much more.

Note: the new FEC entries will be added to Violation Tracker later this month as part of an overall update of the database.

The Obscure Companies Threatening the Planet

Hilcorp Energy, a privately held oil and gas producer based in Texas, shows up in Violation Tracker with only $2 million in regulatory penalties, compared to more than $1.5 billion for petroleum giant Exxon Mobil. Yet according to a detailed new report published by Ceres and the Clean Air Task Force, Hilcorp dwarfs Exxon when it comes to climate-ruining emissions of methane gas.

Hilcorp is one of a group of lesser-known energy producers which turn out to be responsible for a remarkable portion of greenhouse gas emissions. The findings of the Ceres report, which outed the companies using data from the EPA’s Greenhouse Gas Reporting Project, were surprising enough to merit a front-page article in the New York Times.

Among the other low-profile/high-emissions companies featured in the report are Terra Energy Partners, Flywheel Energy, Blackbeard Operating and Scout Energy. These firms have few or no listings in Violation Tracker.

One of the reasons these companies fly under the radar is that they are not publicly traded. Some are controlled by private equity firms, making their business even more opaque.

As the Times article points out, some of these producers have purchased operations from larger, publicly traded corporations subject to more scrutiny. For example, Hilcorp acquired gas wells in the San Juan Basin in northwestern New Mexico from ConocoPhillips, reducing that company’s carbon footprint while doing nothing to reduce the burden on the climate.

It is significant that the Ceres report is appearing in the wake of the showdown at Exxon Mobil, where institutional investors concerned about the risks associated with climate change have just succeeded in winning three seats on the corporation’s board of directors.

That is a vitally important development in the effort to bring about change at the company which is still the largest overall emitter of greenhouse gases. The Ceres findings point out the necessity for the climate movement to target not only the corporate giants but also the smaller players which are having an outsized impact.

One difficulty in changing the practices of both larger and smaller corporations is the fact that the U.S. environmental regulatory system does little to punish firms for their greenhouse gas emissions. A producer such as Hilcorp can get away with its massive methane emissions because it does not need to worry about activist institutional investors or the possibility of substantial penalties from the EPA.

The EPA has gone after automobile producers such as Hyundai for their greenhouse gas emissions, but the agency has faced strong legal obstacles in the effort to regulate emissions by power plants and energy producers.

Those obstacles need to be overcome, and corporations of all kinds need to face substantial monetary penalties for their contributions to the climate crisis.

Note: Apart from the Ceres report, good use of the EPA’s greenhouse gas data has been made by the Political Economy Research Institute’s Greenhouse 100 Polluters Index, which ranks parent companies by the total emissions of their subsidiaries. In that index, power plant owners such as Vistra Energy and Duke Energy are at the top. Exxon is number 11 and Hilcorp number 36.

SCOTUS Boosts Crooked Corporations

The U.S. Supreme Court has given a boost to crooked corporations in a ruling that restricts the powers of one of the federal government’s oldest regulatory agencies, the Federal Trade Commission, which has been operating since 1914. The Justices ruled unanimously that the FTC does not have the authority to go to court and win redress for unfair and deceptive business conduct. It must first go through a cumbersome administrative process.

Since the 1970s the FTC has been obtaining court injunctions against rogue companies and compelling them to provide monetary relief to consumers. In Violation Tracker we document nearly 500 cases brought by the agency since 2000, with total fines and payouts of more than $14 billion. More than a dozen of those cost companies more than $100 million.

Just the other day, the FTC announced it was sending more than $59 million collected on behalf of consumers who were victims of an allegedly deceptive scheme by Reckitt Benckiser Group and Indivior Inc. to thwart lower-priced generic competition with the branded drug Suboxone. Many of these enforcement actions may no longer be possible.

The high court ruling may prompt Congress to revise the law to allow the FTC to go back to using court injunctions. Yet for now the regulatory landscape is in flux. Corporations embroiled in disputes with the FTC, such as Facebook, are claiming that the agency lacks the authority to proceed. Facebook is still smarting from a previous FTC case from 2019 in which it paid a $5 billion penalty for privacy violations.

Given the similarities between the FTC Act and the law governing the Food and Drug Administration, there may be challenges to the FDA’s use of injunctions. The ruling is even being cited in disputes not involving federal agencies. A group of generic drug manufacturers being sued by state attorneys general for price-fixing is claiming that the ruling should also bar actions seeking injunctive relief under Section 16 of the Clayton Act.

On the other hand, there are indications that the FTC may choose to partner with state AGs on consumer protection actions in areas other than antitrust, relying on their power to seek relief from corporations over issues such as unlawful debt collection and privacy violations.

Legal observers also believe that the Consumer Financial Protection Bureau may help fill the gap created by SCOTUS, as least in financial sector cases, given that its authorizing legislation, the Dodd-Frank Act, explicitly allows it to sue for restitution and other relief without first going through lengthy administrative proceedings. It can also do so against a broader range of misconduct.

Nonetheless, it is disappointing to see the FTC and possibly other agencies lose the ability to bring prompt action against corporate miscreants. Business misconduct shows no signs of abating, so regulators need as many tools as possible to end the abuses and force corporations to compensate those who have been adversely affected.

Exercising Enforcement

It is not surprising that Peloton Interactive Inc. thought it could refuse to tell the Consumer Product Safety Commission the identity of a child who was killed in an accident involving one of the company’s treadmills. And it was not surprising that Peloton was shocked when the CPSC unilaterally issued a press release urging owners of the Tread+ to stop using the machine in homes with small children or pets.

The reason is that the CPSC has long been one of the more toothless of the federal regulatory agencies. As shown in Violation Tracker, over the past decade it has brought only about 50 enforcement actions involving monetary penalties. During the Trump Administration, the agency almost faded away, bringing only seven actions. There were none at all during the final two years of Trump’s tenure.

Instead, the CPSC has relied on the willingness of manufacturers to reveal safety problems on their own and voluntarily recall defective products. Peloton did disclose the fatal accident on its website and to the CPSC, but by withholding key details it thwarted the agency’s ability to investigate the matter. It also softened the negative impact of the announcement by making the disingenuous claim that it was protecting the privacy of the family involved.

Peloton also applied more of its own spin in the announcement by suggesting it was enough for users to “make sure” that the space around the equipment is clear. By contrast, the CPSC press release, which the company denounced as “inaccurate and misleading,” noted that it was aware of 39 incidents involving the Tread+, including at least one that occurred while a parent was running on the treadmill. The agency said this indicated that the risks were not limited to situations in which a child has unsupervised access to the treadmills, which cost more than $4,000.

Issuing the release without the company’s consent was a remarkable step for the CPSC, given that a provision of the Consumer Product Safety Act known as Section 6(b) restricts the ability of the agency to reveal company-specific information.

The agency is also limited in its ability to impose mandatory recalls. To do so, the CPSC would need a court order, meaning that a recalcitrant manufacturer could tie up the matter in protracted litigation, all while continuing to sell the dangerous product.

All of this is to say that the less than dazzling enforcement record of the CPSC is to some extent the result of structural impediments. Past attempts to remove those restrictions were not successful, but the Peloton dispute has prompted a renewal of those efforts. U.S. Senator Richard Blumenthal (D-CT) and U.S. Representatives Jan Schakowsky (D-IL) and Bobby L. Rush (D-IL) recently introduced legislation that would repeal Section 6(b).

Corporate lobbyists have worked so hard to promote the idea of over-regulation that many people will be surprised to hear the extent to which an agency such as the CPSC is prevented from taking strong action. The Peloton case is a reminder that the real problem is often not too much regulation but too little.

Public Money and Public Health

When a company is the subject of front-page stories about serious misconduct, the firm would normally have a track record of regulatory infractions documented in Violation Tracker. Yet Emergent BioSolutions, which has had to throw out millions of doses of Covid-19 vaccine because of serious production flaws, does not have a single entry in the database.

This is not because Emergent has had a perfect track record until the present. On the contrary, investigations by the New York Times, the Washington Post and the Associated Press have reported that probes by two federal agencies and by Johnson & Johnson, which contracted with Emergent to manufacture the vaccine, had found serious deficiencies, especially with regard to its efforts to prevent contamination.

If you read those articles carefully, you will see that the findings come from unpublished documents obtained through Freedom of Information Act requests or that were leaked to reporters. In other words, the public was unaware of the deficiencies being found by inspectors from the Food and Drug Administration and J&J auditors. There were no public enforcement actions against the company that would have shown up in the regulatory data collected for Violation Tracker. There are also no substantive references to regulatory issues in the publicly traded company’s 10-K filing.

I also searched the Nexis news archive for articles or press releases about Emergent. Prior to the recent revelations, almost all the coverage about the company focused on the numerous government contracts it has received. Two decades ago, it was the nation’s sole producer of the anthrax vaccine, as a result of which it received many millions of dollars in federal contracts. It also received funding to work on drugs for Ebola and Zika prior to getting on the Covid-19 gravy train.

Among the agencies providing this backing has been the Biomedical Advanced Research and Development Authority, an office within the Department of Health and Human Services. BARDA was apparently aware of shortcomings at Emergent but did little about them. The Times investigation found that in dealing with the company the agency “acted more as a partner than a policeman.”

Along with the federal largesse, Emergent has received millions of dollars in state economic development incentives. In 2004, Maryland provided up to $10 million in assistance for the facility that was producing the anthrax vaccine. The state provided a $2 million loan when Emergent built a new headquarters in 2013, with Montgomery County and the city of Gaithersburg kicking in another $1 million. More public money was provided to the company’s Baltimore operations, where the Covid-19 work has been performed pursuant to an estimated $1.5 billion in manufacturing contracts.

While the production problems were kept quiet, Emergent was able to pretend that all was well at the company. Its CEO Robert Kramer’s total compensation jumped to $5.6 million last year. The company’s stock price at one point last summer soared to $135.

Now all that is over. The stock price is at less than half that level. The company is facing multiple investigations whose results are likely to be made public. Kramer should not expect a big boost in pay.

It is unclear how much Emergent’s practices have set back the country’s campaign to defeat the coronavirus. Yet it seems clear this was an egregious case of a corporation living high on public money without paying adequate attention to public health.