Violation Tracker

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.

The Other Regulators

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

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

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

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

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

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

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

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

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

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

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

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

Rescuing the Cheaters

The federal government has been sending tens of billions of dollars in aid to the country’s hospitals under the Provider Relief Fund created by the CARES Act. That’s all well and good. Yet there is an awkward aspect to this: quite a few of the recipients have been accused of cheating the federal government in the past.

I’ve been working closely with the relief fund data in recent days, in order to prepare it for uploading to Covid Stimulus Watch. I’ve noticed that numerous recipients are hospital chains that have been involved in cases brought under the False Claims Act (FCA), the law that is widely used by the federal government to go after healthcare providers and contractors for billing irregularities or other improprieties in their dealings with Uncle Sam.

Matching the Provider Relief Fund recipients to the FCA data my colleagues and I have collected for Violation Tracker, I found more than 100 overlaps for the period extending back to 2010. These include both for-profit and non-profit hospital systems.

The company that has received the most from the basic Provider Relief Fund (there is a separate set of awards to hospitals that have treated large numbers of covid patients) is also the hospital chain that has paid the most in FCA penalties over the past decade: Tenet Healthcare.

In 2016 Tenet and two of its subsidiaries had to pay over $513 million to resolve criminal charges and civil claims relating to a scheme to defraud the United States and to pay kickbacks in exchange for patient referrals. The subsidiaries pled guilty to conspiracy charges.

Community Health Systems, another big for-profit hospital chain participating in the relief fund, has been involved in ten different FCA controversies over the past decade. In 2018 one of its subsidiaries had to pay $260 million to resolve criminal charges and civil claims that it knowingly billed government health care programs for inpatient services that should have been billed as outpatient or observation services; paid remuneration to physicians in return for patient referrals; and submitted inflated claims for emergency department facility fees.

Among the non-profit relief fund recipients with FCA problems is Michigan-based Beaumont Health, one of whose hospitals had to pay $84 million in 2018 to resolve allegations that it made payments to referring physicians that violated the Anti-Kickback Act as well as the FCA.

CommonSpirit Health, the large Catholic health system, has numerous affiliates receiving relief funds that have faced FCA allegations. For example, in 2014 Dignity Health had to pay $37 million to resolve allegations that 13 of its hospitals in California, Nevada and Arizona knowingly submitted false claims to Medicare and TRICARE by admitting patients who could have been treated on a less costly, outpatient basis.

Altogether, at least 103 health systems whose facilities are participating in the relief fund have paid more than $4 billion in False Claims Act settlements and fines over the past decade.

Given the magnitude of the covid crisis, it would be difficult to argue that these providers should be denied assistance. Yet there should at least be additional safeguards put in place to make sure that they do not engage in similar transgressions when it comes to CARES Act funds.

Note: A list of companies receiving $500,000 or more from the Provider Relief Fund can be found here. A list of recipients of the high-impact awards can be found here.

Introducing Covid Stimulus Watch

The furor over some of the companies receiving federal financial assistance through the Paycheck Protection Program represents one of the most remarkable outbursts of anti-corporate sentiment seen for quite some time. A corporation such as Shake Shack, which used to have a cult following, found itself vilified for getting a $10 million loan from a program the public assumed would be used to help mom-and-pop businesses rather than a fast casual chain that last year had revenues of more than half a billion dollars.

I’s not just a matter of big versus small. Journalists have pounced on the disclosures of the PPP loans—which have come from SEC filings rather than the federal government—to look for examples of problem companies on the list. One of the best examples, by the New York Times, found all kinds of corporate bad actors getting the loans.

A new website my colleagues and I at Good Jobs First have just launched will make it even easier to pursue this kind of research. Covid Stimulus Watch combines available recipient data for the PPP — as well as the Payroll Support Program, which has doled out billions to the airlines – with accountability data about the companies.

The accountability data comes in six categories. Four of those are derived from data in Violation Tracker: employment-related penalties (such as wage theft and workplace discrimination); government-contracting related penalties (mainly False Claims Act cases); environmental, healthcare and safety penalties; and consumer protection, financial misconduct and unfair competition penalties.

The fifth category, relating to taxes and subsidies, shows which large companies have paid very low federal income tax rates and which have received large amounts of pre-pandemic financial assistance from federal, state and local programs, such as those shown in Subsidy Tracker. The final category shows which recipient companies have high levels of executive compensation, especially in comparison to what they pay a typical worker.

The limited set of recipients currently listed in Covid Stimulus Watch already illustrate the accountability issues at stake. For example, the major airlines that are receiving billions of dollars in aid raise concerns in multiple categories. United has paid out over $40 million to settle employment discrimination lawsuits. American Airlines has paid over $70 million in safety violations. JetBlue and Delta had negative federal income tax rates in 2018. The ratio of the pay of American’s CEO to that of its median employee was 195 to 1.

Concerning data can also be seen about some of the smaller recipients. One PPP recipient, Veritone Inc., paid its CEO $18 million in compensation. Another PPP company, FuelCell Energy, received more than $170 million in federal grants prior to the pandemic.

The data in Covid Stimulus Watch will hopefully fuel even more debate over which corporations deserve to be rescued by taxpayers.

Corporate-Owned Nursing Homes and Covid-19

It was only a few days ago that the Centers for Medicare and Medicaid Services announced that nursing homes will be required to notify residents and their families when coronavirus cases have been discovered in a facility. This comes many weeks after the Life Care Center in Kirkland, Washington became an early Covid-19 hotspot and deaths started mounting at other nursing homes across the country.

Even before the pandemic began, conditions in the nation’s roughly 15,000 nursing homes, which house some 1.5 million residents, were far from ideal. As a Washington Post investigation recently found, about 40 percent of nursing homes with publicly reported cases of coronavirus — the list of which is far from complete, given varying transparency practices among the states — had been previously cited by government inspectors for violating regulations meant to control the spread of infections. This made them all the more susceptible to coronavirus.

The blame for that poor track record rests to a significant degree with the large corporations, including private equity firms, that control a substantial portion of the country’s nursing homes. While the Washington Post story did not identify the parent companies of the facilities with reported Covid-19 cases, the data in Violation Tracker shows the compliance problems at those corporations.

The nursing home chain with the largest amount of total penalties is Kindred Healthcare, which has had to pay out more than $350 million in fines and settlements. The bulk of that amount has come from cases in which Kindred and its subsidiaries were accused of violating the False Claims Act by submitting inaccurate or improper bills to Medicare and Medicaid. Another $40 million has come from wage and hour fines and settlements.

Kindred has also been fined more than $4 million for deficiencies in its operations. This includes more than $3 million it paid to settle a case brought by the Kentucky Attorney General over issues such as “untreated or delayed treatment of infections leading to sepsis.”

Golden Living Centers, a large chain owned by the private equity firm Fillmore Capital Partners, accounts for more than $200 million in fines and settlements. Golden Living is the current incarnation of Beverly Enterprises, which in the 1990s was the poster child of nursing home misconduct. In 2000 it paid $170 million to settle allegations that it defrauded Medicare by fabricating records to make it appear that staff members were devoting much more time to residents than they actually were.

Golden Living and Beverly have also paid more than $6 million in fines arising out of inspections of their facilities, including $1.5 million paid to the Arkansas Attorney General to resolve allegations of patient neglect.

Another chain with a problematic track record is Life Care Centers of America, operator of the ill-fated facility in Kirkland. The company has paid more than $147 million in fines and settlements, most of which came from a False Claims Act case in which it was accused of improperly billing Medicare for rehabilitation services.

The company has also paid more than $2 million in fines stemming from inspections, including $467,985 for nursing homes in Washington State. Life Care facilities appear numerous times on the Washington Post list of facilities with reported coronavirus cases.

Other chains with substantial penalty totals include Genesis HealthCare ($57 million), Ensign Group ($48 million) and National Healthcare Corp. ($28 million).

Among the many problems that have been brought into sharp relief by Covid-19 — and that will have to be addressed once we have gotten through the pandemic – is the sorry state of our nursing homes, too many of which seem to put profit ahead of safety for one of the most vulnerable parts of our population.

Another Crooked Bank?

For the past three years, Wells Fargo has been pilloried for having created millions of bogus accounts to extract unauthorized fees from its customers. Now it seems Wells may not have been the only financial institution to engage in this type of fraud.

The Consumer Financial Protection Bureau, despite having been somewhat defanged by the Trump Administration, has just filed suit against Fifth Third Bank for similar behavior. Based in Cincinnati, Fifth Third is a large regional bank with branches in ten states and total assets of about $170 billion.

According to the CFPB’s complaint, the problem at Fifth Third arose when it, like Well Fargo, imposed overly aggressive cross-selling targets on its employees, causing them to create bogus accounts to meet those goals. These actions not only generated illicit fees, the complaint states, but also exposed customers to a higher risk of identity theft when, for example, online banking accounts were created without their knowledge. The issuance of unauthorized credit cards may have harmed customers’ credit scores.

The agency is asking a federal court to order Fifth Third to stop these practices and pay damages and penalties for its actions. The bank issued a press release denying the allegations and vowing to fight the lawsuit vigorously.

Although its “rap sheet” is a lot shorter than those of Wells Fargo and the other megabanks, Fifth Third has not been free from controversy. Violation Tracker’s tally on the company runs to more than $132 million in penalties.

One of the cases on the list was brought by the CFPB. In 2015 the agency announced that Fifth Third would pay $21.5 million to resolve two actions—one involving allegations of using racially discriminatory loan pricing and another involving deceptive marketing of credit card add-on products. The second case included allegations similar to those in the new case: telemarketers for the bank were alleged to have failed to tell cardholders that by agreeing to receive information about a product they would be enrolled and charged a fee.

Fifth Third’s largest past penalty was the $85 million it agreed to pay in 2015 to settle a case brought by the Justice Department and the Department of Housing and Urban Development concerning the bank’s improper origination of federally insured residential mortgage loans during the housing bubble.

In 2013 Fifth Third paid $6.5 million to settle an SEC case concerning the improper accounting of commercial real estate loans in the midst of the financial crisis. It has also paid out more than $8 million in wage theft lawsuits.

If the allegations against Fifth Third hold up, bank regulators and federal prosecutors will also have to determine whether the scheme occurred at other financial institutions. Megabanks such as JPMorgan Chase and Bank of America have run up billions of dollars in fines and settlements for many different kinds of misconduct. We need to know whether the creation of sham accounts should be added to the list.