Violation Tracker

A Gift to Money Launderers

Donald Trump wants to be seen as a law and order president. He is riding roughshod over due process to send purported Venezuelan gang members to a supermax prison in El Salvador, and he muses about doing the same with those who vandalize Tesla dealerships.

Yet when it comes to another group of miscreants, the Trump Administration turns softhearted. During the past two months, the federal government has adopted various kinds of leniency for corporate and white collar lawbreakers. The Justice Department has suspended enforcement of the Foreign Corrupt Practices Act. DOJ and the SEC have abandoned numerous investigations of corporate misconduct. The Consumer Financial Protection Bureau is being dismantled. The EPA is being neutered.

Most recently, the Treasury Department announced it would not enforce the beneficial ownership reporting provisions of the Corporate Transparency Act (CTA) with regard to domestic companies. Treasury Secretary Scott Bessent called the move “a victory for common sense.”

Actually, it is a victory for money launderers. The CTA was enacted to address the problem of illicit money flows around the world. Opponents have been seeking to undo the CTA since its enactment in 2021. Their legal challenges appeared to be succeeding until the Supreme Court upheld the law earlier this year. Now the Treasury Department’s Financial Crime Enforcement Network (FinCEN) is using administrative procedures to severely restrict the scope of the law. As a result, the number of entities expected to report beneficial ownership will plunge from an estimated 32 million to about 20,000.

By exempting domestic entities from the CTA’s reporting requirements, FinCEN would have us believe that money laundering is primarily a problem outside the United States. One has only to look at the cases brought by FinCEN itself to see this is false.

As Violation Tracker documents, FinCEN has collected hundreds of millions of dollars in fines and settlements from U.S. financial institutions for offenses related to money laundering. For example, in 2021 Capital One paid $290 million to resolve allegations that its check cashing group failed to establish and maintain an effective anti-money laundering (AML) program.

U.S. casinos have also been penalized by FinCEN. One of those was the Trump Taj Mahal in Atlantic City. In 1998 the property, then still controlled by Trump, was fined $477,000 for currency transaction reporting violations. The Taj Mahal subsequently received numerous warnings about such issues, and in 2015, by which time it was controlled by Carl Icahn, the casino was fined $10 million for willful and repeated violations of the Bank Secrecy Act.

Scores of other AML cases have been brought against U.S. companies by the Justice Department. These include a $586 million settlement paid by Western Union on charges of willfully failing to maintain an effective AML program and aiding and abetting wire fraud. This case and numerous others involved criminal charges that were usually resolved with a non-prosecution or deferred prosecution leniency agreement.

Many other domestic AML enforcement actions have been brought by bank regulators—including the Federal Reserve, the Office of the Comptroller of the Currency, and the Federal Deposit Insurance Corporation—as well as the SEC, the Commodity Futures Trading Commission and state attorneys general.

In other words, money laundering and AML deficiencies are very much a domestic problem which will now grow only worse with the undermining of the Corporate Transparency Act.

Putting Military Families at Risk

I don’t recall Donald Trump saying during the presidential campaign that he planned to make his supporters helpless against predatory lenders and financial scam artists, but that is apparently what he is about to do at the Consumer Financial Protection Bureau. Trump has ousted CFPB director Rohit Chopra, a zealous champion of consumer protection, and given control of the agency to Scott Bessent, the former hedge fund manager who is already serving as Treasury Secretary.

Bessent’s first act was to order a halt to all activities at the CFPB, including rulemaking and enforcement. He issued a statement saying: “I look forward to working with the CFPB to advance President Trump’s agenda to lower costs for the American people and accelerate economic growth.” Translation: I will slash regulation and perpetuate the myth that reduced oversight works to the benefit of consumers.

The firing of Chopra and freezing of CFPB activities come as welcome news to major financial institutions and fly-by-night operators, both of which have sought to neutralize the agency ever since it began operation in 2011. The agency was also a frequent target of criticism from Congressional Republicans, who hated the fact that the law creating the CFPB provided that the director could only be removed for cause. In 2020 the conservative majority of the Supreme Court threw out that provision, meaning that the director could be removed at will by the President.

As shown in Violation Tracker, the CFPB has over its life collected more than $17 billion in fines and settlements, much of which has gone to affected consumers in the form of restitution. The cases, numbering more than 250, have involved a wide range of financial misconduct, from the Wells Fargo bogus account scandal to the deceptive practices of for-profit colleges.

Let’s focus on one subset of cases in which the CFPB has been especially active: cases brought against lenders that prey on military families. The agency has collected more than $146 million in penalties in a dozen such cases. A big share of that total comes from a $92 million settlement reached in 2014 with Colfax Capital and Culver Capital, also known as Rome Finance. The case, brought in cooperation with 13 state attorneys general, accused Rome Finance of luring servicemembers with the promise of instant financing on expensive electronics but then masked the finance charges with inflated prices in marketing materials and later withheld key information on monthly bills. Richard Cordray, CFPB’s director at the time, stated: “Rome Finance’s business model was built on fleecing servicemembers.”

In 2023 the CFPB found that TMX Finance, known as TitleMax, violated the Military Lending Act by extending prohibited title loans to military families, often charging nearly three times more than the 36% annual interest rate cap. The agency said TitleMax tried to hide its unlawful activities by, among other things, altering the personal information of military borrowers to circumvent their protected status. The CFPB also found that TitleMax increased loan payments for borrowers by charging unlawful fees. The agency ordered the company to pay more than $5 million in consumer relief and a $10 million civil money penalty.

Large financial institutions have also been called out by the CFPB for cheating military families. U.S. Bank and one of its nonbank partner companies, Dealers’ Financial Services, were required to return about $6.5 million to servicemembers for failing to properly disclose all the fees charged to participants in the companies’ Military Installment Loans and Educational Services auto loans program, and for misrepresenting the true cost and coverage of add-on products financed along with the auto loans.

Those who would eliminate or defang the CFPB—especially those who take every opportunity to express their support for the troops–should be made to made to acknowledge that their actions will make military families, as well as millions of others, more vulnerable to financial predators.

Attacking DEI, Enabling Discrimination

The early days of Trump 2.0 have been marked by a preoccupation with rooting out every last trace of DEI policies. Many programs are being abolished, and diversity officials are being terminated. The administration even tried to bring all federal grants and loans to a halt in order to make absolutely sure nothing was going out the door that promoted what the Office of Management and Budget called “Marxist equity.” Newly minted Defense Secretary Pete Hegseth seems to regard DEI as a bigger threat than ISIS.

What was originally a response by the Right to the supposed excesses of wokeness is now starting to resemble a new Red Scare, complete with calls for federal employees to inform on colleagues who try to conceal DEI activities.

The harmful effects of this extend beyond the career prospects of diversity bureaucrats. One example can be found at a federal agency called the Office of Federal Contract Compliance Programs. The mission of the OFCCP is to ensure that employers doing business with the federal government comply with laws and regulations regarding workplace discrimination. Given that the feds pay out some $750 billion a year to an estimated three million contractors, the OFCCP is responsible for preventing unfair treatment of a large portion of the workforce.

OFCCP’s ability to do its job has been hampered by a Trump executive order that rescinds legal authority the agency has had since 1965 to investigate discrimination and promote affirmative action (the old name for DEI). The thrust of Trump’s order is to bar the agency from pursuing the DEI portion of its mission, but it is unclear whether it will still be able to hold contractors accountable for discriminating against groups of workers based on gender, race, national origin, or sexual orientation. Instead, the order commands the OFCCP to focus on eradicating DEI, which is depicted as the real discrimination.

Trump’s action seems to put an end to decades of enforcement activity in which the OFCCP pressured companies to change their hiring, promotion, and pay practices. In Violation Tracker we document more than 500 OFCCP cases dating back to 2000. Among the largest settlements are the following:

In 2017 Qualcomm paid $19.5 million to resolve allegations that it paid female engineers less than their male counterparts.

In 2019 Goldman Sachs paid just under $10 million to settle allegations it engaged in pay discrimination against Black, Hispanic, Asian, and female employees.

About 40 other companies have paid settlements of $1 million or more. Food distributors Sysco and US Foods have been involved in the largest number of cases, with nine each. Scores of Fortune 500 corporations are among those penalized by the OFCCP.

Now the Trump Administration has in effect pardoned these companies for their mistreatment of workers. This is a significant retreat from the principle that taxpayer dollars should not go to the bad actors of the business world—and it is another sign that, despite the populist trappings, MAGA policy ends up serving the interests of corporations.

The Inaugural Rogues Gallery

A news photograph on the inaugural ceremony that ran on the front page of the Wall Street Journal showed Elon Musk right behind Trump and his family members as Chief Justice Roberts administered the oath of office. It came awfully close to the recent New York cover cartoon depicting Musk putting his hand on the bible along with Trump’s.

Other photos revealed that Musk was not the only corporate figure given a prominent position in the limited confines of the Capitol Rotunda. Prime spots went to a line-up of tech moguls, including Mark Zuckerberg of Meta Platforms, Sundar Pichai of Alphabet/Google, Tim Cook of Apple, and Jeff Bezos of Amazon.com. A presidency that purports to be about economic populism began by seeming to signal that corporate CEOs and billionaires will have an outsized role.

What makes the deference shown to those business figures all the more unseemly is that they head companies with checkered regulatory compliance records. Here are some of their transgressions, as documented in Violation Tracker.

Meta Platforms has racked up more than $7 billion in penalties since 2000. The bulk of that comes from a $5 billion penalty imposed on Facebook in 2019 by the Federal Trade Commission for deceiving users about their ability to control the privacy of their personal information. Last year, Meta had to pay more than $1 billion to settle allegations by the Texas Attorney General that it captured personal biometric data without authorization.

Alphabet, parent of Google, has amassed $2.7 billion in penalties largely from antitrust, privacy, and other consumer protection cases. Its biggest payout was a $700 million settlement in 2023 with state attorneys general to resolve allegations of monopolistic practices in its app store. The year before, it paid out $391 million to state AGs to settle a case alleging it misled users about the collection and use of their personal data.

Apple has accumulated $1.4 billion in penalties, mainly from cases involving anti-competitive practices and consumer protection violations. For example, in 2020 it paid $113 million to settle a case brought by over 30 state attorneys general in connection with its decision to throttle the performance of iPhones to avoid addressing a problem with battery performance. In 2014 it paid $32 million to resolve FTC allegations it unfairly charged consumers for in-app purchases incurred by children without their parents’ consent.

Amazon has managed to avoid any ten-figure penalties, but it has been penalized much more often than the other tech giants, with 173 entries in Violation Tracker. The largest portion of these involve workplace safety, given the high level of ergonomic injuries in the company’s distribution centers. Recently, OSHA pressed Amazon to sign a corporate-wide agreement to try to improve conditions.

Tesla, SpaceX, and other businesses owned by Musk have accumulated “only” about $100 million in penalties but they are involved in numerous current regulatory controversies, including some related to their extensive contracts with the federal government.

It is also worth noting that all these companies have been involved in regulatory offenses outside the United States and may be hoping that the Trump Administration can pressure the European Union, for instance to ease up on the oversight.

As shown in Violation Tracker Global, Apple has paid out more than $18 billion in penalties to foreign countries since 2010, including a case last year in which it was ordered by the European Commission to repay 13 billion euros to Ireland to make up for illegal tax breaks. Earlier last year, the Commission fined Apple 1.8 billion euros for abusing its dominant position in the market for the distribution of music streaming apps to iPhone and iPad users through its App Store.

Alphabet has paid out 7 billion euros to the Commission for anti-competitive practices and 965 million euros to French authorities for improper shifting of profits to evade taxes. Meta has paid over 2 billion euros in a series of cases brought by the Irish Data Protection Commission for privacy violations. Amazon was fined 746 million euros by the data protection agency in Luxembourg.

In short, the companies given a place of honor at Trump’s inauguration are serial regulatory violators that have apparently decided that cozying up to the new Administration may pay off at home and abroad.

The 2024 Corporate Rap Sheet

My colleagues and I collected more than 22,000 new entries for the U.S. version of Violation Tracker this year. We also launched Violation Tracker Global, which contains cases brought against large corporations in 52 countries. Here are some of the most notable cases of the year from both databases.

McKinsey and Opioids. McKinsey, the leading management consulting firm, had to pay $650 million in criminal and civil penalties to resolve a U.S. Justice Department (DOJ) case concerning its work for the disgraced pharmaceutical company Purdue Pharma. McKinsey was charged with conspiring with Purdue to “turbocharge” sales of OxyContin while misleading users about the addiction risks of the opioid.

TD Bank and Money Laundering. TD Bank N.A., a U.S. subsidiary of Canada’s Toronto-Dominion, pleaded guilty and agreed to pay $1.9 billion in fines and forfeiture to resolve DOJ charges that it violated the Bank Secrecy Act by failing to file reports on suspicious transactions and thereby facilitated money laundering by criminal networks.

BHP, Vale and a Mining Disaster. Mining giants BHP and Vale, co-owners of the Samarco joint venture, agreed to a US$31 billion settlement to resolve litigation brought by Brazilian communities destroyed by the 2015 Mariana mine-waste dam collapse that killed 19 people and polluted 400 miles of rivers.

Raytheon and Fraud and Bribery. Raytheon Company, a subsidiary of military contractor RTX (formerly known as Raytheon Technologies), agreed to pay over $950 million to resolve a DOJ criminal investigation into a major fraud scheme involving defective pricing on certain government contracts and violations of the Foreign Corrupt Practices Act and the Arms Export Control Act.

3M and PFAS. A federal judge in South Carolina gave final approval to a class action settlement in which 3M agreed to pay an estimated $12.5 billion to more than 10,000 public water systems to resolve allegations that PFAS chemicals produced by the company for use in firefighting foam ended up contaminating water sources.

Apple and Improper Tax Breaks. The European Commission ordered Apple to repay 13 billion euros to Ireland after determining that the special tax breaks the company had been receiving for 16 years amounted to a form of illegitimate state aid.

Meta Platforms and Biometric Data. Facebook parent Meta Platforms agreed to pay $1.4 billion to the Texas Attorney General’s office to settle a lawsuit alleging it improperly captured biometric data from millions of users for its facial recognition system without the authorization required by state law.

Teva Pharmaceuticals and Copaxone. The European Commission fined Teva 462 million euros for abusing its dominant position to delay competition to Copaxone, its medication for the treatment of multiple sclerosis. The Commission found that Teva artificially extended the patent protection of Copaxone and systematically spread misleading information about a competing product to hinder its market entry and uptake.

Uber Technologies and Wage Theft. Uber paid $148 million to settle a case brought by the Massachusetts Attorney General alleging that it violated state wage and hour law in the way it paid its drivers. The agreement also required the company to begin paying a minimum wage of $32.50 an hour and providing benefits such as paid sick leave. The case also targeted Lyft, which paid $27 million.

Glencore and Bribery. The Office of the Attorney General of Switzerland ordered commodities trading company Glencore to pay a penalty equal to about $152 million for failing to take steps to prevent the bribery of government officials in the Democratic Republic of Congo by a business partner.

Walgreens and False Claims. Walgreens Boots Alliance Inc. and Walgreen Co. agreed to pay $106 million to the DOJ to resolve alleged violations of the False Claims Act and state statutes for billing government health care programs for prescriptions never dispensed.

Veolia and a Workplace Death. A British subsidiary of France’s Veolia Group pleaded guilty to breaching the Health and Safety at Work Act after a worker died and another was seriously injured while decommissioning a North Sea gas rig. The Health and Safety Executive fined the company £3 million and ordered it to pay £60,000 in costs.

Goldman Sachs and Apple Card Users. The U.S. Consumer Financial Protection Bureau ordered Goldman Sachs to pay $64 million in fines and redress for mishandling customer service breakdowns affecting thousands of Apple Card holders. These failures meant that consumers faced long waits to get money back for disputed charges and some had incorrect negative information added to their credit reports.

You can find many more examples of the year’s corporate scandals in Violation Tracker and Violation Tracker Global. There is every reason to believe there will be many more cases for the Trackers to document in the coming year.

Big Banks and Dirty Money

Toronto-Dominion has joined the dubious club of large companies that have paid a penalty of $1 billion or more in a single case of misconduct. It achieved that distinction with the recent slew of announcements by the U.S. Justice Department and several financial regulators that the book was being thrown at the Canadian bank’s U.S. subsidiary TD Bank for widespread failures in meeting its obligations to prevent the use of its operations for money laundering by criminals and tax evaders.

TD Bank was hit with $1.9 billion in criminal fines by the DOJ and more than a billion from the Federal Reserve, the Office of the Comptroller of the Currency, and the Treasury Department’s Financial Crimes Enforcement Network. It all came to $3.09 billion in penalties. Adding these to Toronto-Dominion’s previous cases documented in Violation Tracker raises the bank’s aggregate penalties in the U.S. to nearly $4 billion, far and away the highest total for any parent company headquartered in Canada.

Looking specifically at penalties for anti-money-laundering (AML) deficiencies, Toronto-Dominion is now at the top of the list in that category, overtaking Denmark’s Danske Bank, which has hit with $2 billion in criminal fines by the DOJ in 2022.

Other banks with the highest penalties for AML and related Bank Secrecy Act violations include: JPMorgan Chase ($811 million), HSBC ($665 million), U.S. Bancorp ($528 million), Deutsche Bank ($491 million), and Capital One ($390 million). The non-bank with the largest total is Western Union at $740 million.

AML violations are not limited to the United States. In the new Violation Tracker Global, which covers cases against large corporations in 45 countries (including the U.S.), AML is one of the most frequent offenses, with total penalties equal to more than $20 billion imposed by regulators and courts in three dozen countries.

The U.S. by far contributes the most ($15 billion) to that total. Other countries with the most AML penalties against large corporations include Australia, the Netherlands, and the United Kingdom, each with between $1 billion and $2 billion. Next are Denmark and Sweden with totals between $500 million and $700 million.

Outside the United States, the largest individual AML cases include: a $916 million penalty in Australia against Westpac Banking Corporation; a $900 million penalty in the Netherlands against ING Bank; a $675 million penalty in Denmark against Danske Bank; a $575 million penalty in the Netherlands against ABN AMRO; a $529 million penalty in Australia against Commonwealth Bank; a $397 million penalty in Sweden against Swedbank; and a $350 million penalty against NatWest in the United Kingdom.

Toronto-Dominion had one AML penalty outside the U.S.—a penalty equal to less than $7 million in its home country of Canada.

These figures suggest that large banks everywhere have a problem complying with AML restrictions. That is probably because doing business with clients flush with dubious cash is simply too lucrative for them to resist. Large penalties imposed in the U.S. and a few other countries may have some deterrent effect, but regulators and prosecutors need to find more effective forms of punishment.

Note: The new TD Bank cases will be added to Violation Tracker and Violation Tracker Global as part of updates that are being prepared.

Challenging Corporate Greenwashing

Large corporations like to tout their environmental initiatives. The problem is that their claims are often exaggerated, misleading or completely unfounded. And rarely are they called to account for their deception.

Recently, there have been two exceptions to the rule, involving the petroleum industry, which has long been one of the most brazen practitioners of greenwashing. California Attorney General Rob Bonta announced the filing of a lawsuit against Exxon Mobil, alleging that it engaged in what the AG called “a decades-long campaign of deception that caused and exacerbated the global plastics pollution crisis.”

Bonta accused Exxon Mobil, a leading producer of the polymers used to produce single-use plastics, of employing “misleading public statements and slick marketing” to promote the idea that recycling is an adequate way to deal with the plastics pollution crisis.

The lawsuit, which seeks to get Exxon Mobil to cease making misleading statements and pay damages, bears a resemblance to previous actions against the corporation for its long history of denying the reality of the climate crisis and the major role the oil industry has played in exacerbating global warming.

Over in South Africa, another oil giant, France’s TotalEnergies, was recently found to have made misleading statements about its commitment to sustainable development. The Advertising Regulatory Board, acting on a complaint brought by the environmental group Fossil Free South Africa, based its ruling on the simple fact that the petroleum company’s core business is antithetical to sustainability.

The advertising board could also have looked at the environmental record of TotalEnergies. As shown in Violation Tracker, the company has paid more than $60 million in environmental penalties in the United States. It also paid $15 million to resolve allegations that it violated the False Claims Act by knowingly underpaying royalties owed on natural gas produced from federal and Indian leases. And it paid nearly $400 million to settle foreign bribery allegations.

As will soon be shown in Violation Tracker Global, TotalEnergies has also had regulatory challenges in other countries. For example, in 2010 a French appeals court upheld a 200 million euro judgment against the company in connection with a large oil spill by the tanker Erika off the coast of Brittany.

Of course, Exxon Mobil also has a checkered compliance record. Violation Tracker records more than $2 billion in environmental penalties in the U.S since 2000. That total would have been considerably larger if the Supreme Court had not slashed a multi-billion-dollar damage award stemming from the giant oil spill by the company’s Valdez supertanker off the coast of Alaska. Violation Tracker Global will contain $3 million in environmental penalties in other countries, especially Canada.

Supreme Court rulings such as the Citizens United case emboldened corporations to assert their free speech rights. Yet when that speech denies scientific reality and contributes to environmental devastation, society needs to respond. California’s lawsuit will not solve the plastics crisis, but it will help to make the case that Exxon Mobil is part of the problem rather than the solution.

Note: Violation Tracker Global will be launched in October

Cigna SLAPPs the FTC

Pharmaceutical companies, the big pharmacy chains and the middlemen known as pharmacy benefit managers, or PBMs, have been taking pains to blame one another for the high cost of prescription drugs. It is not unusual for business groups with conflicting positions to engage in this sort of finger-pointing, but now a major PBM is attacking a federal regulatory agency for criticizing its practices.

In a highly unusual and objectionable step, Cigna, parent of PBM Express Scripts, has filed a lawsuit against the Federal Trade Commission, seeking to force the agency to retract a recent interim report depicting PBMs as “powerful middlemen inflating drug costs and squeezing main street pharmacies.”

The FTC report points out that the market for PBM services has become highly concentrated, and the largest PBMs are now owned by the largest health insurers (as in Cigna’s ownership of Express Scripts) or pharmacy chains (CVS control of Caremark). “As a result of this high degree of consolidation and vertical integration,” the report states, “the leading PBMs can now exercise significant power over Americans’ access to drugs and the prices they pay.”

Cigna is certainly within its rights to disagree with and criticize the report, as the company did in a full-page advertisement in the Wall Street Journal. Yet Cigna did more than that. Its lawsuit, filed in federal court in Missouri, accuses the FTC of defamation and of violating the company’s due process rights. It seeks to have the report expunged from the FTC website along with “any other relief the Court deems just and equitable.”

Although the complaint does not explicitly ask for monetary damages, the action bears a close resemblance to the SLAPP suits filed by corporations seeking to silence their critics by causing them severe financial harm. This kind of tactic is seen, for example, in the lawsuit being pursued against Greenpeace by the pipeline company Energy Transfer. Like the SLAPP suits brought against NGOs, the Cigna action seems designed to intimidate—both the FTC and by extension its other critics.

Cigna’s claim it has been defamed ignores the fact that the company’s track record is hardly unblemished. Violation Tracker contains more than 200 entries for Cigna and its subsidiaries, with total penalties of $746 million.

Express Scripts accounts for about $30 million of that total, stemming from cases such as a $3.2 million settlement with the Massachusetts Attorney General in 2022 to resolve allegations the company failed to follow prescription pricing procedures designed to keep costs down and prevent overcharges in the state’s workers compensation insurance system.

Accredo, a specialty pharmacy owned by Express Scripts, paid $60 million in 2015 to resolve federal allegations that it received illegal kickbacks, in the form of patient referrals and other benefits, from the pharmaceutical company Novartis in exchange for promoting refills for its drug Exjade.

It is unacceptable for Cigna, or any other company, to seek to muzzle a federal regulator through the use of the legal system. Hopefully, the court will see the danger of this lawsuit and dismiss it promptly.

Attacking Price Manipulation

Throughout Joe Biden’s time in office, critics have complained he has not done enough to address high grocery prices. Now that his replacement as the Democratic presidential nominee has come forth with a plan to deal with the problem, many of those same critics are accusing Kamala Harris of going too far.

A wide range of pundits are particularly scandalized at Harris’s critique of price-gouging. It is perfectly valid to question whether her policies would be effective, but many commentators are trotting out simplistic and outdated economic principles to claim that corporate price manipulation is non-existent.

These believers in the supremacy of market forces are apparently unaware that the food sector is a hotbed of anti-competitive practices. This is especially true in the meat industry, where a small number of dominant corporations have had to pay out hundreds of millions of dollars in fines and settlements to resolve allegations that they collude to keep prices high.

Take the case of JBS, the giant Brazilian corporation that owns U.S. companies such as the poultry producer Pilgrim’s Pride and the beef producer Swift. As shown in Violation Tracker, JBS and its subsidiaries have paid out over $200 million in class action antitrust lawsuits since 2021. Pilgrim’s Pride was also sentenced to pay $107 million in criminal penalties after pleading guilty to federal charges of participating in a conspiracy to fix prices and rig bids for broiler chicken products.

Tyson Foods, another poultry goliath, has paid out over $120 million in class action settlements over the past three years, including one case in which it had to hand over $99 million. In the pork industry, Smithfield Foods, owned by the Chinese corporation WH Group, has paid around $200 million in price-fixing settlements.

Price-fixing conspiracies have also been alleged in the tuna industry, in which StarKist paid a criminal penalty of $100 million, as well as in milk processing, peanut processing and other food sectors. In 2020 the National Milk Producers Federation agreed to pay $220 million to settle litigation alleging it sought to boost prices through a program to reduce the number of dairy cows. There was even a $28 million settlement involving a mushroom marketing cooperative.

Aside from their illegal collusion on prices, food companies have been accused of entering into illegal agreements designed to suppress wages. A federal court in Oklahoma recently gave preliminary approval to a settlement in which Pilgrim’s Pride will pay $100 million. Other poultry processors such as Tyson and Perdue previously agreed to pay a total of tens of millions of dollars more.

Price-fixing is not exactly the same thing as price-gouging. The first involves illegal agreements among purported competitors, while the other may be committed by a powerful company acting on its own. Price-gouging can be illegal in certain circumstances under state law, especially if it happens during an emergency. Yet it is not, alas, illegal for companies to jack up prices in most circumstances.

That’s why all chief executives of food companies are not being led away in handcuffs. Yet it is all the more reason for the federal government to devise innovative ways to get corporations to bring down prices that escalated through market manipulation of one form or another.

A New DOJ Payday for Whistleblowers

Over the past decade, the Securities and Exchange Commission has paid out around $2 billion to individuals who provided information that led to successful enforcement actions against rule-breaking corporations. The awards can amount to tens of millions of dollars and sometimes reach the nine-figure level. More than a dozen other federal agencies such as the Commodity Futures Trading Commission have similar incentive programs.

The Justice Department recently announced that it will jump on the whistleblower bandwagon with a pilot program designed to assist in the prosecution of corporate crimes. DOJ’s initiative will cover certain crimes involving financial institutions, from traditional banks to cryptocurrency businesses; foreign corruption involving misconduct by companies; domestic corruption involving misconduct by companies; and healthcare fraud schemes involving private insurance plans.

To be eligible for an award, someone must provide DOJ with original non-public information that leads to a successful prosecution with a corporate penalty of at least $1 million. The whistleblower, who must not have participated in the illegal activity, could receive up to 30 percent of the first $100 million in net proceeds and 5 percent of proceeds between $100 million and $500 million. That means that a whistleblower could receive as much as $55 million.

Whistleblowing is not entirely new to DOJ. The department has long employed the False Claims Act qui tam program to investigate fraud against the federal government by contractors and Medicare healthcare providers. Many of the nearly 4,000 False Claims Act cases in Violation Tracker were made possible by whistleblowers. These cases are handled as civil matters, whereas the new pilot program will cover criminal charges.

DOJ sees the whistleblower program as part of its broader effort to encourage corporations to self-report when they detect illegal behavior within their ranks. The department took the unusual step of structuring the program so that whistleblowers remain eligible for an award if they first report the misconduct to corporate superiors and the company in turn discloses it to DOJ.

It would be ill-advised for the department to offer leniency deals to companies that engage in self-reporting only after learning that a whistleblower is ready to go public. Such deals are meant to incentivize companies to come forward of their own volition, not when the boom is about to be lowered.

Some critics complain that the DOJ pilot is deficient in that it does not adequately protect whistleblowers from retaliation. The program description deals with the issue by saying that the department could respond to retaliation by declining to award the company cooperation credit and/or “institute appropriate enforcement action.” DOJ would do well to adopt procedures like those in the Sarbanes-Oxley Act providing specific remedies for whistleblowers who experience retaliation.

Despite these limitations, it is encouraging that DOJ is adopting a practice for its criminal cases that has a long track record of success in bringing to light corporate wrongdoing of a civil nature. Let’s hope that this approach will put more pressure on rogue companies to clean up their act.