Archive for the ‘Violation Tracker’ Category

Getting Tough on Corporate Killing

Thursday, January 23rd, 2020

The lead story on the front page of a recent edition of the Wall Street Journal was about the former chief executive of a Brazilian mining company not widely known in the United States. The Journal’s editors probably realized their readers would be shaken by the news that Fabio Schvartsman has been charged with homicide in the deaths of 270 people in a mining dam collapse last year.

The decision by prosecutors in the state of Minas Gerais to bring such charges against Schvartsman as well as other former executives at Vale SA shows the depth of anger in Brazil at the giant iron ore company over the accident in which a torrent of waste swept away people, submerged houses and created a large toxic wasteland (photo).

Vale and a German consulting company, five of whose officials were also hit with homicide charges, are alleged to have long known about a critical safety flaw in the tailings dam but failed to act.

Although Brazil does not have a death penalty or life sentences for civilian offenses, the filing of homicide charges against corporate executives is an aggressive measure that has rarely been applied in that country or anywhere else.

There are more precedents when it comes to corporate manslaughter, which is the idea that a business entity can be prosecuted for causing the death of employees or other persons. For example, in 2007 the United Kingdom enacted the Corporate Manslaughter and Corporate Homicide Act, though that law has not been enforced as rigorously as many advocates had hoped.

In the United States there is no such federal statute, though the principle of corporate criminal liability is well-established, and numerous companies have faced criminal charges, though they frequently end with deferred prosecution or non-prosecution agreements.

The Violation Tracker database has more than 1,600 criminal cases (compared to 395,000 civil matters). Many of these are financial in nature or involve violations of environmental laws such as the Clean Water Act that are deemed negligent or deliberate but usually don’t involve loss of life.

A much smaller number involve corporate killing, including notorious cases such as BP’s role in the Deepwater Horizon disaster or the Upper Big Branch disaster at a coal mine owned by Massey Energy.

In these matters, however, the corporations, as in civil cases, mainly paid financial penalties and their executives faced no personal liability. One exception was former Massey CEO Don Blankenship, who was convicted of conspiring to violate federal mine safety standards and was sentenced to a year in prison. Otherwise, the Justice Department has shown little interest in prosecuting corporate executives for environmental or workplace fatalities.

There has been a bit more of such activity at the local level, especially on the part of the Manhattan District Attorney’s Office. It has brought criminal charges against both companies and individuals in connection with workplace and other accidents. For example, in November 2019 a building owner, a plumber and a contractor were convicted of manslaughter by causing a 2015 explosion resulting from unauthorized natural-gas connections installed in a rental building.

Three years earlier, the Manhattan DA won a conviction against a construction supervisor accused of ignoring warnings about unsafe conditions on a building site that resulted in a fatal accident.

The approach of the Manhattan DA and the prosecutors in Brazil points to a promising way forward in the handling of corporate misconduct that results in serious harm or death. If they know they may end up behind bars for a long time, corporate executives and managers may become more serious about their responsibility to abide by health and safety laws.

The Controversial Corporations Exploiting Citizens United

Thursday, January 16th, 2020

It has now been exactly ten years since the U.S. Supreme Court opened the floodgates for special-interest political advertising in its Citizens United ruling. To mark the occasion, the Center for Responsive Politics has published an excellent report detailing how political spending has changed over the last decade.

One significant finding is that, although Citizens United overturned the prohibition on independent political expenditures by corporations, most companies have not taken advantage of that new right directly. The biggest surges in spending have come from wealthy individuals and from Super PACs.

This is not to say that corporations have stayed on the sidelines. CRP notes that they are funneling much of their spending through trade associations and dark money groups that do not disclose their donors.

To emphasize its point about the limited role of corporations in independent expenditures, the CRP report notes that only 36 companies in the S&P 500 have contributed $25,000 or more to Super PACs since 2012. The report notes that the biggest of these spenders are oil and gas companies but otherwise does not identify them.

Karl Evers-Hillstrom, the author of the report, agreed to share the full list with me, so I could learn more about which corporations are bucking the trend and getting more directly involved with political spending.

Seven of the 36 are those oil and gas companies, including giant producers such as Chevron and ConocoPhillips as well as the big fracking player Devon Energy. The utility industry accounts for eight of the 36 and includes some of the largest contributors to air pollution and carbon emissions: American Electric Power, Duke Energy, Exelon and Southern Companies.

Only three other industries account for more than one of the corporations on the list: insurance (Anthem, Centene and MetLife), casinos (Wynn Resorts and MGM Resorts International) and telecommunications (AT&T and Charter Communications).

The remainder consists of 14 corporations from different industries such as pharmaceuticals (Merck), tobacco (Altria), retail (Walmart), banking (BB&T, now part of Truist Financial) and miscellaneous manufacturing (3M).

The list thus includes some of the most controversial companies from many of the most controversial industries. Among the 36 are some firms that were involved in contentious mergers (e.g. AT&T’s acquisition of Time Warner) and policy issues (Anthem and Centene are big players in healthcare). After fighting for years over federal regulation of tobacco, Altria has moved into the contested business of vaping. Walmart was embroiled in a foreign bribery investigation.

One thing that characterizes nearly all the companies on the list is the fact that they have been implicated in significant compliance breaches. I checked the whole list against the data in Violation Tracker and found that the 36 firms account for more than $29 billion in fines and settlements.

The biggest penalty totals belong to Occidental Petroleum ($5.4 billion), American Electric Power ($4.8 billion), Merck ($3.3 billion) and Walmart ($2 billion). There are six other companies with totals of $1 billion or more. The average penalty for the 36 companies is $844 million.

What all this suggests is that, while most companies are not making full use of Citizens United, corporations that are engaged in controversial activities and have serious compliance problems can take advantage of the ruling and employ their financial resources to try to manipulate public policy in their favor. The threat to democracy thus remains.

U.S. Prosecutors and Foreign Corporations

Thursday, January 9th, 2020

Federal prosecutors recently announced that telecommunications giant Ericsson will pay more than $1 billion to resolve allegations that it conspired to make illegal payments to win contracts in five countries. The settlement included a $520 million criminal penalty imposed by the Justice Department and a $540 million civil payment to the Securities and Exchange Commission.

This was the latest in a long series of cases brought under the Foreign Corrupt Practices Act, the 1977 law that emerged out of the Watergate-era revelations about improper overseas payments by U.S. corporations. But what the case against Sweden’s Ericsson highlights is the extent to which the law is being applied to foreign corporations as well as domestic ones.

In fact, companies based outside the United States increasingly appear to be the primary targets of prosecutors. In the period since the Trump Administration took office, foreign corporations have paid about $4 billion in FCPA penalties to DOJ and the SEC—more than seven times the sum paid by domestic firms. Apart from the Ericsson settlement, the largest combined penalties have been paid by a Russian company ($831 million by Mobile TeleSystems PJSC) and another Swedish one ($731 million by Telia).

By contrast, U.S.-based firms have gotten off with much lighter financial punishment. The only domestic company paying more than $100 million was Walmart, though its long-delayed $281 million penalty was well below what had been expected.

The tougher treatment of foreign companies can also be seen in the prosecution of price-fixing. Violation Tracker shows that during the Trump Administration foreign companies have paid more than $723 million to DOJ in criminal penalties, whereas domestic firms have been penalized only $44 million. There were seven fines of $50 million or more among the foreign companies; none among those based in the United States.

This tendency toward imposing heavier penalties on foreign companies is not unique to the Trump years. During the Obama Administration, seven of the ten largest FCPA settlements involved foreign corporations, as did nine of the ten largest price-fixing cases.

There is no evidence to suggest that foreign companies are more prone to law-breaking and thus account for more of the penalties. When it comes to offenses that are more purely domestic in nature – such as environmental, consumer protection and employment violations – U.S.-based companies more than hold their own.

The question is whether the federal government is using those portions of its enforcement powers that impact more heavily on international trade to put an added burden on the foreign competitors of U.S. companies. Perhaps this is an indirect form of protectionism.

Personally, I have no problem with the prosecution of foreign corporations that are engaged in misconduct, as long as domestic companies doing the same thing are not being let off the hook.

A Boom Decade for Corporate Misconduct

Thursday, January 2nd, 2020

Business journalists are looking back with amazement at the stock market’s track record over the past decade. Yet the 2010s were also a boom period for corporate crime and misconduct.

In Violation Tracker my colleagues and I have documented more than 240,000 cases for that period representing $442 billion in fines and settlements—more than twice the $161 billion total for the previous decade. (The numbers are not adjusted for inflation.)

The cases from the 2010s include 574 with a penalty of $100 million or more, 147 with a penalty of $500 million or more, and 67 with a penalty of $1 billion or more.

The top tier of these mega-cases is dominated by four corporations. BP is linked to the largest single case on the list—the $20.8 billion settlement with the federal government and five states to resolve civil claims stemming from the massive 2010 Deepwater Horizon oil spill in the Gulf of Mexico. BP paid out numerous other mega-penalties and smaller ones to put its total for the decade at nearly $28 billion.

The second biggest single penalty during the decade was Bank of America’s $16.65 billion settlement with the Justice Department in 2014 to resolve claims relating to fraud in the period leading up to the financial crisis, including such behavior on the part of Merrill Lynch and Countrywide Financial, which BofA acquired during that crisis. BofA also had plenty of other penalties during the decade—including two in excess of $10 billion—bringing its total for that period to an eye-popping $62 billion.

The third of the penalty leaders is Volkswagen, which in 2016 reached a $14.7 billion settlement with the federal government and the state of California to resolve allegations relating to systematic cheating on diesel pollution emission testing through the use of defeat devices. VW paid out several other multi-billion penalties related to the cheating and racked up a penalty total of more than $23 billion for the decade.

Rounding out the list of companies with individual penalties in excess of $10 billion is JPMorgan Chase, which in 2013 reached a $13 billion settlement to resolve federal and state claims relating to the sale of toxic mortgage-backed securities by the bank itself and by its acquisitions Bear Stearns and Washington Mutual. JPMorgan also had several other penalties of $1 billion or more, along with smaller ones, that pushed its penalty total for the decade to more than $29 billion.

Other big domestic banks had a substantial share of mega-penalties. These include Citigroup, with a $7 billion toxic securities settlement in 2014 (and a penalty total of $16 billion for the decade) and Wells Fargo, with a similar $5.3 billion settlement in 2012 (and a penalty total of $15 billion stemming from issues such as the creation of bogus accounts to generate illicit fees).

The decade also saw a slew of mega-cases involving foreign banks such as BNP Paribas, Deutsche Bank, Royal Bank of Scotland and Credit Suisse for offense such as violations of economic sanctions and their own toxic securities abuses.

Financial services companies of all kinds dominated the mega-penalty list, accounting for 41 of the 67 billion-dollar cases. Also worthy of mention are the pharmaceutical companies, including settlements by GlaxoSmithKline for $3 billion and Johnson & Johnson for $2.2 billion, both for marketing drugs for purposes not approved as safe by the Food and Drug Administration. That industry will end up paying much more when the pending multistate opioid litigation is resolved.

The list could continue. Suffice it to say that the decade’s major cases made it clear that corporate misconduct perseveres through good times and bad.

The 2019 Corporate Rap Sheet

Thursday, December 19th, 2019

While the news has lately focused on political high crimes and misdemeanors, 2019 has also seen plenty of corporate crimes and violations. Continuing the pattern of the past few years, diligent prosecutors and career agency officials have pursued their mission to combat business misconduct even as the Trump Administration tries to erode the regulatory system. The following is a selection of significant cases resolved during the year.

Online Privacy Violations: Facebook agreed to pay $5 billion and to modify its corporate governance to resolve a Federal Trade Commission case alleging that the company violated a 2012 FTC order by deceiving users about their ability to control the privacy of their personal information.

Opioid Marketing Abuses: The British company Reckitt Benckiser agreed to pay more than $1.3 billion to resolve criminal and civil allegations that it engaged in an illicit scheme to increase prescriptions for an opioid addiction treatment called Suboxone.

Wildfire Complicity: Pacific Gas & Electric reached a $1 billion settlement with a group of localities in California to resolve a lawsuit concerning the company’s responsibility for damage caused by major wildfires in 2015, 2017 and 2018. PG&E later agreed to a related $1.7 billion settlement with state regulators.

International Economic Sanctions: Britain’s Standard Chartered Bank agreed to pay a total of more than $900 million in settlements with the U.S. Justice Department, the Treasury Department, the Federal Reserve, the New York Department of Financial Services and the Manhattan District Attorney’s Office concerning alleged violations of economic sanctions in its dealing with Iranian entities.

Emissions Cheating: Fiat Chrysler agreed to pay a civil penalty of $305 million and spend around $200 million more on recalls and repairs to resolve allegations that it installed software on more than 100,000 vehicles to facilitate cheating on emissions control testing.

Foreign Bribery: Walmart agreed to pay $137 million to the Justice Department and $144 million to the Securities and Exchange Commission to resolve alleged violations of the Foreign Corrupt Practices Act in Brazil, China, India and Mexico.

False Claims Act Violations: Walgreens agreed to pay the federal government and the states $269 million to resolve allegations that it improperly billed Medicare, Medicaid, and other federal healthcare programs for hundreds of thousands of insulin pens it knowingly dispensed to program beneficiaries who did not need them.

Price-fixing: StarKist Co. was sentenced to pay a criminal fine of $100 million, the statutory maximum, for its role in a conspiracy to fix prices for canned tuna sold in the United States.  StarKist was also sentenced to a 13-month term of probation.

Employment Discrimination: Google’s parent company Alphabet agreed to pay $11 million to settle a class action lawsuit alleging that it engaged in age discrimination in its hiring process.

Investor Protection Violation: State Street Bank and Trust Company agreed to pay over $88 million to the SEC to settle allegations of overcharging mutual funds and other registered investment company clients for expenses related to the firm’s custody of client assets.

Illegal Kickbacks: Mallinckrodt agreed to pay $15 million to resolve claims that Questcor Pharmaceuticals, which it acquired, paid illegal kickbacks to doctors, in the form of lavish dinners and entertainment, to induce them to write prescriptions for the company’s drug H.P. Acthar Gel.

Worker Misclassification: Uber Technologies agreed to pay $20 million to settle a lawsuit alleging that it misclassified drivers as independent contractors to avoid complying with labor protection standards.

Accounting Fraud: KPMG agreed to pay $50 million to the SEC to settle allegations of altering past audit work after receiving stolen information about inspections of the firm that would be conducted by the Public Company Accounting Oversight Board.  The SEC also found that numerous KPMG audit professionals cheated on internal training exams by improperly sharing answers and manipulating test results.

Trade Violations: A subsidiary of Univar Inc. agreed to pay the United States $62 million to settle allegations that it violated customs regulations when it imported saccharin that was manufactured in China and transshipped through Taiwan to evade a 329 percent antidumping duty.

Consumer Protection Violation: As part of the settlement of allegations that it engaged in unfair and deceptive practices in connection with a 2017 data breach, Equifax agreed to provide $425 million in consumer relief and pay a $100 million civil penalty to the Consumer Financial Protection Bureau. It also paid $175 million to the states.

Ocean Dumping: Princess Cruise Lines and its parent Carnival Cruises were ordered to pay a $20 million criminal penalty after admitting to violating the terms of their probation in connection with a previous case relating to illegal ocean dumping of oil-contaminated waste.

Additional details on these cases can be found in Violation Tracker, which now contains 397,000 civil and criminal cases with total penalties of $604 billion.

Note: I have just completed a thorough update of the Dirt Diggers Digest Guide to Strategic Corporate Research. I’ve added dozens of new sources (and fixed many outdated links) in all four of the guide’s parts: Key Sources of Company Information; Exploring A Company’s Essential Relationships; Analyzing A Company’s Accountability Record; and Industry-Specific Sources.

Corporate Law & Order

Tuesday, December 10th, 2019

Some of the best episodes of the old Law & Order television series were the ones in which the prosecutors investigated corporate misconduct. In 1992, for example, one episode titled “The Corporate Veil” featured a plot involving a medical equipment manufacturer’s sale of faulty pacemakers.

In real life, district attorneys focus mostly on homicides and other street crimes, but the business culprits depicted on Law & Order were not entirely imaginary. Local prosecutors do sometimes target rogue corporations, especially in certain parts of the country.

The latest expansion of Violation Tracker documents this fact. My colleagues and I at the Corporate Research Project of Good Jobs First looked at the records of district attorneys in the country’s 50 largest counties and 50 largest cities (some of which use other titles for their prosecutors, such as state attorney and prosecuting attorney).

In the period since the beginning of 2000, we found a total of 565 instances in which local prosecutors brought cases against corporations for offenses such as fraud against consumers and hazardous waste violations that resulted in a company’s paying a monetary fine or settlement. The aggregate penalties came to $5.9 billion.

These cases are far from evenly distributed among the large localities. California’s counties and cities, with 441 successful actions against corporations, account for more than three quarters of the nation’s cases.

California is also unusual in that its localities frequently band together to bring cases against large companies. We found 191 of these group lawsuits that together resulted in more than $1.8 billion in fines and settlements. These include a $1 billion settlement reached this year by 18 California counties and other public entities with Pacific Gas & Electric to resolve claims relating to the company’s role in major fires.

These multi-jurisdictional lawsuits are similar to those more often brought by groups of state attorneys general. In September, the Corporate Research Project published a report on these multistate cases, based on a compilation of more than 600 such actions.

The ability of California counties and large cities to pursue cases against corporations is strengthened by the state’s Unfair Competition Law and False Advertising Law, which prohibit many forms of predatory business conduct. Local prosecutor activism has caused tension with the state attorney general’s office, which views itself as the appropriate protector of the public against corporate abuses.

Although California’s local prosecutors have a commanding lead in the number of corporate cases, New York’s have collected the most penalty dollars. The Empire State’s $3.5 billion total (compared to $2.3 billion in California) is due mostly to a dozen very large cases brought against major foreign banks by the Manhattan District Attorney’s Office. The banks, such as BNP Paribas and UniCredit, were accused of doing business with parties subject to international economic sanctions.

New York local prosecutors have brought a total of 88 business misconduct cases that resulted in fines or settlements. The only other state in double digits was Texas, with 12 cases generating $12 million in penalties. Large localities in nine more states had one to six cases each: Arizona, Colorado, Florida, Illinois, Louisiana, Minnesota, Ohio, Oklahoma and Utah.

The local prosecutors’ cases, along with an update of the existing categories, brings the number of entries in Violation Tracker to 397,000 with aggregate penalties of $604 billion.

Note: In addition to the local prosecutors’ cases, the new Violation Tracker update includes cases from eight state and local consumer protection agencies as well as more than 200 cases from the New York Department of Financial Services with total penalties of more than $10 billion. The latter is the first portion of what will be complete coverage of state financial regulatory agencies throughout the country.

Putting Strings on Bank Mergers

Thursday, December 5th, 2019

The U.S. financial system has survived a decade without another meltdown like that caused by the proliferation of toxic securities in the late 2000s. The credit belongs to tougher regulation, not to a moral conversion on the part of the large banks. Those institutions still exhibit significant ethical deficits even as they grow larger.

That’s why new legislation on bank mergers being introduced by Sen. Elizabeth Warren and Illinois Rep. Chuy Garcia makes sense. The Bank Merger Review Modernization Act would require regulatory agencies to apply more rigorous standards when deciding whether to approve proposed deals.

Those standards would include a quantitative risk metric, consideration of the impact on market concentration for specific banking products, Community Reinvestment Act ratings and approval by the Consumer Financial Protection Bureau.

Those measures are all fine, but I would also suggest that regulators be required to consider the full track record of each party when it comes to compliance with a broad range of laws regulations.

I say this having compiled a large quantity of documentation of bank misconduct in my work on Violation Tracker. I am continuously amazed at the number and variety of cases in which banks have been involved as well as the eye-popping penalties they have paid to buy their way out of legal jeopardy.

The Violation Tracker penalty total for the financial services industry now stands at $305 billion (since 2000), and that number will increase by about $8 billion next week when we post an update that for the first time will include cases brought by the New York State Department of Financial Services and the Manhattan District Attorney’s Office.

Those agencies have brought several dozen major cases against large banks, especially foreign-based ones, for violations of international economic sanctions, money-laundering regulations and rules regarding the manipulation of foreign exchange markets.

Warren and Garcia express specific concern about the combination of SunTrust and BB&T, which are merging to form a new “Too Big to Fail” bank they are naming Truist.

There is good reason for the banks to shed their old identities. According to Violation Tracker, SunTrust has racked up more than $1.5 billion in penalties. These include a 2014 case in which the Consumer Financial Protection Bureau, the Department of Housing and Urban Development, and the attorneys general of 49 states and the District of Columbia required the company to address mortgage servicing misconduct by providing $500 million in loss-mitigation relief to underwater borrowers. It also required SunTrust to pay $40 million to approximately 48,000 consumers who lost their homes to foreclosure. At the same time, SunTrust had to pay $418 million to resolve a related case brought by the Justice Department for originating and underwriting loans that violated its obligations as a participant in the Federal Housing Administration insurance program.

As if that was not enough, SunTrust had to pay another $320 million as part of the resolution of a DOJ criminal case alleging that it misled numerous mortgage servicing customers who sought mortgage relief through the federal Home Affordable Modification Program.

BB&T has paid more than $130 million in penalties, most of which came from a 2016 case in which it agreed to pay $83 million to the Justice Department to resolve allegations that it violated the False Claims Act by knowingly originating and underwriting mortgage loans insured by the Federal Housing Administration that did not meet applicable requirements.

Why, one might ask, should corporations with such blemished records be allowed to merge and become the country’s sixth largest bank, whose combined resources will allow it to capture additional market share? It might be worth exploring whether, in addition to the kind of safeguards being proposed by Warren and Garcia, banks with a substantial record of misconduct could be barred from participating in mergers, or at least be required to take additional steps to make amends to the customers and communities they have harmed.

Another Type of Quid Pro Quo

Thursday, November 21st, 2019

As the political news is dominated by discussion of quid pro quo and bribery, there has been another ongoing series of allegations about improper payments for things of value. The other quid pro quo relates to the pharmaceutical industry, which has been the subject of a seemingly never-ending scandals about financial inducements given to healthcare professionals.

The most significant recent case involves a company called Avanir Pharmaceuticals, which had to pay more than $115 million to resolve allegations that it paid kickbacks to physicians to get them to prescribe its drug Nuedexta for uses not approved as safe by the Food and Drug Administration.

Among those uses were the treatment of behaviors associated with dementia among residents of long-term care facilities. Nuedexta was tested and approved for patients exhibiting what is known as pseudobulbar affect (PBA) — involuntary, sudden, and frequent episodes of laughing or crying that occur secondary to a neurologic disease or brain injury.

The case against Avanir included allegations that physicians receiving its payments ended up putting large numbers of patients on Nuedexta who showed no symptoms of PBA, exposing them to unknown risks.

The Justice Department regarded Avanir’s behavior to be serious enough to warrant criminal charges, but like in so many other cases, the company was offered a deferred prosecution agreement that allowed it to buy its way out of full legal jeopardy by paying criminal penalties of nearly $13 million. The company agreed to cooperate in the prosecution of several individuals who received the kickbacks and whose liability may end up being more than financial in nature.

In addition to the criminal matter, Avanir agreed to pay $103 million to settle a related civil False Claims Act case based on the fact that federal and state healthcare programs ended up paying claims stemming from the improper prescribing of Nuedexta.

Avanir’s alleged behavior is especially troublesome because of the involvement of elderly dementia patients, but the use of kickbacks is far from unknown in the pharmaceutical industry. In Violation Tracker we document about 50 drug industry cases in which kickbacks were the primary or secondary offense.

These cases, which have resulted in more than $7 billion in fines and settlements, have implicated pretty much every large pharmaceutical producer and numerous smaller ones as well. Some companies show up on the list several times. These include Abbott Laboratories, which along with its subsidiaries has been involved in six cases between 2003 and 2017 that resulted in $630 million in penalties, and Pfizer, which together with its subsidiaries has paid $531 million in five cases between 2004 and 2018.

The extent of the recidivism in drug industry kickback cases suggests that the industry is not taking the problem very seriously and that the Justice Department’s approach has not had the necessary deterrent effect. Perhaps there is a lesson here for the political world as well.

Being Mindful of Paycheck Abuses

Thursday, November 14th, 2019

It turns out that yoga instructors are mindful about more than poses and breathing. They also make sure they are paid properly for their work. A group of instructors in Illinois who sued CorePower Yoga for violating federal labor law recently reached a final settlement of $1.5 million to resolve allegations that the chain failed to pay them for mandatory out-of-studio work such as class preparation and communicating with students.

The yoga instructors’ case is just one of a remarkable series of settlements that continue to emerge from the courts despite the efforts by employers to thwart collective action against workplace abuses. I keep an eye on these developments as part of my work on Violation Tracker and am amazed at the quantity and variety of wage theft litigation. Here are some other examples I have been collecting to include in the next update of the database.

PetSmart agreed to pay $2.4 million to a group of dog groomers in California who alleged they were shortchanged on overtime and mandatory rest breaks and meal periods.

Zocdoc, an online medical appointment booking service, agreed to pay $1.4 million to resolve a lawsuit filed in New York alleging that the company mistakenly classified sales personnel as exempt from overtime pay.

Safelite agreed to pay $8.2 million to windshield replacement technicians in California who claimed they were not properly paid for administrative duties and time spent traveling to jobs.

Great American Financial Resources agreed to pay $1.25 million in Ohio to settle a dispute involving commissions for insurance agents.

Here are some other cases in which the parties have reached a settlement that is awaiting final court approval:

Morgan Stanley agreed to pay more than $10 million to resolve a lawsuit alleging it improperly refused to reimburse its financial advisers for work-related expenses such as client entertainment.

Pongsri Thai Restaurant in New York agreed to pay $3.7 million to a group of workers to resolve allegations that the company violated overtime and minimum wage regulations.  

FedEx agreed to pay $3.1 million to settle a suit brought by a group of drivers in western New York claiming they were misclassified as independent contractors and subject to improper pay deductions.

Not all these cases are resolved through a settlement. For example, a federal jury in Florida recently awarded $1.2 million to a group of forepersons employed by the tree service company Asplundh who alleged they were improperly denied overtime pay. It is not yet clear whether the company will appeal.  

A federal appeals court recently upheld a $4.6 million verdict won by a group of exotic dancers who had alleged that the Penthouse Club in Philadelphia misclassified them as independent contractors and thus denied them minimum wage and overtime protections.

Two things are made clear by this list. The first is that the problem of wage theft is pervasive. It is present in both old economy and new economy companies and in both highly paid and low-wage occupations. The culprits are both large employers and small ones, and the problem can be found all over the country.

The second conclusion is that, despite adverse rulings from the U.S. Supreme Court and efforts by employers to make it as difficult as possible for workers to sue, there is no sign yet that the flow of successful collective action wage and hour lawsuits is receding.

This is vital at a time when the Trump Labor Department has been seeking to replace federal enforcement with a dubious program promoting voluntary compliance by employers. For now, workers are holding their own in the ongoing battle over paycheck abuses.

Immunity Disorders

Thursday, October 24th, 2019

Immunity was once a term used mainly in discussing medical conditions, but Donald Trump and his defenders have seized on it as an all-purpose defense in dealing with the Mueller investigation and now the Ukraine probe. Trump’s lawyers just made preposterous claims about the scope of Presidential immunity in appellate court arguments seeking to block a subpoena for Trump Organization business records.

The claim is based on the dubious argument that having to respond to a criminal case would unduly distract the president from his duties. Given that Trump seems to relish doing battle with those who dare to investigate him, it is unlikely that an indictment would change his behavior much. If Trump is successful in his immunity claims, that would go a long way in putting the presidency above the law.

At least the debate on presidential immunity is being conducted in the open. There is another form of effective immunity that is rarely described as such but is also dangerous to our society.

That is the de facto immunity that chief executives of large companies enjoy in cases of egregious corporate misconduct. Consider some of the issues that dominate the business news these days.

  • Large pharmaceutical manufacturers and distributors stand accused of fostering an opioid epidemic that has resulted in tens of thousands of overdose deaths.
  • Johnson & Johnson is involved in a series of controversies about asbestos in baby powder, dangerous pelvic mesh and improper marketing of an anti-psychotic drug.
  • Boeing is facing allegations that it covered up serious safety hazards in a new jetliner that was involved in two fatal crashes before being taken out of service.
  • Exxon Mobil is facing lawsuits accusing it of suppressing for many years internal evidence of the costs and consequences of climate change exacerbated by its own operations.
  • PG&E is alleged to be responsible for wildfires in California that took scores and lives and destroyed thousands of homes.

What all these situations have in common is that the defendants are the corporations themselves rather than the individual executives ultimately responsible for the actions or policies that created the harms. We have come to take it for granted that corporations can shield their officers and board members from liability and use the company’s coffers to buy their way out of legal jeopardy.

This is, of course, nothing new. Top executives of the big banks escaped individual prosecution for their role in the financial meltdown, as did CEOs in many other scandals.

There have been a few exceptions. Enron CEO Jeffrey Skilling was sentenced to 24 years in prison for his role in that company’s giant fraud, but he used his resources to fight the sentence and ended up spending only half that amount of time behind bars.

In Violation Tracker we have 380,000 cases of corporate misconduct, including 84 in which a company paid a penalty of $1 billion or more. If we had chosen to compile data on convictions of corporate executives rather than companies, the list would fit on a single page.

If we are lucky, the courts will strike down the spurious claims of presidential immunity. Yet we must also find ways to make sure that rogue chief executives also remain within the reach of the law.