Consumer Deception

Large companies like to give the impression they put customer satisfaction above all else. They constantly tout their rankings in surveys such as those conducted by J.D. Power.

Yet it also turns out they are frequently sued by groups of customers for deceptive practices. Over the past two decades, major companies have paid out over $25 billion in damages and settlements in class action and multi-district consumer protection lawsuits filed throughout the United States. Some corporations have been involved in multiple cases, and a few have had total payouts of more than $1 billion.

These findings come from a compilation of consumer protection lawsuits prepared for inclusion in Violation Tracker. Using court records, we have documented more than 600 successful legal actions dating back to the beginning of 2000. These are only cases in which a company was accused of cheating its customers by overcharging for goods and services or engaging in false advertising. This list does not include cases involving issues such as product safety or privacy violations, which were previously added to Violation Tracker. It also does not include cases brought by government agencies, which were also already in the database.

One thing jumps out from the new list of cases: banks, insurance companies and other players in the financial services sector account for a far larger portion of the penalties than any other part of the economy: over $14 billion in 249 cases. This is more than 55 percent of the penalty total and 40 percent of the cases.

Half of Big Finance’s penalty total comes from a handful of companies. Bank of America paid out over $3 billion in 29 cases. JPMorgan Chase racked up $2.3 billion in penalties in 26 cases. Wells Fargo’s penalty total is $1.3 billion from 21 cases. State Farm Insurance ranks next with $669 million from six cases.

Here are just a few of the abuses Bank of America has been accused of committing: imposing excessive overdraft fees on checking accounts; charging military customers interest rates above federally mandated limits; enrolling customers in credit protection plans without their consent; applying late fees on credit card customers who actually paid on time; and forcing home mortgage customers to purchase excessive amounts of flood insurance;

Outside the financial sector, the biggest penalty totals belong to Dominion Energy ($2.5 billion), Western Union ($508 million), Apple Inc. ($462 million), BP ($414 million) and General Motors ($389 million). Apple’s alleged transgressions ranged from distributing iPhone software updates that slowed the device’s performance to the renewal of app subscriptions without customer consent.

While most of the cases on the list involve prices, fees and other monetary practices, about 100 relate to the quality of the goods and services being sold. Over $1 billion has been paid out by companies accused of false or deceptive advertising and marketing. The single biggest penalty of this type is linked to Acer America, which paid an estimated $280 million to resolve allegations that it misled customers about the Windows operating system installed on its laptop computers.

Behr and its parent Masco paid over $100 million to settle claims that they falsely advertised their wood sealants as protecting against mildew damage. Many of the smaller settlements involved allegations that producers of food and personal-care products falsely advertised their products as organic or natural.

While many of the corporate defendants in these cases will insist they settled out of expedience, it seems clear that many large companies have a tendency to engage in dubious practices. If they are truly concerned about customer satisfaction, putting an end to these practices is a good way to begin.

3M’s Sticky Legal Situation

For the past decade, Johnson & Johnson has symbolized the deterioration of a well-regarded consumer products corporation into the target of multiple lawsuits over alleged disregard for product safety. Now another familiar company is following the same path.

3M, best known as the producer of Scotch Brand adhesive tape and Post-it sticky notes, has been embroiled in two major lawsuits that will probably result in the payment of billions of dollars in settlements. The litigation does not involve office supplies but rather two of the thousands of other products produced by a company originally known as Minnesota Mining and Manufacturing Company.

In one of the cases, 3M has been sued by some 250,000 military veterans who accuse the company of producing foam earplugs that failed to protect them from service-related hearing loss. This stems from a 2018 False Claims Act case brought by the U.S. Justice Department in which the company paid a penalty of $9.1 million. Last year, in what is called a bellwether case, a jury awarded a single plaintiff $50 million in damages.

In an attempt to limit its wider liability, 3M filed for bankruptcy for the subsidiary, Aearo Technologies, that produced the earplugs. Lawyers for the plaintiffs cried foul, and earlier this month a federal bankruptcy judge dismissed the filing, calling it premature. 3M is appealing the dismissal, but the Wall Street Journal reports that the company is in settlement talks.

3M is also said to be deeply involved in negotiating a settlement of its other major legal woe: lawsuits accusing the company of being responsible for the contamination of water supplies with per- and polyfluoroalkyl (or PFAS) chemicals used in the production of its firefighting foam. These substances, which have been linked to numerous adverse health effects, have become known as forever chemicals because they do not break down in the human body or the environment.

A federal judge in South Carolina, where the PFAS cases have been consolidated, recently halted a bellwether trial after the parties in the wider litigation reported that a settlement seemed imminent. This was just after DuPont and its spinoff companies Chemours and Corteva announced they had agreed to pay more than $1 billion to settle their own PFAS cases.

3M’s record apart from these two cases has not been entirely unblemished. In 2018 the company paid $850 million to the Minnesota Attorney General’s office to settle allegations that its disposal of perflourochemicals, or PFCs, over many years had damaged drinking water and natural resources in the Twin Cities area.

It has also been accused of antitrust violations. In 2006 the company paid over $28 million to settle litigation alleging it monopolized the market for adhesive tape. In 2011 3M paid $3 million to settle an age discrimination case brought by the Equal Employment Opportunity Commission. Violation Tracker contains more than 100 other penalties the company has paid in environmental, workplace safety, and employment cases.

With the earplug and PFAS cases, it appears that the company’s aggregate penalty total will soon reach a much higher level. 3M is going to have to sell a lot more Post-its.

Update: Plaintiffs’ attorneys reported that 3M has agreed to pay over $12 billion to public water systems to resolve the PFAS litigation.

DOJ’s Unweaponized Approach to Corporate Crime

There is a lot of loose talk these days about the supposed weaponization of the Justice Department in regard to a certain former president. Yet no one on any part of the political spectrum can claim that DOJ is being overly aggressive in prosecuting corporate defendants.

Despite promises early in the Biden Administration, DOJ has not carried out a serious crackdown on the most serious business offenders. There have been some major prosecutions, but they tend to focus on foreign-based companies (as I discussed in an April post) and the overall volume of cases has not surpassed the dismal record of the Trump years.

Instead, DOJ has devoted much of its energy to creating incentives for companies to report their own misconduct. This carrot-rather-than-stick approach may work in cases of transgressions by lower-level employees, but it is ineffective when the rot reaches all the way to the top.

Recently, DOJ rolled out its latest initiative. Unfortunately, it seems to focus mostly on image-burnishing. The department has created a webpage titled Corporate Crime summarizing all the ways in which it goes after business miscreants. It is a helpful list, but it does not include anything new in the way of enforcement—though DOJ’s self-reporting efforts are prominently featured.

There is one interesting feature on the page: a link to a new Corporate Crime Case Database. At the moment, it is a very modest resource consisting of links to 13 press releases issued recently by various branches of DOJ. The page states: “While it is still in the process of being populated, it will eventually contain the significant, relevant cases from each component and U.S. Attorney’s Office, resolved since the end of April 2023.”

We don’t know more about plans for the database because DOJ chose to roll it out with no fanfare—not even a press release. A department spokesperson told the Wall Street Journal that the scope might be widened to include cases resolved in the last several years.

Even with that addition, the database would be a less-than-robust response to the long-standing efforts by Ralph Nader and corporate accountability groups to get the federal government to produce a resource on white-collar offenses comparable to the FBI’s Uniform Crime Reporting Program, which has been assembling detailed data on street crime since the 1930s. It also does not appear to satisfy the proposal put forth by Senators Dick Durbin and Richard Blumenthal, along with Rep. Mary Gay Scanlon, in the Corporate Crime Database Act they introduced in Congress last year.

Since DOJ has been so reserved about the project, it is not clear whether the new database is meant to be its complete response to the proposals by Nader, Durbin et al. Those proposals envision something a lot more ambitious. The Corporate Crime Database Act would require the DOJ’s Bureau of Justice Statistics to create a resource that collects comprehensive information from every federal agency that carries out enforcement actions with respect to corporate offenses.

That sounds like something more akin to what my colleagues and I have been doing with Violation Tracker, which also covers state and local enforcement activity and which extends back to 2000. Our aim has been to provide a repository of both civil and criminal actions in which corporations have been fined or reached settlements for a wide range of offenses.

DOJ, with resources much greater than ours, should be able to create something a lot more substantial than a list of links to its recent press releases.

More Compliance Officers, Less Compliance

It appears these are boom times for corporate compliance officers. According to an article in Law360, a recent survey by the recruiting firm BarkerGilmore found that that “the demand for compliance talent is higher than ever because of an evolving list of new requirements like environmental, social and governance programs; enterprise risk management and new work culture brought on by post-pandemic norms.” Pay is also rising rapidly for these officers.

This is all good news for those who want to make a career of helping corporations deal with government regulations, but what does it mean for compliance itself? Does the inclination of big business to spend more on this function indicate that corporate behavior is improving?

Based on the data collected in Violation Tracker, that does not seem to be the case. Fines and settlements in the U.S. in 2022 climbed to over $69 billion, the highest annual total in seven years. Over the entire span of time covered by the database, which extends back to 2000, the only higher totals occurred in the mid-2010s, when the annual tallies reached as high as $77 billion due to giant settlements by the likes of BP in connection with the Deepwater Horizon disaster and by the major banks in connection with the mortgage and toxic securities crises.

Last year also saw a jump in the average penalty paid per case. That figure was $2.5 million, up from $2 million the year before. Aside from the $2.9 million average in 2020, last year’s amount was the highest since 2015.

Another indicator that 2022 was a banner year for penalties can be seen in the number of individual parent companies which paid a massive amount–$100 million or more–in fines and settlements. Sixty-three parents gained that dubious distinction, the highest number since 2015.

Included in that group were eleven companies with penalties of $1 billion or more: Allianz, Walgreens Boots Alliance, CVS Health, Teva Pharmaceutical Industries, Wells Fargo, Walmart, AbbVie, Danske Bank, Navient, Bayer and Glencore.

What does it say that penalties are accelerating at the same time that corporations are purportedly putting more resources into compliance? One possibility is that the increasing use of compliance officers is merely window dressing, a gesture meant to satisfy investors concerned about social responsibility. These officers may have little power and influence. They can warn managers about regulatory risks but may have little ability to change behavior that is illicit but profitable.

A more charitable interpretation would be that compliance officers are bringing more violations to light by encouraging companies to self-report infractions. This, in turn, could contribute to increases in overall penalty levels.

This would be a hopeful sign if it meant that companies were at the same time cleaning up their behavior. The problem is that recidivism shows no signs of receding. Year after year, most large companies go on breaking the rules and treating penalties as an affordable cost of doing business as usual.

If compliance officers could do something about that, they would truly be earning their rising pay.

Goldman Gives In

The verdict in the Trump case was not the only court victory against sexism this week. Lawyers for women who worked in securities and investment banking positions at Goldman Sachs announced that the Wall Street giant has agreed to pay $215 million to settle a long-running gender discrimination case.

Some 2,800 current and former employees at Goldman will share in the settlement, which resolves a case first filed back in 2010. Along with the payout, the company will take steps to improve gender equity in pay and promotions.

For years, Goldman strenuously denied allegations that its personnel evaluation system systematically placed women at lower rankings than men, and it aggressively sought to reverse the certification of the class in 2018. Those efforts were unsuccessful, eventually resulting in the scheduling of a trial in June of this year. Trials are rare in discrimination class actions, since juries are thought to be more sympathetic to plaintiffs.

Goldman finally decided to give in, becoming the latest large company to settle a class action gender discrimination lawsuit. Other cases during the past two decades documented in Violation Tracker include the following:

  • In 2022 Sterling Jewelers paid $175 million to settle litigation alleging that for years it had discriminated against tens of thousands of women in its pay and promotion practices.
  • In 2010 drug giant Novartis paid $175 million to settle charges of gender discrimination, including pregnancy discrimination.
  • In 2022 Google agreed to pay $118 million to settle class action litigation alleging it discriminated against women in its salary practices.
  • In 2007 Morgan Stanley paid $46 million to a class of about 3,000 women to settle gender discrimination allegations.
  • In 2018 the retail chain Family Dollar paid $45 million to more than 37,000 former and current managers who alleged they were paid less than their male counterparts. That case took nearly 15 years to get resolved.
  • In 2004 Boeing paid more than $40 million to a class of female workers who alleged they were denied desirable job assignments, promotional opportunities, and management positions.
  • In 2013 Merrill Lynch paid more than $38 million to a group of women employed as financial advisors who said they were discriminated against in pay and promotion.
  • In 2014 United Airlines paid $36.5 million to settle a lawsuit alleging that the company engaged in gender discrimination by requiring female flight attendants to weigh less than comparable male ones.  
  • In 2008 Smith Barney paid $33 million to women formerly employed as financial advisors who claimed they were paid less than their male counterparts.
  • In 2011 Wells Fargo paid $32 million to settle a lawsuit alleging that its Wachovia Securities subsidiary gave female financial advisers fewer opportunities than their male co-workers with respect to promotions, assignments, signing bonuses and compensation.

What this list show is that gender discrimination has been an issue in a wide range of companies and occupations, but sexism has been especially problematic in the traditionally macho world of Wall Street. Now that perhaps the most elite firm in the industry has capitulated, the worst abuses may finally come to an end.

Rogue Rescuer

Once again federal regulators have turned to JPMorgan Chase to rescue a failing smaller bank. For the moment, the customers of First Republic Bank may be pleased that their accounts are being taken over by a larger and more stable institution.

Yet they may not be quite so happy to learn that their savior has a much worse record when it comes to compliance with laws and regulations. As shown in Violation Tracker, First Republic was named in only a handful of enforcement actions and paid penalties of less than $4 million. JPMorgan, on the other hand, has 236 Violation Tracker entries and has paid over $36 billion in fines and settlements.

The contrast with First Republic is partly a matter of size. JPM’s vast operations give it many more opportunities to get into trouble. Those operations have included the marketing of residential mortgage-backed securities which turned out to be toxic and which resulted in legal actions that cost the company billions. Some of these entanglements were inherited by JPM when it took over Bear Stearns and Washington Mutual in 2008.

Yet JPM has also had problems when it comes to the treatment of its own customers in the course of routine banking functions. This has become clear to me in the course of assembling data for the latest category of class action litigation to be added to Violation Tracker: consumer protection lawsuits.

The collection is not yet done, but I have already identified more than a dozen settlements in which JPM has paid out hundreds of millions of dollars. Among these are the following:

* In 2012 JPM agreed to pay $100 million to settle litigation alleging it improperly raised interest rates on loan balances transferred to credit cards.

* In 2020 JPM agreed to pay more than $60 million to settle litigation alleging it overcharged customers serving in the military, in violation of the Servicemembers Civil Relief Act.

* In 2014 JPM agreed to pay $300 million to settle litigation alleging it pushed mortgage borrowers into force-placed insurance coverage whose cost was inflated due to kickbacks.

* In 2012 JPM agreed to pay $110 million to settle litigation concerning improper overdraft fees resulting from the way that debit-card transactions were processed.

* In 2011 JPM agreed to pay up to $7.8 million to settle litigation alleging it charged credit card customers hidden fees after deceptively marketing special deals on balance transfers and short-term check loans.

* In 2014 JPM and several subsidiaries agreed to pay more than $18 million to settle litigation alleging the use of misleading loan documents to steer borrowers to adjustable-rate mortgages.

* In 2018 JPM agreed to pay over $11 million to settle litigation alleging it improperly charged interest on Federal Housing Administration-insured mortgages that were already paid off.

These were all cases brought by private plaintiffs. JPM also paid hundreds of millions more in consumer protection fines and settlements to federal and state agencies. Among these was a 2013 case brought by the Consumer Financial Protection Bureau in which JPM paid a $20 million penalty to the agency and over $300 million in refunds to two million customers for what were said to be illegal credit card practices.

There is widespread concern that rescue deals are allowing a too-big-to-fail bank like JPM to grow even larger. Yet we should also worry that more and more of the population is being forced to do business with megabanks that seem to regard themselves as too big to have to comply with laws that protect consumers.

Corporate Miscreants Foreign and Domestic

The Biden Administration appears to be really serious about economic sanctions–and not only those against Russia. The Justice Department and Treasury just imposed more than $600 million in penalties on British American Tobacco for violating prohibitions on doing business with North Korea. 

Aside from the unusually harsh approach toward a product, tobacco, which does not have any obvious national security implications, the case is significant because it continues the administration’s seeming preoccupation with going after large corporations based outside the United States. 

If we look at the largest fines and settlements –say, those above $200 million– announced since Biden took office and documented in Violation Tracker, most of them involve foreign companies. Aside from BAT, these include Germany’s Allianz, Denmark’s Danske Bank, Switzerland’s Glencore and ABB, Holland’s Stellantis, Sweden’s Ericsson, India’s Sun Pharmaceuticals and the United Kingdom’s Barclays. 

These cases certainly have their merits, but it is surprising that there have been so few comparable actions announced against domestic corporations. Corporate crime and misconduct are not exclusively or even primarily an issue with companies based abroad. 

After Biden was elected there was an assumption that the lax enforcement practices seen during the Trump years would disappear. A major crackdown has yet to materialize. Instead, the Justice Department has focused on finding ways to incentivize companies to cooperate with investigations.  

There is no explicit policy to this effect, but it appears that prosecutors are going easier on domestic corporate targets while acting tougher with foreign ones. One gets the impression that business oversight is being used in a way to give domestic companies a competitive advantage. 

This would be in keeping with the Biden Administration’s efforts to promote domestic manufacturing through legislation such as the CHIPS Act and Buy American policies. Yet there is a difference between industrial policy and regulatory policy. 

Although those on the Right complain when they think government is picking winners and losers, that actually goes on all the time when tax policy is written or major procurement contracts are awarded. The legal system is another matter. 

Every company, wherever it is headquartered, deserves equal treatment under the law. At the same time, the public deserves to be protected against misdeeds committed by domestic and foreign business entities.  

Given that U.S.-based companies are likely to do more of their business in this country, any policy of regulating them more lightly would be especially problematic. Some of the offenses charged against foreign corporations– such as bribery committed abroad– mean a lot less to U.S. residents than serious environmental, financial or workplace transgressions that may be committed by domestic firms. 

None of this should be taken as a call for retreating from enforcement actions against foreign companies. Nonetheless, it would be satisfying to see the Biden Administration bring more major cases against homegrown corporate miscreants.  

Conspiring Against Competition

A federal judge in Minnesota recently granted final approval to a $75 million settlement between Smithfield Foods and plaintiffs alleging that the company was part of a conspiracy to fix the prices of pork products. This came a week after the Washington State Attorney General announced $35 million in settlements with a group of poultry processors.

A couple of weeks ago, a federal judge in New York approved a $56 million settlement of a class action lawsuit in which two drug companies were accused of conspiring to delay the introduction of a lower-cost generic version of an expensive drug for treating Alzheimer’s Disease.

All these court actions are part of an ongoing wave of illegal price-fixing conspiracies by large companies throughout most of the U.S. business world. The scope of the antitrust violations is revealed in a report I just published with my colleagues at the Corporate Research Project of Good Jobs First. The report, entitled Conspiring Against Competition, draws on data collected from government agency announcements and court records for inclusion in the Violation Tracker database.

We looked at over 2,000 cases resolved over the past two decades, including 600 brought by federal and state prosecutors as well as 1,400 class action and multidistrict private lawsuits. The corporations named in these cases paid a total of $96 billion in fines and settlements.

Over one-third of that total was paid by banks and investment firms, mainly to resolve claims that they schemed to rig interest-rate benchmarks such as LIBOR. The second most penalized industry, at $11 billion, is pharmaceuticals, due largely to owners of brand-name drugs accused of illegally conspiring to block the introduction of lower-cost generic alternatives.

Price-fixing happens most frequently in business-to-business transactions, though the higher costs are often passed on to consumers. Apart from finance and pharmaceuticals, the industries high on the penalty list include: electronic components ($8.6 billion in penalties), automotive parts ($5.3 billion), power generation ($5 billion), chemicals ($3.9 billion), healthcare services ($3.5 billion) and freight services ($3.4 billion).

Nineteen companies (or their subsidiaries) paid $1 billion or more each in price-fixing penalties. At the top of this list are: Visa Inc. ($6.2 billion), Deutsche Bank ($3.8 billion), Barclays ($3.2 billion), MasterCard ($3.2 billion) and Citigroup ($2.7 billion).

The most heavily penalized non-financial company is Teva Pharmaceutical Industries, which with its subsidiaries has shelled out $2.6 billion in multiple generic-delay cases.

Many of the defendants in price-fixing cases are subsidiaries of foreign-based corporations. They account for 57% of the cases we documented and 49% of the penalty dollars. The country with the largest share of those penalties is the United Kingdom, largely because of big banks such as Barclays (in the interest-rate benchmark cases) and pharmaceutical companies such as GlaxoSmithKline (in generic-delay cases).

Along with alleged conspiracies to raise the prices of goods and services, the report reviews litigation involving schemes to depress wages or salaries. These include cases in which employers such as poultry processors were accused of colluding to fix wage rates as well as ones in which companies entered into agreements not to hire people who were working for each other. These no-poach agreements inhibit worker mobility and tend to depress pay levels—similar to the effect of non-compete agreements employers often compel workers to sign.

Despite the billions of dollars corporations have paid in fines and settlements, price-fixing scandals continue to emerge on a regular basis, and numerous large corporations have been named in repeated cases.

Higher penalties could help reduce recidivism, but putting a real dent in price-fixing will probably require aggressive steps to deal with the underlying structural reality that makes it more likely to occur: excessive market concentration.

The Two Faces of Howard Schultz

One person from Starbucks responded to a subpoena from Senate labor committee chair Bernie Sanders, but there seemed to be two versions of Howard Schultz at the witness table.

Schultz number one was the typical anti-union corporate executive. Despite the vast number of unfair labor practice charges that have been filed by Starbucks workers, many of which have been sustained by NLRB administrative law judges, he insisted the company has done nothing wrong. Accused of failing to bargain in good faith at the locations where employees have voted for representation, he blamed the union.

While giving gave lip service to the idea that workers have a right to seek union representation, Schultz added that “the company has a right to express a preference.” Not only does such a right not exist, but Starbucks has, as fired activist Jaysin Saxton testified at the hearing, gone far beyond stating its opinion. It stands accused of using many classic union-busting tactics as well as new ones such as refusing to allow credit card tipping at pro-union locations.

The other Howard Schultz tried to portray himself as a model employer, insisting that Starbucks offers much better pay and benefits than its competitors in the retail sector. Even if there is some truth in this, it is not saying much that you treat your workforce a bit better than Walmart and McDonald’s.

This Schultz argued that unionization might be appropriate at companies that treat their workers unfairly, but not at a supposedly enlightened one like Starbucks. What he could not seem to comprehend is that as much as the company claims to value and respect its green-aproned “partners,” they may want to relate to management on a more equal footing.

If Starbucks really believed in employee empowerment, it would have adopted a neutral stance toward unionization, as Microsoft did in response to the union push at Activision Blizzard. Instead, it has resorted to retrograde anti-union practices that strengthen the case for collective bargaining.

This approach throws into question the idea that Starbucks is a high-road company. Despite its carefully cultivated reputation, there have long been signs of questionable policies at the coffee chain. Some of these can be seen in the Starbucks entries in Violation Tracker, which documents more than $50 million in penalties over the past two decades. Almost all of these are employment-related.

For example: in 2013 the company agreed to pay $3 million to settle litigation alleging it denied baristas their right under California law to take uninterrupted meal breaks. Starbucks has paid millions of dollars to settle lawsuits accusing it of improperly classifying employees such as assistant store managers as exempt from overtime pay. In 2019 the company paid $176,000 to state and local agencies in New York to settle allegations it improperly penalized employees who could not find a substitute when they needed to take a sick day.

Long-standing problems such as these, along with its more recent repressive practices, suggest that Starbucks may not be such a paragon of corporate virtue after all. In fact, it may very well be one of those unfair employers that even Howard Schultz admits should be unionized.

A Marriage of Two Tainted Banks

The acquisition of struggling Credit Suisse by its rival UBS may calm the international banking waters, but it will do nothing to improve the compliance profile of the Swiss financial services sector. That’s because both Credit Suisse and UBS have seriously tainted records. Combining them will simply put all those problems under one roof.

Let’s start with Credit Suisse. Its problems extend back at least to the late 1980s, when it was named as one of the banks that allegedly laundered money for a Turkish-Lebanese drug ring. Credit Suisse also played a role in the Reagan Administration’s Iran/Contra scandal.

In the 1990s Credit Suisse was one of the Swiss banks sued in the United States by relatives of Holocaust victims who had been unable to access assets held by the banks for decades. There were also charges that the banks profited by receiving deposits of funds that had been looted by the Nazis. In 1998 the banks agreed to pay a total of $1.25 billion in restitution. The judge in the case later accused the banks of stonewalling in paying out the settlement.

After it acquired a controlling interest in First Boston in the late 1980s and formed CS First Boston, Credit Suisse ended up with more U.S. legal entanglements. CSFB was a target of U.S. divestment activists in the early 1990s because of Credit Suisse’s operations in apartheid-era South Africa. Later that decade, it was one of the investment banks sued for their role in the 1994 bankruptcy of California’s Orange County. In 1998 CSFB agreed to pay $870,000 to settle SEC charges of having misled investors in Orange County bonds and then settled a suit brought against it by the county for $52.5 million.

In 2003, CSFB was one of ten major investment firms that agreed to pay a total of $1.4 billion to settle federal and state charges involving conflicts of interest between their research and investment banking activities. CSFB’s share was $200 million.

In 2009 Credit Suisse agreed to forfeit $268 million to the United States and $268 million to the New York County District Attorney’s Office to resolve criminal charges that it violated economic sanctions in its dealings with customers from countries such as Iran and Sudan.

In 2014 the U.S. Justice Department fined Credit Suisse $1.1 billion and ordered it to pay $666 million in restitution to the IRS after the bank pleaded guilty to charges of conspiring to help U.S. customers evade taxes through the use of offshore accounts.

In 2017 the Justice Department announced a $5.3 billion settlement with Credit Suisse concerning its marketing of toxic mortgage-backed securities a decade earlier. The settlement included a $2.5 billion civil penalty and $2.8 billion in relief to distressed homeowners and affected communities.

Credit Suisse has paid hundreds of millions more in penalties in other cases involving foreign bribery, foreign exchange market manipulation, defrauding investors and much more. Its penalty total in Violation Tracker is more than $11 billion.

And the scandals continue. For example, Credit Suisse is currently embroiled in a corruption case involving the tuna fishing industry in Mozambique.

UBS has a record that is no better. Union Bank of Switzerland and Swiss Bank Corporation, which merged in 1998 to form UBS, were both involved in that same money laundering scandal with Credit Suisse. They were both also embroiled in controversies over investments in South Africa and their polices regarding the accounts of Holocaust victims.

UBS also entered the U.S. market (through the purchase of PaineWebber) and was implicated in the conflict-of-interest scandals. It, too, was prosecuted by the Justice Department for conspiring to aid tax evasion, paying $780 million in penalties.

In 2008 UBS agreed to buy back $11 billion in securities and pay $150 million in penalties as part of the resolution of multi-state litigation alleging it misled customers in the marketing and sale of auction rate securities.

It has paid hundreds of millions more in fines and settlements in cases dealing with financial market manipulation and other offenses. Including that $11 billion securities buyback, its Violation Tracker penalty total is over $17 billion.

In short, the marriage of UBS and Credit Suisse will bring together two banks with highly problematic records. The combined company should work not only to help stabilize financial markets but also to address its legacy of misconduct.