Regulation

The State of Environmental Enforcement

Climate change is the most pressing environmental issue of our time, but we still have to contend with plenty of air pollution, water contamination and hazardous waste proliferation. That task will be easier now that the EPA is abandoning the lax practices of the Trump Administration and is once again getting serious about enforcement.

Yet the federal agency will not be taking on the challenge by itself. Enforcement of laws such as the Clean Air Act and the Clean Water Act is a function shared by the EPA and state environmental agencies. Not all states are equally enthusiastic about this responsibility.

Evidence of this can be found in the latest expansion of Violation Tracker consisting of more than 50,000 penalty cases my colleagues and I at the Corporate Research Project collected from state environmental regulators and attorneys general and just posted in the database. An analysis of the data is contained in a report titled The Other Environmental Regulators.

These cases include $21 billion in fines and settlements (limited to those of $5,000 or more) imposed against companies of all sizes, with the largest amounts coming in actions brought against BP in connection with the 2010 Deepwater Horizon disaster in the Gulf of Mexico.

It should come as no surprise that the oil and gas industry accounts for much more in aggregate penalties — $8.2 billion – than any other sector of the economy. Utilities come in second with $6 billion. The worst repeat offender is Exxon Mobil, which was involved in 272 different cases with $576 million in total penalties. Those cases were spread across 24 different states.

That last number might have been even higher if all states were diligent about their enforcement duties. Instead, we found disparities that go beyond what might be expected from differences in size. There were unexpected results at both ends of the spectrum.

Given its reputation for being hostile to regulations, we were surprised that Texas turned out to have far more enforcement actions than any other state—over 9,500 since 2000. The Texas Commission on Environmental Quality and the Railroad Commission of Texas (which oversees pipelines and surface mining) may be cozy with industry when it comes to rulemaking and permitting, but they seem to be serious about enforcing regulations that are on the books.

At the bottom of the list are states such as Oklahoma and Kansas that appear to have brought only a tiny number of enforcement actions over the past 20 years. That is the conclusion we reached because the states post no significant enforcement case information on their websites and denied our open records requests for lists of cases. Little also turned up in news archive searches. It is difficult to believe that the many oil and gas operators in Oklahoma, for instance, hardly ever committed infractions.

Given that state environmental agencies are, to a great extent, enforcing federal laws, there should be much greater consistency in their oversight activities and their disclosure of those efforts.

Note: When using Violation Tracker you can locate state environmental cases by choosing one of the environmental listings in the Option 1 state agency dropdown, or you can do an Option 2 search that includes State as the Level of Government and Environmental Violation as the Offense Type.

EPA’s New Leadership Will Also Encourage More State Enforcement

The confirmation and swearing in of Michael Regan as administrator of the EPA creates an opportunity for the agency to repair the damage done during the Trump years. Part of that effort will be to change the dynamic between the EPA and state environmental regulators.

It is often forgotten that responsibility for enforcement of laws such as the Clean Air Act and the Clean Water Act is actually shared between the federal and state governments. I was reminded on this in the course of preparing the latest expansion of Violation Tracker, which will consist of more than 50,000 state-government environmental enforcement actions dating back to the beginning of 2000. The new data will be posted later in March along with a report examining the relative level of activity among the states.

Regan ran the Department of Environmental Quality in North Carolina, one of the agencies from which we collected data. The DEQ has brought around 1,500 successful enforcement actions over the past decade, putting it among the top ten states according to our tally, which is limited to cases in which a penalty of $5,000 or more was imposed.

The DEP and the North Carolina Attorney General have collected more than $950 million in fines and settlements, putting it among the top five states in terms of aggregate penalty dollars. North Carolina’s penalty total was boosted enormously by an $855 million settlement reached with Duke Energy earlier this year involving coal ash cleanup.

Regan is not the first state official to head the EPA. But consider the contrast with the person Donald Trump chose to be his first EPA administrator: Scott Pruitt, who had served as the attorney general of Oklahoma and who made a name for himself in that position by repeatedly suing the EPA to bring about regulatory rollbacks. Oklahoma, by the way, came in at the bottom of our tally of state enforcement caseloads.

Under Pruitt and his successor, the former coal lobbyist Andrew Wheeler, the EPA backed away from aggressive enforcement in favor of voluntary compliance, which for many corporations is an invitation to ignore regulations. This not only affected enforcement work at the federal level but also encouraged a hands-off approach by the states that emboldened environmental scofflaws.

Fortunately, places such as North Carolina went their own way. Now that Regan is running the show at EPA, states will feel encouraged to pursue meaningful enforcement of the laws governing air, water and hazardous waste pollution. Maybe even Oklahoma will be inspired to change its ways.

A Reckoning for Texas

Electric utilities come in in numerous forms. Some are cooperatives or municipals devoted to serving the interests of their members. Others are investor-owned entities that are unabashedly focused on the pursuit of profit. Texas has some of both, but the Lonestar State stands out for its decision to operate a statewide power grid cut off from all other states. This move is now causing massive hardship amid the polar vortex.

Hare-brained energy market approaches have been around for some time in Texas. Houston was the headquarters of Enron, which made use of federal deregulation to promote aggressive energy trading schemes that turned out to thoroughly fraudulent. It was only a few months after Enron declared bankruptcy that the Texas legislature adopted a statewide electricity market deregulation scheme.

Since then, the old-line utilities have been broken up, bought and sold like so many Monopoly properties. For instance, Dallas Power & Light morphed into TXU Electric Delivery, which in turn became Oncor Electric Delivery. Oncor was then taken over by California-based Sempra Energy.

Houston Lighting and Power was split up into several companies, including CenterPoint Energy. When the storm hit, CenterPoint was focused on a complicated financial deal involving its subsidiary Enable Midstream Partners.

Amid this wheeling and dealing, Texas utilities seemed to have forgotten about their most important responsibility: serving their customers. They created the now ridiculously named Electric Reliability Council of Texas to coordinate their efforts, but neither that non-profit nor the individual companies thought to prepare for the kind of extreme weather situation that is now crippling the state.

There have been signs that Texas climate was becoming erratic. In 2018 hailstones the size of tennis balls caused $1 billion in damages in North Texas. Houston had its earliest snow ever. Bloomberg is reporting that ERCOT was warned a decade ago that Texas utility facilities needed to be winterized to assure service during colder weather.

ERCOT deserves no sympathy, but it is absurd for politicians like Gov. Greg Abbott to put all the blame on the non-profit when he has long been a climate change denier, a deregulation proponent and a renewable energy basher.

The current disaster should serve as a wake-up call to Texas politicians as well as Texas utilities that they should focus less on ideological posturing and financial maneuvers and pay more attention to the needs of the residents of the state.

Solving the Corporate Identity Crisis

Like the Republican Party, Corporate America is embroiled in a battle between its evil impulses and its better angels. Nowhere is this clearer than with regard to environmental policy.

On one side are the ESG proponents such as BlackRock’s CEO Larry Fink, who according to the New York Times, is using his firm’s role as a massive institutional investor to pressure corporations to embrace sustainable practices. In his annual letter to companies, he called not just for vague aspirations but specific plans that are incorporated in long-term strategies and reviewed by boards of directors.

General Motors has just announced that it will phase out gasoline-powered cars and trucks and will sell only zero-emissions vehicles by 2035. The company will spend $27 billion developing about 30 types of electric vehicles.

At the same time, fossil fuel companies are going ballistic over the Biden Administration’s plan to suspend oil and gas leasing on federal lands, despite the fact that some 90 percent of exploration occurs on private property and is not affected by the executive order. Biden has also not called for a ban on fracking, despite allegations during the presidential campaign that this was his real plan.

The conflict within the business world was epitomized by the U.S. Chamber of Commerce, which issued a press release that welcomed the Biden Administration’s focus on climate change while rejecting the leasing action.

There is also a corporate identity crisis with regard to employment practices, especially those in the high-tech sector. For many years, Silicon Valley companies had reputations as great places to work and were even accused of coddling their employees.

Now companies such as Amazon have replaced Walmart as the exemplars of bad employers. That image has intensified as groups of workers have begun to turn to collective action to address their concerns. Rather than embracing the right of employees to have a real voice at work, high-tech employers are adopting old-fashioned union-busting tactics. Amazon has even taken a move from the Donald Trump playbook by opposing mail-in voting during a representation election in Alabama.

The one clear lesson from the corporate inconsistencies is that ESG and other voluntary business practices are no substitute for strong government oversight. We should not have to wait until big business decides whether it really wants to help save the planet or will cling to fossil fuels as long as possible.

We should also not have to wait until giant companies decide whether they will treat their workers with respect or continue to regard them as little more than vassals.

It is thus encouraging that the Biden Administration is taking decisive action to restore effective regulation of both the environment and the workplace as well as areas such as consumer protection. Once agencies such as the EPA, the NLRB and the CFPB go back to enforcing the law in an aggressive manor, corporate ambivalence will become much less relevant and we can be confident that the entire private sector will feel pressured to do the right thing.

Regulatory Renewal

One of the biggest betrayals committed by Donald Trump was his inclusion of a traditional Republican attack on regulation in a purportedly populist agenda. He managed to get many of his working-class followers to believe that weakening oversight of business was in their interest while it was actually a boon to the large corporations he pretended to challenge.

Some initial steps by President Biden indicate that he is ending that charade and will return regulatory agencies to their intended missions, especially when those involve helping working families. This intention can be seen both in his nominations for new agency heads and early confrontations with some Trump holdovers.

One of those confrontations took place at the Consumer Financial Protection Bureau, an agency that was created by the 2010 Dodd-Frank Act and which incurred the wrath of business-friendly Congressional Republicans for its aggressive enforcement actions against financial sector abuses. Those politicians took special aim at the provisions in Dodd-Frank that gave the CFPB’s director a great deal of independence.

The Trump Administration worked hard to defang the CFPB and in 2017 succeeded in putting the agency under the control of OMB Director Mick Mulvaney, who was openly contemptuous of its mission. In 2018 Trump named Kathy Kraninger, a Mulvaney crony with no experience in financial regulation, to head the agency. After being confirmed on a party-line vote, Kraninger went on to weaken the CFPB’s rules against predatory lending and reduced enforcement activity against large banks.

Immediately upon taking office, Biden demanded Kraninger’s resignation. Ironically, Biden was able to take that action because opponents of the agency’s independence had prevailed in a Supreme Court decision. The new administration turned the tables and used the ruling to facilitate the reinvigoration of the agency.

While Kraninger agreed to resign, Biden had to fire Peter Robb, the powerful general counsel of the National Labor Relations Board. A veteran management-side lawyer whose anti-union activity dates back to his involvement with the Reagan Administration’s attack on the air traffic controller’s union, Robb has spent the past three years doing his best to thwart the agency’s mission of promoting collective bargaining. He even tried to limit worker free speech by asking a federal court to bar the use of large inflatable rats on picket lines.

Robb’s term was not supposed to expire until November, but the Biden Administration apparently decided it was worth alienating Republicans in order to stop the damage Robb has been inflicting on labor rights.

Replacing these key policymakers at the CFPB and the NLRB will go a long way in reorienting the agencies back to their mission of protecting working families from the predatory practices of the financial services industry and the abusive practices of employers. They fit together with the overall change of direction signaled in the executive order Biden issued on his first day reversing Trump’s deregulatory framework.

These personnel and broad policy moves will hopefully be just the first steps in an extended campaign by the Biden Administration to end the demonization of regulation and to use the powers of the federal government to promote economic justice.

The 2020 Corporate Rap Sheet

For all of his populist bluster, Donald Trump has done little during his four years in office to stem the power of big business. He criticizes corporations only when he feels personally slighted or when it fits into one of his many outlandish conspiracy theories.

Fortunately, career officials at regulatory agencies and career prosecutors at the Justice Department, as well as those at the state level, have continued doing their jobs. The following is a selection of significant cases resolved during 2020.

Opioid market abuses: The Justice Department announced an $8 billion global resolution of its criminal and civil investigations into abuses by Purdue Pharma LP. The company agreed to plead guilty to three felony counts and pay criminal fines and forfeitures of $5.5 billion and $2.8 billion in a civil settlement. Given that the company is going through bankruptcy, it is unclear how much of this will actually be paid.

Bogus bank accounts: As part of the ongoing prosecution of Wells Fargo for pressuring employees to meet unrealistic sales goal by creating bogus accounts without customer permission, the Justice Department announced that the bank would pay $3 billion to resolve criminal and civil charges. Wells was allowed to enter into a deferred prosecution agreement to avoid a guilty plea.

Foreign bribery: Goldman Sachs and its Malaysian subsidiary admitted to conspiring to violate the Foreign Corrupt Practices Act in connection with a scheme to pay over $1 billion in bribes to Malaysian and Abu Dhabi officials to obtain lucrative business for Goldman Sachs, including its role in underwriting approximately $6.5 billion in three bond deals for 1Malaysia Development Bhd. Goldman Sachs agreed to pay more than $2.9 billion and disgorge $606 million as part of a coordinated resolution with criminal and civil authorities in the United States, the United Kingdom, Singapore, and elsewhere.

Emissions cheating: The Department of Justice, the Environmental Protection Agency, and the California Air Resources Board announced a $1.5 billion settlement with German automaker Daimler AG and its American subsidiary Mercedes-Benz USA, LLC resolving alleged violations of the Clean Air Act and California law associated with emissions cheating.

False claims and kickbacks: Novartis agreed to pay over $642 million in separate settlements resolving claims that it violated the False Claims Act. The first settlement pertained to the company’s alleged illegal use of three foundations as conduits to pay the copayments of Medicare patients. The second settlement resolved claims arising from the company’s alleged payments of kickbacks to doctors.

Tax evasion: Bank Hapoalim of Israel agreed to pay a total of more than $600 million in penalties to resolve criminal allegations by the Justice Department that it conspired with U.S. taxpayers to hide assets and Income in offshore accounts. The parent company entered into a deferred prosecution agreement while its Swiss subsidiary pled guilty.

Illegal robocalls: Dish Network agreed to pay $210 million to resolve a long-running federal-state lawsuit alleging that the company engaged in illegal telemarketing through unwanted robocalls to thousands of people on the Do Not Call registry.

Spoofing: The Commodity Futures Trading Commission and the Justice Department announced that JPMorgan Chase would pay $920 million to resolve civil and criminal allegations involving deceptive conduct that spanned at least eight years and involved hundreds of thousands of spoof orders in precious metals and U.S. Treasury futures contracts on the Commodity Exchange, Inc., the New York Mercantile Exchange, and the Chicago Board of Trade.

Predatory lending: Banco Santander’s U.S. arm agreed to pay $550 million to resolve multistate litigation alleging that the bank, through its use of proprietary credit scoring models to forecast default risk, knew that certain consumer segments were likely to default, yet issued high-interest automobile loans to them anyway.

Corruption: A criminal investigation of Commonwealth Edison was resolved with a deferred prosecution agreement under which ComEd agreed to pay $200 million and admit it arranged jobs, vendor subcontracts, and monetary payments associated with those jobs and subcontracts, for various associates of a high-level elected official for the state of Illinois, to influence and reward the official’s efforts to assist ComEd with respect to legislation.

Defrauding investors: SCANA Corp. and its subsidiary SCE&G agreed to settle a Securities and Exchange Commission lawsuit charging them with defrauding investors by making false and misleading statements about a nuclear plant expansion that was ultimately abandoned. The company agreed to pay a $25 million penalty and $112.5 million in disgorgement.

Mortgage abuses: Nationstar Mortgage, which does business as Mr. Cooper, agreed to pay $86.8 million to resolve federal and multistate allegations that the mortgage servicer engaged in unlawful practices in the wake of the 2008 financial crisis. The settlement addressed alleged misconduct regarding servicing transfers, property preservation, loan modifications, and other issues, which in some cases led to improper foreclosure or borrowers being locked out of their homes.

Labor relations violations: CNN agreed to pay $76 million in backpay, the largest monetary remedy in the history of the National Labor Relations Board, to resolve a case that originated in 2003 when CNN terminated a contract with Team Video Services and hired new employees to perform the same work without recognizing or bargaining with the two unions that had represented the TVS employees.

Additional details on these cases can be found in Violation Tracker. Some will appear next week in an update to the database that will increase the number of its cases to 444,000 and the penalty total to $650 billion.

Downplaying Corporate Misconduct

Despite all the effort it has put into eliminating business regulations, the Trump Administration insists that it diligently enforces those rules that are still in effect. Moreover, Trump likes to depict himself as some sort of crusader against corporate misconduct.

A new indication of the absurdity of these claims comes from the U.S. Labor Department, which recently decided it would no longer issue press releases when citing companies for violations of rules governing workplace safety, employment discrimination and labor standards. According to an internal memo obtained by the New York Times, the excuse for the change was that such releases tend to linger prominently in search results and would be misleading if an enforcement action was ultimately found to have been unjustified.

Rarely does an alleged violation turn out to have no basis, and in those very few instances the problem could be resolved by the issuance of a new press release that would presumably circulate as easily as the original one. The real motivation for the change is to reduce the ability of agencies to pressure corporate transgressors and could be a stepping-stone toward the elimination of all announcements of violations.

Some parts of the Trump Administration already seem to have moved in that direction. In the course of collecting data for Violation Tracker, I check the websites of more than 50 federal regulatory agencies every three months to find new cases to add to the database. By the way, only finalized cases are included.

Agencies report on different schedules. Some issue a press release on each case when it is resolved or add each penalty to an ongoing database. Others disclose the data periodically, whether monthly, quarterly or annually.

What I have found is that some agencies seemed to have given up on new reporting even while leaving their historical data in place. Here are some examples:

The Bureau of Safety and Environmental Enforcement, which regulates offshore oil drilling, has no data on its civil penalties page more recent than fiscal year 2018.

The Federal Maritime Commission’s Bureau of Enforcement has not updated its penalty announcements since May 2019.

The most recent item on the Consumer Product Safety Commission’s list of press releases relating to an enforcement penalty is dated November 26, 2018.

It is difficult to determine whether these agencies are not announcing enforcement actions or have stopped bringing them. Either would be troubling.

Publicizing violations and penalties is just as important as the enforcement actions themselves. For many companies, the fines they are required to pay are trivial. The disclosure of their conduct means much more in terms of the impact on the firm’s reputation among customers and investors. Those revelations, called “regulation by shaming” in the academic literature, can have a bigger deterrent effect.

Violation Tracker is meant to enhance the deterrence by collecting a wide variety of disclosures about corporate misconduct and showing the degree of recidivism, especially among large companies. Keeping the database current is a lot easier when agencies are not hiding their data.

Corporate Culprits Receiving COVID Bailouts

In implementing the CARES Act passed by Congress to rescue the economy from the effects of the pandemic, the Trump Administration has directed tens of billions of dollars in aid to companies with a track record of misconduct. This transfer of public wealth to private bad actors will likely turn out to be more expensive than the TARP bailout of the banks a decade ago, given that much of the new aid will not be repaid.

My colleagues and I at Good Jobs First have found that more than 43,000 regulatory violators and other business miscreants have so far received $57 billion in grants and $91 billion in loans, including many that are forgivable. Over the past decade, the penalties paid by these companies for their misdeeds amounted to more than $13 billion. Our findings are summarized in a new report titled The Corporate Culprits Receiving COVID Bailouts.

We derived these numbers through a careful comparison of the CARES Act data we have compiled for our Covid Stimulus Watch website and the entries covering the past decade in Violation Tracker.

More than 87 percent of the CARES Act recipients with a record of misconduct are small businesses, while the other 13 percent are units and subsidiaries of larger companies. The latter received $55 billion in grants and $53 billion in loans, while the smaller companies received $2 billion in grants and $38 billion in loans. The large companies account for 90 percent of the penalty dollars.

The largest violation category among all 43,000 companies is government contracting at $5.6 billion, or 42 percent of the total. Employment-related penalties and consumer protection penalties each add up to about $3 billion (23 percent), while environmental and safety penalties total $1.6 billion (12 percent).

Hospitals (both for-profit and non-profit) and other providers that received funding from healthcare-related CARES Act programs account for $9 billion of the penalties, or 68 percent of the total. More than half of these penalties derive from Medicare and Medicaid billing fraud.

Recipients of small-business loans account for $3 billion of the penalties (23 percent), with the largest portions coming from wage theft and workplace safety and health violations.

There are two other groups of CARES Act recipients with a significant history of misconduct: colleges and universities getting aid through the Higher Education Emergency Relief Fund and airlines receiving massive levels of assistance through the Payroll Support Program. They paid $900 million and $600 million in penalties, respectively.

Seventy CARES Act recipients had been involved in cases that included criminal charges. Of these, 33 of the defendants were large companies, which paid total penalties of $3 billion. The 37 smaller defendants paid $47 million.

While the bulk of CARES Act spending comes in the form of grants and loans, the Federal Reserve is also seeking to prop up the commercial credit market by purchasing corporate bonds, especially those issued by Fortune 500 and Global 500 corporations. The corporations whose bonds have been purchased by the Fed account for more than $100 billion in penalties over the past decade. Because the purchases, which averaged about $3 million per company, are small in comparison to the size of these corporations, we decided not to include the associated penalties in the main analysis of the report.

The revelation that tens of thousands of CARES Act recipients have records of misconduct—including some cases of a criminal nature—raises serious questions about how the aid was distributed. It appears that little screening was done by federal agencies before awarding grants and loans, partly because there were no strict eligibility requirements written into the CARES Act. In some programs the money was apportioned by formula rather than choosing some recipients over others.

In the Paycheck Protection Program there was an application process, but it was handled by banks – which received commissions for their efforts – rather than the Small Business Administration. The application form required business owners to state whether they personally had been convicted or pled guilty to felonies such as fraud and bribery, while for the companies themselves the only issue seemed to be whether they had been debarred by a federal agency.

While little can be done about aid awards that were technically legal, there are steps the federal government could take with regard with two categories of recipients. The first consists of those companies and non-profits which were accused of defrauding the federal government and which paid civil penalties (usually through a settlement) for False Claims Act violations. The other category consists of those involved in cases that were serious enough to be brought with criminal charges.

Given that companies involved in FCA cases are usually allowed to continue doing business with the federal government after paying their penalty, it would be difficult to debar them from future covid stimulus programs. These companies should, however, be subject to additional scrutiny to ensure they do not resume their fraudulent behavior while receiving grants and loans.

The most compelling case for excluding a group of companies from participation in future aid programs concerns those with a history of criminal misconduct. The PPP provision dealing with corrupt business owners should be applied to businesses themselves, especially when the firms involved are larger entities. Doing so would protect taxpayer funds and serve as a deterrent against future corporate criminality.

Small Companies, Big Misdeeds

More than 1 million companies have received financial assistance from the CARES Act. My colleagues and I at Good Jobs First have been seeking to determine how many of those recipients have a track record of misconduct, and we will soon be releasing a report summarizing what we have found.

One conclusion I can share now is that the misbehavior can be found among small companies as well as large ones. While many of the smaller firms and non-profits paid penalties for commonplace offenses, some were involved in more serious cases. Here are some examples:

Coast Produce Company has received a Paycheck Protection Program loan worth between $2 and $5 million (the data was disclosed in ranges). In 2015 it paid $4 million to resolve civil allegations that it fraudulently overcharged the federal government for fresh fruits and vegetables it supplied to military dining facilities and Navy ships in Southern California. As part of a second agreement with criminal prosecutors, it agreed to implement various measures to ensure the company complies with its legal obligations.

The Academy of Art University has received a grant of $1.9 million from the Higher Education Emergency Relief Fund. In 2016 it paid the San Francisco City Attorney $60 million ($20 million in penalties and fees, and units of affordable housing valued at $40 million) in settlement of allegations it had ignored city land use rules, with multiple violations of zoning, signage, environmental, historical preservation and building code requirements.

American Refining Group in Pennsylvania has received a PPP loan worth between $5 and $10 million. In 2019 it had to pay $4.85 million ($350,000 in penalties and $4.5 million in equipment improvements) to resolve allegations by the Environmental Protection Agency that it was violating the Clean Air Act.

Meadows Regional Medical Center in Georgia has received a $9.3 million grant from the Provider Relief Fund. In 2017 it paid more than $12 million to resolve federal and state allegations of violating anti-kickback laws through its financial arrangements with physicians.

The Gagosian Gallery in New York has received a PPP loan worth between $2 and $5 million. In 2016 it paid $4.28 million to the New York Attorney General to resolve allegations that one of its affiliates engaged in sales tax evasion for a decade.

Williamson and McKevie LLC has received an Economic Injury Disaster Loan of $150,000. In a 2018 settlement with the Georgia Attorney General it agreed to give up accounts worth $8.8 million and pay a $20,000 civil penalty to resolve allegations it committed multiple violations of the federal Fair Debt Collection Practices Act and the Georgia Fair Business Practices Act when it repeatedly harassed and deceived consumers.

Adams Thermal Systems has received a PPP loan worth between $2 and $5 million. In 2013 it entered into a deferred prosecution agreement with the U.S. Attorney’s Office and the Occupational Safety and Health Administration to pay more than $1.33 million in criminal penalties and OSHA fines levied as a result of the 2011 death of a worker at the company’s plant in Canton, South Dakota.

These are just a few of the thousands of examples of companies that have gone from being defendants to recipients of federal largesse.

The Other Regulators

When it comes to business regulation, we tend to focus on federal agencies, which for the financial sector means the SEC, the CFPB, the Federal Reserve and the like. Yet there is another world of financial regulation at the state level, which at a time of weakening enforcement is more important than ever.

My colleagues and I at the Corporate Research Project have just completed a deep dive in this world for a major expansion of Violation Tracker. We collected enforcement data dating back to the beginning of 2000 for each state’s regulatory agencies dealing with banking, consumer finance, insurance and securities. In all, we created 15,000 entries with total penalties of more than $17 billion.

The number of cases and penalty amounts vary greatly from state to state. Among the more than 150 agencies we looked at, some disclosed hundreds of successful enforcement actions while others reported a few dozen. Some states are active in one of the areas we examined and weak in others.

The state that has by far collected the most in overall penalties is New York, whose total is more than $11 billion. Its Department of Financial Services has gone after the world’s biggest financial institutions and has won major settlements such as the $2.2 billion paid by the French bank BNP Paribas for violating international economic sanctions and the $715 million paid by the Swiss bank Credit Suisse for facilitating tax evasion.

California is second in penalties at just over $1 billion but far ahead in the number of cases. Its financial regulatory agencies have carried out more than 2,000 successful actions. Their biggest settlement was the $225 million paid in 2017 by Ocwen Loan Servicing for mortgage abuses.

Three other states have collected more than $100 million in penalties: Arizona ($665 million in 488 cases), Texas ($632 million in 1,097 cases) and New Jersey ($339 million in 398 cases).

If we focus on the area of insurance, in which the states have pretty much exclusive jurisdiction, the largest number of penalties of $5,000 or more were found in California (1,475), Texas (950) and Virginia (633). Yet in terms of total penalty dollars, New York was first with $808 million, followed by Texas ($617 million) and California ($541 million).

We also identified more than 100 cases in which regulators from different states brought cases jointly. These actions are similar to the multi-state attorneys general cases we analyzed in our Bipartisan Crime Fighting by the States report published in September 2019.

The cases brought by groups of state insurance and securities regulators have yielded about $2 billion in penalties since 2000. The companies that have paid the most in penalties in these cases are: Citigroup ($251 million), American International Group ($204 million), Bank of America ($201 million) and the Swiss bank UBS ($179 million).

Looking at both single-state and multi-state actions in banking, insurance and securities combined, the companies that have paid the most in total penalties turn out to be the big foreign banks, which account for every spot in the top ten. That New York sanctions case puts BNP Paribas on top with more than $2 billion, followed by Deutsche Bank and Credit Suisse.

The U.S. companies with the largest overall penalty totals are State Farm Insurance ($368 million), UnitedHealth Group ($354 million), Citigroup ($295 million), American International Group ($275 million) and MetLife ($263 million).

With the addition of the state financial cases, Violation Tracker now contains 437,000 cases with total penalties of $627 billion imposed by more than 50 federal and 200 state and local agencies.