Violation Tracker

The $8 Billion Slap on the Wrist

In the normal course of events, an $8 billion penalty and a guilty plea would represent a landmark event in the history of corporate crime enforcement. The newly announced resolution of charges against Purdue Pharma is, however, a disappointment and a missed opportunity to mete out appropriate punishment to one of the most egregious rogue companies this country has ever seen.

Let’s start with the monetary penalty. The $8 billion amount ranks 11^th among all the fines and settlements collected in Violation Tracker. It is surpassed by penalties paid by companies such as BP, Volkswagen, Bank of America and JPMorgan Chase.

As bad as the environmental and financial conduct of those corporations may have been, it is likely that Purdue Pharma has caused much greater harm. It bears a significant amount of responsibility for the hundreds of thousands of people who have died from overdoses after becoming addicted to opioids the company recklessly promoted.

There is also the issue of the economic costs to society. The Society of Actuaries has estimated those costs to be as high as $214 billion a year. Looked at in comparison to the human and economic costs, the $8 billion penalty seems woefully inadequate—all the more so because it is unclear how much of that amount the bankrupt company will actually pay.

It is good that the Justice Department extracted a guilty plea from Purdue rather than its frequent practice of allowing large companies to sign deferred prosecution or non-prosecution agreements. Yet this is a case which called out for individual as well as corporate criminal charges. DOJ got the Sackler Family, which controls Purdue, to pay out $225 million—yet that is a pittance in relation to the billions the family has taken from the company.

One unusual feature of the case resolution is the provision that will require Purdue to emerge from bankruptcy as a benefit company supposedly dedicated to serving the public rather than maximizing profits. It remains to be seen how that would work, but it is already troubling that the creation of the trust would allow Purdue to reduce its criminal penalty substantially.

The good news is that the DOJ settlement is not the end of the story. The statement that the Sackler family has not been released from potential federal criminal liability is not expected to mean much, especially under a Trump Administration.

The possibility of more aggressive action can be found at the state level. Numerous state attorneys general have sharply criticized the deal and have vowed to pursue their own cases. “I am not done with Purdue and the Sacklers,” warned Massachusetts AG Maura Healey.

Let’s hope that state prosecutors do their job, because their federal counterparts have failed to adequately crack down on the worst corporate violators and the individuals behind them.

Trump’s Environmental Charade

When challenged about their climate denialism, President Trump and Vice President Pence tend to respond with a claim that the United States has the world’s cleanest air and water, thereby implying that their administration is doing a good job enforcing environmental regulations. Aside from being a separate issue from climate change, the claim is false in two ways: our air quality and water quality are far from the best, and enforcement has been on the decline.

The latter should come as no surprise, since regulation-bashing has been one of the hallmarks of the Trump Administration. It is one of the few areas in which traditional Republican values have been preserved.

Much of the administration’s focus has been on reversing the environmental initiatives of the Obama Administration, yet there has also been an erosion in the enforcement of longer-standing laws such as the Clean Air Act and the Clean Water Act.

The latest evidence of this comes in a new study by David Uhlmann of the Environmental Crimes Project at the University of Michigan Law School. The analysis, which has received prominent coverage in the New York Times, finds that during the first two years of the Trump Administration the number of criminal prosecutions under the Clean Water Act fell 70 percent and those under the Clean Air Act declined by more than 50 percent.

It should be noted that criminal prosecutions represent a small subset of environmental cases, the large majority of which are brought as civil matters. Criminal charges are often brought against individuals rather than corporate polluters, and they often involve specific offenses such as ocean dumping of hazardous wastes.

Uhlmann’s analysis is based on the number of cases and the number of defendants, which will differ given that some cases have multiple defendants. His findings are consistent with the data in Violation Tracker, where we focus more on the penalties paid by offenders, and we include civil as well as criminal cases.

Our data shows that the total penalties (both fines and settlements) collected by the EPA and the Justice Department have been trending downward during the Trump years. In the period from 2009 to 2016, environmental penalties averaged over $7 billion a year, an amount boosted by major cases against corporations such as BP for the Deepwater Horizon disaster and Volkswagen for emissions cheating.

Penalties during the Trump Administration have averaged $974 million per year. The average would be much lower if not for the $1.5 billion settlement announced in September with Daimler for its emissions cheating. It is encouraging that this case was resolved during the current administration, but it is one of only a small number of mega-settlements reached over the past few years, and most of these represented the culmination of enforcement initiatives begun under the previous administration.

Thanks to career public servants in the EPA and the Justice Department, environmental enforcement has not disappeared during the Trump Administration. Yet the downward trend in penalties suggests that political appointees are probably thwarting more aggressive action against polluters.

The Legacy of Financial Services Racism

At a time when numerous large corporations have been expressing support for the Black Lives Matter movement, it is important not to forget that big business has played a role in perpetuating systemic racism and widening the racial wealth gap.

This reality became clearer for me while I was collecting a new category of data for Violation Tracker: class-action lawsuits brought against financial services corporations engaging in discriminatory practices against their customers.

I was able to identify a total of 30 cases in which banks, insurance carriers and consumer finance companies paid a total of $400 million in settlements over the past two decades to resolve allegations that they charged higher premiums or interest rates to minority customers.

These private lawsuits are in addition to dozens of similar cases already in Violation Tracker that were brought by the Justice Department and state attorneys general during the same time period.

A wave of this litigation came in the early 2000s, when all the major automobile financing companies—including subsidiaries of carmakers such as Ford, General Motors, Toyota, and Honda—agreed to settle allegations that they allowed dealers to charge inflated interest rates on loans to African-American customers.

Subsequent years saw settlements with major insurance companies such as John Hancock, which in 2009 agreed to pay $24 million to resolve allegations that for decades it sold only inferior policies to Black customers. As recently as 2018, Travelers Indemnity settled a suit alleging it engaged in racial discrimination by refusing to write commercial policies for landlords who rented to tenants using Section 8 vouchers.

Over the past decade, major banks have faced private discrimination lawsuits concerning their mortgage lending practices. The defendant in four of these cases was Wells Fargo, which has paid more than $28 million in settlements. These include a case resolved just last year in which the City of Philadelphia had sued the bank on behalf of minority residents it allegedly steered to mortgages that were riskier and more expensive than those offered to similarly situated white homebuyers.

Discriminatory practices such as redlining began many decades ago. What the consumer civil rights lawsuits now documented in Violation Tracker show is that these injustices are not entirely a phenomenon of the distant past. The financial services sector has more work to do to ensure that their customers of color are treated equitably.

Note: with the addition of these lawsuits and other recent cases, Violation Tracker now contains a total of 438,000 entries involving $633 billion in fines and settlements.

High-Minded Hypocrisy

As they push forward to fill a Supreme Court vacancy shortly before a presidential election, Republicans are putting on a master class in hypocrisy. A new report on self-proclaimed socially responsible corporations reminds us that the tendency to say one thing and do another can also be seen in the world of business.

The study, produced by consulting firm KKS Advisors and an initiative called Test of Corporate Purpose (TCP), looks at large corporations that were signatories to a much-ballyhooed statement issued in 2019 under the auspices of the Business Roundtable. That statement was meant to give the impression that big business is no longer concerned only with maximizing returns for shareholders and is promoting the well-being of other stakeholders such as employees.

Some of us responded to the Roundtable’s statement with skepticism, but KKS and TCP decided to put the 181 signatories to the test, looking at their behavior in dealing with the pandemic and the problem of inequality. Basing its analysis on news coverage of corporate actions, the report compared signatories and non-signatories on topics such as workplace safety, healthcare access, wage levels, diversity and environmental justice. The evaluations used data prepared by Truvalue Labs using the framework of the Sustainability Accounting Standards Board.

The report’s conclusion is that signatories were slightly less likely to respond in a responsible way to the pandemic and slightly more likely to do so with regard to inequality—in other words, endorsement of the Roundtable statement did not make a big difference one way or the other. KKS and TCP put it this way: “our results suggest that corporate commitments to purpose are less informative about a company’s future performance on social and human capital issues than other indicators. What matters more is whether a company has a strong track record of proactively managing issues that may become material during a crisis, and whether a company is an early responder on relevant issues during a crisis.”

I’m not sure exactly what is meant by “proactively managing issue” and being an “early responder” may be a good or bad thing depending on the nature of the response. I also think the report goes too far in trying to use news coverage to assess and rank corporate behavior.

My preference is to use concrete evidence relating to corporate behavior—especially the extent to which companies have been found to be violating regulations relating to the workplace, the environment, consumer protection, etc.

When the Roundtable statement was initially released, I ran the names of the signatories through Violation Tracker and found that they accounted for more than $197 billion in cumulative penalties, with 21 of them having penalty totals of $1 billion or more.

Serious violators can also be found among the companies—both signatories and non-signatories—that receive the highest ratings in the KKS-TCP report, which groups the firms into four quartiles without listing specific scores. For example, included in the quartile with the best ratings is drug giant Novartis, which according to Violation Tracker has paid more than $1.5 billion in fines and settlements over issues such as the promotion of drugs for purposes not approved as safe by the Food and Drug Administration.

That figure will increase to more than $2 billion next week when the database is updated to include recent cases such as one in which Novartis paid $642 million to settle Justice Department allegations relating to kickbacks and other illegal payments. Also in the first quartile are other repeat offenders such as the French bank BNP Paribas, whose Violation Tracker penalty total is more than $12 billion.

Until large corporations end their unlawful conduct, they have no claim to being models of social responsibility.

Covid Contracts and the Fraudsters

If you needed a plumber or a caterer, you would avoid a service provider who had in the past tried to bill you for work not performed or grossly overcharged for what was completed. The Trump Administration takes a different approach. In selecting contractors to provide the goods and services the federal government needs to deal with the pandemic, it has turned to dozens of corporations with a history of cheating Uncle Sam.

This finding emerges from a comparison of the recipients of coronavirus-related contracts to the data in Violation Tracker. The analysis focuses on a list of about 175 larger corporations and non-profits that account for nearly half of the roughly $12 billion in contracts awarded so far for laboratory services, medical equipment and much more.

Among this group, 69 contractors, or more than one-third of the total, have paid fines and settlements during the past decade for healthcare fraud and other violations relating to the federal False Claims Act or related laws. They have been involved in 189 individual cases with total penalty payments of $4.7 billion.

These are not trivial matters. Twelve of the contractors paid total penalties of more than $100 million and the average per parent company was $27 million.

The company with the largest penalty total is pharmaceutical giant Pfizer, which received a $13 million contract from the Department of Health and Human Services and whose separate covid-19 vaccine effort is being touted by the Trump Administration. Over the past decade, Pfizer has been penalized in 15 contracting cases, paying out a total of $987 million, most of it stemming from a 2016 lawsuit in which its subsidiary Wyeth had been accused of overcharging federal healthcare programs by misrepresenting its financial relationships with hospitals.

Drug wholesaler McKesson, which has been awarded contracts worth a total of $9 million, has paid penalties of $453 million to resolve allegations such as reporting inflated pricing information for a large number of products, causing Medicaid to overpay for those drugs.

The Walgreens pharmacy chain, which received a $72 million contract for covid-19 testing services, has paid $367 million in contracting penalties, three-quarters of which stemmed from a 2019 case in which the company had been accused of billing federal healthcare programs for hundreds of thousands of insulin pens it knowingly dispensed to beneficiaries who did not need them and that it overcharged Medicaid by failing to disclose lower drug prices it offered the public through a discount program.

Smaller but still significant penalties have been paid by the companies receiving the largest covid-19-related awards. The Dutch company Philips, recipient of $646 million in ventilator contracts, paid a penalty of $34 million through a subsidiary for giving illegal kickbacks to suppliers that purchased sleep apnea masks that were sold to Medicare beneficiaries. AstraZeneca, recipient of $436 million in contracts, has paid $170 million in penalties for False Claims Act and related violations.

The discovery that many covid-19 federal contractors have a history of misconduct in their government business is consistent with the recent finding by Good Jobs First that thousands of companies receiving CARES Act grants and loans have similar track records, including more than 200 healthcare providers that have paid $5 billion in False Claims Act penalties over the past decade.

Some of those aid recipients are also covid-19 contract recipients. Large companies such as Walgreens, Quest Diagnostics and Becton Dickinson are receiving money from the federal government through multiple channels despite having paid penalties in the past for contracting abuses. The awarding of federal contracts to corporations with a history of misconduct dates back long before the pandemic or this administration, but maybe now is the time to begin doing something about this wrong-headed practice.

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.

The Corporate Marauder Undermining the Postal Service

Donald Trump got elected in part by selling the idea that his business experience would enable him to do a great job of running the government. We see how that turned out. And now we have another veteran of the private sector wreaking havoc on the United States Postal Service.

Louis DeJoy was named postmaster general after spending four decades in the trucking and logistics business, becoming wealthy enough in the process to join the ranks of Republican megadonors. He made his name and his fortune through the creation of a company called New Breed Logistics, which grew to prominence by securing contracts with large corporations such as Boeing as well as the Postal Service.

In 2014 he sold New Breed to the Fortune 500 company XPO Logistics, staying on to run the New Breed operation and serve as a director of XPO until 2018. If we want to get a sense of the management approach DeJoy is bringing to the USPS, we can look at the track record of New Breed and XPO.

As shown in Violation Tracker, XPO and its subsidiaries have racked up a total of $65 million in fines and settlements in more than 70 misconduct cases over the past two decades. Nearly two-thirds of that total comes from wage theft. Last year XPO paid $16.5 million to resolve allegations that for years it misclassified drivers as independent contractors to deny them overtime pay and paid breaks.

This year XPO paid another $5.5 million for wage and hour violations relating to workers at its Last Mile operations. Altogether, XPO and its subsidiaries have had to pay out some $40 million in wage theft lawsuits. Another $3.5 million settlement in a misclassification case brought against an XPO unit and the retailer Macy’s is awaiting final court approval.

Another problem area for XPO is employment discrimination. Two of the cases in this category relate to New Breed Logistics. In 2015 a federal appeals court upheld a $1.5 million jury verdict in a sexual harassment and retaliation case originally filed by the Equal Employment Opportunity Commission in 2010. Also in 2015, New Breed had to pay $90,000 to resolve allegations by the Office of Federal Contract Compliance Programs that it engaged in discriminatory practices at a facility in Texas.

XPO has also been called out for workplace safety and health deficiencies. It has been cited more than 20 times by OSHA for serious, willful and repeated violations.

Along with the mistreatment of workers, the rap sheet of XPO and its businesses includes allegations of cheating the federal government. This comes by way of Emery Worldwide, an air freight company that became part of Con-Way Inc., which was purchased by XPO in 2015.

In 2006 Emery paid $10 million to settle a False Claims Act lawsuit brought by the Justice Department concerning the submission of inflated bills to the Postal Service for the handling of Priority Mail at mail processing facilities during a multi-year contract.

Leave it to the Trump Administration to choose someone to head the Postal Service who was associated with a company linked to fraud committed against that same agency.

XPO continues to do business with the Postal Service, and DeJoy has continued to receive income from the company through leasing agreements at buildings he owns. Even if XPO had a spotless record, DeJoy’s ongoing dealings with it create a glaring conflict of interest.

DeJoy claims to be retreating, at least through the election, from the measures that threatened to create chaos for mail-in ballots. Nonetheless, his corporate marauder’s approach to the management of the Postal Service still poses a grave threat to the future of a vital American institution.

The Corporate Culprits Receiving Covid Bailouts

Allegations of insider trading threaten to derail a plan by the Trump Administration to provide a $765 million covid-related loan to Eastman Kodak. This comes on the heels of controversy over the administration’s use of $700 million in coronavirus relief funds as a loan to trucking company YRC Worldwide, supposedly for national security reasons.

There will undoubtedly be more revelations about these specific sweetheart deals, but they also highlight a broader question about the vast amounts of federal assistance that has been flowing to businesses during the pandemic: to what extent are funds going to companies that have a track record of misconduct and may very well continue those misdeeds while getting taxpayer aid.

My colleagues and I have been seeking to answer at least the first part of that question with our work on two databases: Covid Stimulus Watch, which collects information on recipients of CARES Act business assistance, and Violation Tracker, which for the past five years has been assembling data on penalties paid by thousands of companies for regulatory infractions and other wrongdoing.

Each of the databases seeks to match the companies named in individual covid awards or penalties to a universe of more than 3,000 larger parent corporations. That allows us to aggregate the data to show the full extent to which a parent is getting aid or being penalized across its various operations.

We are also connecting the parents across the two datasets. We have 700 examples of medium and large companies that are both receiving covid aid and that have paid federal or state penalties for misconduct.

These corporations and their subsidiaries have received a total of $52 billion in grants and $54 billion in loans from CARES Act program. They have paid a total of $112 billion in fines and settlements since 2010. The assistance has, in effect, almost totally reimbursed them for their penalties.

Behind these aggregate numbers are some significant differences among the 700 corporations. About 250 of the largest companies are on the list because the Federal Reserve has been purchasing their bonds under the Secondary Market Corporate Credit Facility. Those purchases total about $1.8 billion, but the average amount per company is only about $7 million—a small figure for the Fortune 500 and Global 500 firms that dominate the list. At the same time, these companies — which include the likes of BP, Volkswagen and Merck – account for $101 billion of the penalties, or about 90 percent.

About 150 of the parents are medium-size companies that received only Paycheck Protection Program loans worth a total of $712 million. Their penalty total is about $560 million.

The remaining 300 parents fall into two main categories. First, there are the major airlines and other aviation companies being assisted through the Payroll Support Program. They account for $17 billion in grants and $7 billion in loans. Their penalty total is $614 million, with the major airlines accounting for most of that. American Airlines, for instance, has since 2010 paid $79 million in safety penalties, $42 million in employment penalties, and $22 million in federal contracting penalties.

The subset of common parents between Covid Stimulus Watch and Violation Tracker that accounts for a substantial number of covid recipients, a large aid amount and a hefty penalty total is healthcare. About 250 for-profit and non-profit providers have received some $34 billion in grants and $44 billion in loans and accelerated payments.

These hospitals, nursing homes and medical practices have paid $8.5 billion in fines and settlements since 2010. This includes more than $1 billion in penalties for employment-related violations such as wage theft and discriminatory practices.

Yet by far the biggest portion — $5.3 billion — of the penalties paid by the healthcare providers stem from False Claims Act matters. These are cases in which they have been accused by the federal government of improperly billing Medicare and Medicaid, thus engaging in fraud. In most cases the providers face only civil charges and are allowed to pay their way out of liability.

The poster child for this group of corporations is the for-profit hospital chain Tenet Healthcare, which has received $684 million in covid grants and $817 million in loans and accelerated payments. Since 2010 Tenet has paid more than $600 million in False Claims Act penalties, including a case in which two subsidiaries pled guilty to criminal charges relating to the payment of illegal kickbacks for patient referrals.

If policymakers want to explore whether covid aid is being misused, recipients such as Tenet — which are now receiving aid from the same federal government they were previously accused of cheating — might be a good place to start.

Note: we are also in the process of identifying small companies receiving covid aid that have a history of misconduct.

Foreign-Owned Regulatory Violators Found Among PPP Recipients

The massive Paycheck Protection Program was depicted as a necessary measure to save American small businesses, yet the list of recipients of the forgivable loans released by the Treasury Department contains numerous companies that are neither small nor American.

These include firms such as Jindal Saw USA LLC and JSW Steel (US) Inc., two affiliates of the Jindal Group, a multi-billion-dollar conglomerate owned by one of India’s wealthiest families. JSW Steel’s investments in the United States have been touted by Donald Trump, though the company later sued the U.S. Commerce Department when it was denied permission to import steel from India without paying a steep tariff.

Continental Carbon Company, owned by Taiwan’s International CSRC Investment Holdings Company (formerly China Synthetic Rubber Corporation), received a PPP loan worth between $5 million and $10 million.

These are two examples that have emerged from an examination of the PPP recipient list my colleagues and I have been doing as part of the integration of the data into our Covid Stimulus Watch website. Here are some others:

Giti Tire Manufacturing (USA) Ltd and Giti Tire (USA) Ltd, subsidiaries of Singapore’s Giti Tire.

Sekisui Voltek, LLC, a subsidiary of Japan’s Sekisui Chemical.

The U.S. subsidiary of Korean Air Lines (owned by the Hanjin Group).

Asahi Forge of America Corporation, a subsidiary of Japan’s Asahi Forge.

It does not come as a complete surprise that foreign-owned companies appeared on the PPP list. There was discussion of this possibility at the time the program was debated and enacted.

The issue then was whether such entities would be eligible for the loans if they were part of foreign companies with a workforce that surpassed the PPP employee limits. The muddled guidance provided by the Trump Administration has apparently allowed funds to go to firms linked to foreign corporations that are far from small businesses.

Another concern has come to light as we match PPP recipients to the data my colleagues and I have assembled for our other database, Violation Tracker: some of these foreign companies getting PPP loans have a history of misconduct.

The U.S. operations of Jindal Group have paid more than $1.4 million in penalties, mostly resulting from workplace safety and health violations.

Continental Carbon has paid over $2 million in penalties, nearly all of which involved Clean Air Act violations. Giti Tire, Sekisui, and Asahi Forge have also paid penalties to OSHA and/or the EPA.

In 2007 Korean Air Lines had to pay a $300 million criminal fine to the U.S. Justice Department after pleading guilty to conspiring to fix the prices of passenger and cargo flights. In 2018 Hanjin Transportation Co. Ltd., also part of the Hanjin Group, paid more than $6 million to the Justice Department to resolve allegations relating to a bid-rigging conspiracy that targeted contracts to supply fuel to United States Army, Navy, Marine Corps, and Air Force bases in South Korea.

In creating the Paycheck Protection Program, Congress probably did not intend to provide assistance to entities that are owned by large foreign companies and that had a track record of repeated regulatory violations and other serious misconduct.

Now that there is consideration of extending and expanding PPP, the question is whether such companies will continue to benefit from the largesse of American taxpayers.

The Paycheck Protection Program and Wage Theft

The Trump Administration’s reluctant disclosure of the names of more than 600,000 recipients of Paycheck Protection Program aid has shown that many of the loans went to firms that are well-connected and that otherwise don’t fit the image of mom-and-pop businesses we were led to believe would be the main beneficiaries.

There is another problem: many of the recipients previously engaged in behavior that amounts to paycheck endangerment. They failed to comply with minimum wage and/or overtime requirements and thus paid their workers less than what they were owed. In other words, they engaged in wage theft.

This comes from an analysis of data my colleagues and I have collected for the Covid Stimulus Watch and Violation Tracker databases. That includes the big PPP dataset and information on penalties imposed by the Labor Department’s Wage and Hour Division, one of the many agencies whose enforcement data can be found in Violation Tracker.

We are in the process of determining which PPP recipients are on the list of wage and hour violators, so we can highlight that in Covid Stimulus Watch along with other corporate accountability data.

As a first step, I looked at the 4,800 companies identified as receiving the largest PPP loans–$5 million to $10 million. So far, I have found 88 of those recipients that paid wage theft penalties since 2010. Their penalties averaged about $100,000—which is roughly double the amount paid in back pay and fines in a typical wage and hour case.

The largest wage theft penalty I’ve found for a PPP recipient is the $1.9 million paid by Hutco Inc., a marine and shipyard staffing agency based in Louisiana. In announcing the penalty, the U.S. Department of Labor said the company had utilized improper pay and record-keeping practices, resulting in “systemic overtime violations” affecting more than 2,000 workers.

PPP recipient National Food Corporation, a major egg producer, paid $435,000 in penalties for wage and hour violations at its operations in Washington State. The company also paid $650,000 to settle a sexual harassment lawsuit filed by the Equal Employment Opportunity Commission.

Hearth Management, a PPP recipient that manages assisted living facilities in four states, paid a total of $383,000 in wage theft penalties at several locations. At a facility in Tennessee, the Labor Department reported that the company made deductions from timecards for meal breaks even when employees worked through those breaks, and it failed to include on-call and other non-discretionary supplements when calculating overtime rates.

Other PPP recipients with substantial wage theft penalties include the publisher O’Reilly Media, the electronics company Sierra Circuits, the restaurant chain Legal Sea Foods, and Erie County Medical Center in Buffalo, New York, which has also been penalized for overbilling Medicaid. Apart from the PPP money, the Erie County Medical Center has received more than $75 million in grants and loans from other federal programs related to covid relief.

We will undoubtedly find many more companies with similar track records as we analyze the other hundreds of thousands of PPP recipients.

It was not illegal for employers with a history of wage theft penalties to apply for and receive PPP assistance, yet the presence of these companies in the recipient list points to dual risks.

First, there is the possibility that these firms will “cook the books” when it comes to reporting on their use of PPP funds and submitting their requests to have the loans forgiven. Second, these firms may feel that the current economic crisis will give them cover for returning to their old practices of wage theft. At a time of massive unemployment, these firms may assume that workers will not dare to complain about being shortchanged on their pay.

For these reasons, PPP employers with a history of wage theft penalties should be subject to additional scrutiny both by the Wage and Hour Division and the Small Business Administration. Paycheck protection must mean not only the preservation of jobs but also the defense of fair labor standards.