Violation Tracker

Two-Faced Corporations

The new issue of Corporate Knights, a magazine which usually focuses on celebrating environmental initiatives in the business word, has a cover story with a different angle. Headlined “The Climate Blockers,” the piece highlights major companies with split personalities: They talk a good game when it comes to matters such as sustainability while directly and indirectly promoting policies that impede decarbonization.

Among the corporations deemed to be most guilty of this hypocrisy are U.S. petroleum giants Chevron, ExxonMobil and ConocoPhillips and U.S. utilities Sempra Energy, American Electric and Southern Company. Others on the ten-worst list are BASF, Nippon Steel, Gazprom and Toyota.

This assessment is based on the work of InfluenceMap, a UK-based non-profit which seeks to hold large corporations accountable for their climate practices. Its Climate Policy Footprint report identifies the “most negative and influential” companies globally, based on lobbying and other influence activities—whether carried out by the corporation itself or by its trade associations.

InfluenceMap also identifies the trade associations with the worst track record on climate policy. The biggest culprits are said to be the American Petroleum Institute, American Fuel & Petrochemical Manufacturers, the U.S. Chamber of Commerce, and BusinessEurope.

Some of the companies on the ten-worst list are not only members of these associations but also part of their leadership. Chevron CEO Mike Wirth is also the chairman of the American Petroleum Institute. Chevron and ExxonMobil have representatives on the board of American Fuel & Petrochemical Manufacturers. Chevron, ConocoPhillips and Sempra have representatives on the board of the U.S. Chamber.

InfluenceMap provides a vital service at a time when growing numbers of large companies are professing adherence to ESG principles—especially the environmental component—while quietly working to discourage legislators and policymakers from moving ahead on aggressive climate initiatives.

Strangely, it is also a time when rightwing public officials in the U.S. are trying to gin up public opposition to what are being labeled “woke corporations.” This effort exaggerates the significance of ESG in the business world and ignores the divergence between sustainability p.r. and regressive influence efforts.

There are actually two types of environmental hypocrisy rampant in Corporate America. Not only are purportedly enlightened companies pushing bad policies—they are failing to comply with existing environmental safeguards. This includes not only climate practices, which are not heavily regulated, but also conventional pollution.

This is part of what we document in Violation Tracker. Take, for example, the companies in the InfluenceMap ten-worst. Over the past two decades, Chevron has racked up over $1 billion in fines and settlements. These include a fine of more than $1 million in red Texas last year. ExxonMobil’s total since 2000 is more than $2 billion, including a $9.5 million settlement last year with New Jersey over PCB contamination. They are surpassed by American Electric Power, whose penalty total is nearly $5 billion.

No company that repeatedly breaks environmental laws—nor any company that uses its influence to block or slow down climate-friendly initiatives—should be able to depict itself as an environmental white knight.

The Bank from Hell

Perhaps because it was announced just days before Christmas, the Consumer Financial Protection Bureau’s giant enforcement action against Wells Fargo has not received all the attention it deserves. The agency imposed a whopping $1.7 billion civil penalty and ordered the bank to provide more than $2 billion in consumer redress.

CFPB took these steps in response to what it called illegal practices affecting over 16 million consumer accounts. Wells was found to have repeatedly misapplied loan payments, wrongfully foreclosed on homes, improperly repossessed vehicles, and incorrectly assessed interest and fees, including surprise overdraft charges. Wells Fargo, it seems, was behaving like the bank from hell.

CFPB’s action does not come as a complete surprise. Wells already had a dismal track record. As shown in Violation Tracker, the bank has paid over $20 billion in fines and settlements during the past two decades. It has been especially tainted since 2016, when the CFPB revealed that bank employees, pressured to meet unrealistic sales goals, had been secretly opening unauthorized accounts in the name of unsuspecting customers who found themselves paying fees for services they had not requested.

Wells was initially fined only $100 million by CFPB, but the controversy over the bogus accounts continued. In 2020 the bank had to pay $3 billion to resolve criminal and civil charges brought by the Justice Department and the SEC. The impact of the case was diminished by the fact that DOJ offered Wells a deferred prosecution leniency agreement and by the decision not to prosecute any individual executives.

A different approach was taken by the Federal Reserve in its capacity as a bank regulator. In 2018 it announced that Wells would be subject to restrictions on its growth until it sufficiently improved its governance and internal controls. The Fed also pressured the bank to replace four members of its board of directors.

The new CFPB case suggests that neither the DOJ nor the Fed action was sufficient to get Wells to change its ways. Other evidence comes from private class action lawsuits. These include a $386 million settlement to resolve allegations the bank added unnecessary insurance fees to car loan bills and a $30 million settlement of allegations it improperly charged interest on Federal Housing Administration-insured loans after they were paid off.

All of this leads to two questions: Why does anyone continue to do business with Wells Fargo? And why do regulators allow it to continue to operate? The answers to both have a lot to do with the enormous concentration in the U.S. banking sector. In some parts of the country, Wells may be one of only a tiny number of full-service commercial banks doing business.

Size is also a factor in how Wells is treated by regulators. As outraged as they may be about the bank’s misconduct, they are not inclined to take any punitive action which might threaten its viability. A villainous Wells Fargo is apparently seen as preferable to the collapse of a bank with nearly $2 trillion in assets.

It is difficult to avoid the conclusion that Wells is taking advantage of this situation by pretending to reform its practices while continuing to conduct its dubious form of business as usual. Regulators need to find a way to bring this rogue bank under control once and for all.

Note: The new CFPB action was announced right after we completed an update of Violation Tracker. It will be added to the database as part of the next update later this month.

The 2022 Corporate Rap Sheet

The prognosis for the U.S. economy remains uncertain, but it is clear that 2022 has been a bumper year for corporate penalties. Including an update that will be posted soon, Violation Tracker will end up documenting more than $56 billion in fines and settlements. Among them are a dozen individual penalties in excess of $1 billion.

Many of the largest cases were brought by state attorneys general against large drug companies and pharmacy chains for their role in fueling the opiate crisis. Teva Pharmaceuticals entered into a settlement worth up to $4.25 billion to resolve allegations it deceptively marketed opioid products. Allergan paid $2.37 billion in a similar case.

Settlements were even higher in cases involving the failure of large pharmacy chains to question extraordinarily high volumes of suspicious opioid prescriptions. Walgreens paid $5.7 billion, CVS $5 billion and Walmart $3.1 billion.

The biggest Justice Department penalties were imposed on foreign companies in criminal cases. Allianz, the German insurance company and asset manager, paid $5.8 billion to resolve allegations that it misled public pension funds into investing in complex and risky financial products, causing them to suffer heavy losses. Denmark’s Danske Bank A/S paid $2 billion to settle charges that it lied to U.S. banks about its anti-money-laundering controls in order to help high-risk customers in countries such as Russia transfer assets.

Glencore, a commodity trading and mining company headquartered in Switzerland, paid $1.2 billion in a case involving international bribery. In another case brought under the Foreign Corrupt Practices Act, ABB Ltd, also based in Switzerland, paid DOJ a penalty of $315 million. It was also offered a leniency agreement called a deferred prosecution agreement, even though it was not the first time the company had been caught up in a bribery case.

In another case in which DOJ targeted a foreign company for actions abroad, the French building materials company Lafarge (part of the Holcim Group) paid $777 million to resolve allegations that it gave material support to terrorist groups such as ISIS when it made payments in exchange for permission to operate a cement plant in Syria.

Coming in just under a billion was the $900 million settlement DOJ reached with the drug company Biogen to resolve allegations that it paid illegal kickbacks to physicians to induce them to prescribe its products. This was the largest penalty among some 200 resolutions of cases brought under the False Claims Act during the year.

The biggest environmental fine of 2022 was the $299 million paid by automaker FCA US LLC (formerly the Chrysler Group and now part of Stellantis) to resolve criminal charges that it defrauded regulators and customers by making false and misleading representations about the design, calibration, and function of the emissions control systems on more than 100,000 of its vehicles. The allegations were similar to those faced by Volkswagen in its emissions cheating scandal, for which it paid around $20 billion in fines and settlements in previous years.

This year also saw an environmental settlement of $537 million paid by Monsanto (owned by Bayer) in a case involving the contamination of water supplies with polychlorinated biphenyls, or PCBs.

Privacy was the focus of numerous large cases, especially ones involving the tech giants. Google paid $391 million in a settlement with 40 state attorneys general of allegations the company misled consumers about the collection and use of their personal location data. Twitter had to pay $150 million to resolve allegations by DOJ and the Federal Trade Commission that it misrepresented how it employed users’ nonpublic contact information.

Employment-related cases tend to have lower regulatory penalty amounts, but private class action cases can result in sizeable settlements. This year saw Sterling Jewelers pay $175 million to settle a lawsuit alleging that for years it had discriminated against tens of thousands of women in its pay and promotion practices. Business services company ABM Industries agreed to pay $140 million to settle litigation alleging it failed to keep accurate records of time worked by its janitor employees, causing them to be underpaid.

There were also cases that overlapped employment issues and antitrust. Cargill, Sanderson Farms and Wayne Farms agreed to pay a total of more than $84 million to settle allegations that they violated antitrust laws by sharing poultry workers wage and benefit information, thereby depressing compensation levels.

In 2022 large corporations once again paid vast sums of money in connection with a wide range of misconduct. At the same time, they are spending more than ever to tout their supposed social responsibility credentials. The country would be a lot better off if big business focused less on ESG PR and more on compliance.

Update: After this blog was posted, several other major penalties were announced. The Consumer Financial Protection Bureau announced the largest penalty in its history against Wells Fargo, which was ordered to pay a fine of $1.7 billion and provide $2 billion in customer restitution to resolve allegations that the bank imposed illegal fees and interest charges on borrowers for automobile and home loans. The Federal Trade Commission fined software company Epic Games $520 million for violating online privacy protections for children. And a subsidiary of Honeywell was fined more than $160 million for paying bribes in Brazil.

Derailing a Strike

The Biden Administration and Congressional Democrats purport to be pro-union, but in their desperation to prevent a rail strike they fail to understand something fundamental about collective bargaining: Sometimes workers have to inconvenience the public in order to achieve their legitimate goals.

A strike is a form of disruption. It is designed to put direct economic pressure on an employer by curtailing operations. Yet it also uses indirect means. The hope is that customers, suppliers, creditors and other stakeholders will press management to settle its differences with the union, resulting in better terms for workers. The louder the public uproar, the more likely there will be concessions by employers.

By trying to prohibit a strike by rail workers dissatisfied with the agreement previously negotiated with the help of the Biden Administration, Congress is eliminating both the direct and indirect pressures management might feel to improve on those contract provisions. It is trying to impose a clean solution in a conflict that is inherently messy.

At the insistence of progressives, Speaker Nancy Pelosi agreed to an add-on bill that would compel the railroads to provide additional paid sick days—a key point of contention—~~but as of this writing it seems unlikely that measure will pass the Senate.~~but that measure failed in the Senate.

Passage of a measure imposing the previous agreement and banning a strike would amount to one of the most egregious cases of strike-breaking by the federal government since Ronald Reagan busted the air traffic controllers union in 1981. It would also constitute an outrageous giveaway to a group of employers with a dismal track record on working conditions and safety.

As documented in Violation Tracker, the five U.S.-owned Class I railroads — BNSF, CSX, Kansas City Southern, Norfolk Southern and Union Pacific—have been fined more than 9,000 times by the Federal Railroad Administration and the Occupational Safety and Health Administration over the past two decades. They have paid over $100 million in penalties. The biggest offender is Union Pacific, with over 3,400 citations and $42 million in fines over safety issues.

The hazards indicated by these repeated violations—along with the grueling schedules imposed on rail workers—make the demand for ample paid sick leave all the more urgent.

That urgency applies not only to railroad employees but to the public. The safety lapses cited by the Federal Railroad Administration can lead to accidents such as collisions with cars and trucks at grade crossings or derailments in which hazardous materials spill out and endanger nearby communities.

Railroads have a history of trying to suppress information about dangerous working conditions. For example, in 2019 and 2020 BNSF, which is part of Warren Buffett’s Berkshire Hathaway conglomerate, was ordered to pay more than $1.7 million in damages and compensation to an employee who faced retaliation after reporting track defects.

CSX has been fined several times for whistleblower retaliation. For example, in 2021 OSHA found that the company violated the Federal Railroad Safety Act and demonstrated a pattern of retaliation after firing a worker in December 2019 for reporting safety concerns. The agency ordered the company to pay $71,976 in back wages, interest, and damages, and $150,000 in punitive damages.

In 2020 Norfolk Southern was ordered to pay $85,000 and reinstate an employee who was fired for reporting an on-the-job injury. Union Pacific has paid over $700,00 in five retaliation cases.

The rap sheets of the Class I railroads also include multiple environmental penalties. For example, in 2009 Union Pacific had to pay more than $31 million to settle alleged violations of the Clean Water Act in Nevada. In 2019 it paid $2.3 million to four California counties to resolve allegations relating to the mishandling of hazardous wastes.

In 2010 Norfolk Southern paid over $8 million to the Environmental Protection Agency in connection with a derailment and spill of hazardous chemicals in South Carolina. Three years earlier, it paid over $7 million to Pennsylvania to help pay for the restoration of waterways and wetlands affected by a lye spill.

In 2018 CSX paid $2.7 million to federal and state agencies to resolve liabilities related to water pollution caused by a 2015 derailment and oil spill in West Virginia. In 2004 BNSF paid North Dakota $29 million to resolve litigation relating to a massive underground leak of diesel oil.

The Biden Administration and Congressional Democrats may not have intended it, but their approach to the rail conflict ended up providing an extraordinary benefit to one of the least deserving industries.

Reducing Exploitation in the Gig Economy

On October 10 the San Diego City Attorney announced that the grocery delivery service Instacart had agreed to pay $46.5 million to settle a lawsuit alleging that it violated California’s labor code by misclassifying some 308,000 of its workers over a five-year period.

The following day, the U.S. Department of Labor announced a proposed new rule for determining when gig workers should be classified as employees rather than independent contractors.

These events represent two fronts in the widening war between regulators seeking to bring traditional workplace protections to the gig economy and companies such as Instacart that have come to rely on low-cost flexible labor.

In the middle are the workers themselves, who do not line up neatly on either side. Some of those doing gig work value flexibility over things such as overtime pay and may view the DOL proposal and the stricter rules adopted by states such as California as threats to their livelihood.

Yet there are also large numbers of people toiling for the likes of Instacart and Uber who struggle to make a decent living and feel exploited. Many of them would welcome the benefits that come with employee status, even if it means more rigidity in their working arrangement.

The proposed DOL rule seeks to better identify who belongs in which category by replacing the narrow criteria adopted during the Trump Administration with a multi-factor test that it takes the department 184 pages to detail. For example, the DOL would look at whether the worker had the ability to set prices for the services provided.

These additional tests would likely make it more difficult for companies to classify workers as independent contractors. Yet even if the new rule is implemented in some form, the gig giants will resist changing their ways. In all likelihood, they will go on treating workers as independent contractors and wait to be challenged. That’s the approach they have taken under current law

As shown in Violation Tracker, four of the largest ride-sharing and delivery services have together paid over $88 million in class-action wage and hour lawsuits. Uber leads the pack with $49 million in such settlements, followed by Lyft with $28 million. Instacart and DoorDash have each paid about $5 million.

That is on top of what they have paid to state and local agencies in misclassification cases such as the one brought in San Diego. Uber, for example, recently paid $100 million to New Jersey.

If the rules are changed, these settlements will become even larger and more frequent. The gig companies will go on paying them in the hope of staving off something they see as much worse.

Once gig workers become employees, it will be a lot easier for them to seek the additional protections that come with collective bargaining. Employee status is an important stepping stone to unionization, which would mean an end to the worst forms of exploitation.

It is possible to imagine an economy that combines labor flexibility with strong worker protections, but it would require the gig employers to cede some of the one-sided control they now exercise.

Non-Profit Hospitals Need to Heal Themselves

Providence, a gigantic non-profit health system with more than 50 hospitals in five Western states, describes itself as “steadfast in serving all, especially those who are poor and vulnerable.” According to a recent New York Times investigation, Providence has also preyed on those populations by using aggressive techniques to get payments from patients who should have been given free care. Those techniques, dubbed Rev-Up, were developed with the help of the consulting firm McKinsey, which the Times said was paid more than $45 million for its advice.

Now Providence is trying to repair the damage to its image. The Times reports that the health system is providing refunds to more than 700 low-income patients who were hounded into making payments for their care. Providence is not disclosing how much its is refunding, but the amount is likely to be a small fraction of what ruthless efforts such as Rev-Up brought in. A lawsuit filed by the Washington State Attorney General accuses Providence of improperly siccing debt collectors on more than 50,000 patients.

Failing to live up to its obligation to provide free care is just one of the ways in which Providence has acted as something less than a model non-profit institution. As documented in Violation Tracker, the health system has paid out more than $380 million in regulatory fines and class action settlements. These include cases involving issues such as wage theft, workplace safety and privacy. It has paid out over $28 million in False Claims Act cases, which involve submitting fraudulent bills to federal programs such as Medicare. Providence’s biggest payouts have involved cases in which it was accused of mismanaging employee retirement plans.

Providence is just one of dozens of large non-profit health systems that show up in Violation Tracker with large penalty totals from multiple cases. The system that tops the list is California-based Sutter Health, which has racked up $749 million in penalties from 46 cases. The largest of these was a $575 million settlement with the California Attorney General and other parties, which accused Sutter of engaging in anti-competitive practices that drove up healthcare costs. Sutter has also paid $170 million in False Claims Act cases.

Apart from Providence and Sutter, about 20 other non-profit health systems have paid out at least $50 million in penalties. These include Trinity Health ($328 million), RWJBarnabas Health ($277 million) and Northwell Health ($208 million). About 120 others have paid at least $1 million.

Many of these penalties result from a preoccupation with the bottom line, which leads the health systems to cut corners on compliance, shortchange their employees and cheat the government. The non-profit hospital systems may not have shareholders, but they seek to generate ever-larger surpluses that can be used for building new facilities and buying up competitors. Expansion seems to be the ultimate goal.

Their behavior makes them increasingly indistinguishable from the giant for-profit health chains HCA and Tenet, each of which has well over $1 billion in penalties. The difference, of course, is that the public is subsidizing the non-profits by relieving them of the obligation to pay taxes. The time has come to force the giant hospital systems such as Providence to focus less on empire-building and more on their social obligations.

The Price of Not Heeding the WARN Act

In 2020 a furniture company called Flexsteel Industries laid off about 300 workers at its plants in Dubuque, Iowa and Starkville, Mississippi. According to a class action lawsuit filed on behalf of the employees, Flexsteel violated federal law by failing to provide either severance pay or 60 days’ notice.

The law in question is the Worker Adjustment and Retraining Notification Act of 1988, better known as the WARN Act. Oddly, the law does not provide for enforcement by the U.S. Department of Labor. Instead, workers must usually take a non-compliant employer to court. They have done so many times and have often won substantial settlements.

WARN Act class action lawsuits are the latest category of private litigation to be added to Violation Tracker. The newly posted update to the database includes more than 100 WARN settlements totaling over $225 million over the past two decades. About half of the settlements were for $1 million or more. That includes the $1.3 million won by the Flexsteel workers.

Overall, the settlements range from $100,000 to $35 million, with the highest amount coming in a 2011 case involving the now-defunct semiconductor company Qimonda. The second largest was $15 million, in a case involving Taylor, Bean & Whitaker Mortgage Corp.

These settlements, like about three-quarters of the cases collected, came while the company was in bankruptcy proceedings. Many employers mistakenly thought that a bankruptcy filing exempted them from complying with the provisions of the WARN Act.

Although bankruptcy cases can drag on for years, victims of WARN Act non-compliance are often able to receive more timely relief by filing what are known as adversary proceedings. These are the equivalent of civil lawsuits brought in federal district courts and can get resolved much sooner than other bankruptcy matters.

While most WARN Act cases are brought against direct employers, some of the settlements involve private equity firms that controlled the company. For example, in 2019 Apollo Global Management and a human resources service paid $3 million to resolve a case brought by about 1,000 workers laid off from Apollo’s portfolio company Classic Party Rentals.

Additional WARN Act cases are making their way through the courts. Tesla is the target of one of those suits, filed earlier this year on behalf of those terminated as part of the company’s practice of periodically weeding out workers considered to have performance issues. Tesla is arguing that the workers should not be able to bring a class action, given that they signed employment agreements providing for the use of arbitration to resolve disputes.

Some employers have tried to argue that layoffs that took place during the pandemic should not be covered by the WARN Act, given that the law has an exception for natural disasters. A federal appeals court, however, ruled in June that Covid should not be lumped together with events such as earthquakes and floods mentioned in the legislation.

If the U.S. economy continues to move in the direction of a downturn, layoffs will become more common and the protections of the WARN Act—and WARN class actions—will help workers deal with the slump

Note: The Violation Tracker update also includes the addition of 10,000 wage and hour cases brought by the California Labor Commissioner’s Office over the past two decades.

The Pill Mills of the Fortune 500

The downfall of Purdue Pharma illustrated the role played by drugmakers in the opioid crisis. Large settlements paid by the likes of McKesson and AmerisourceBergen highlighted the culpability of the major drug wholesalers. Now more attention is being paid to the other players in the corrupt supply chain: pharmacies.

The assumption used to be that the main retail culprits were small pharmacies in places such as West Virginia that readily filled far more oxycontin prescriptions than would be expected to arise from legitimate use in their communities. Those businesses, like the unscrupulous clinics that wrote the prescriptions, are often called pill mills.

A decision just handed down by a federal court in San Francisco indicates that our understanding of that phrase needs to be revised. Following a bench trial, U.S. District Judge Charles Breyer ruled that the giant pharmacy chain Walgreens improperly dispensed hundreds of thousands of suspicious prescriptions for narcotic painkillers in the Bay Area over more than a decade.

“In exchange for the privilege of distributing and dispensing prescription opioids,” Judge Breyer wrote, “Walgreens has regulatory obligations to take reasonable steps to prevent the drugs from being diverted and harming the public. The evidence at trial established that Walgreens breached these obligations.”

Those regulatory obligations come from the Controlled Substances Act (CSA), a federal law which regulates the distribution of drugs ranging from Xanax to fentanyl. As shown in Violation Tracker, the U.S. Justice Department and the Drug Enforcement Administration have brought about two dozen successful CSA actions against large pharmacy chains, including those operated by the big supermarket companies.

In 2013 Walgreens had to pay $80 million to resolve a DEA case involving what the agency called “an unprecedented number of record-keeping and dispensing violations.” CVS, another pharmacy goliath, has paid out over $130 million in a dozen CSA cases.

These amounts are likely to be dwarfed by the damages against Walgreens in the San Francisco case, which have yet to be determined. Walgreens and CVS, along with Walmart, are also embroiled in an opioid test case brought by two counties in Ohio. The plaintiffs are seeking a payout of several billion dollars to help pay for addiction services.

If those Ohio counties are successful, it would give a green light to several thousand other cases that have been filed around the country and are being treated as a multidistrict action. On top of that, Walgreens, CVS and Walmart are facing a slew of opioid cases brought by the Cherokee Nation and other tribes.

It is unlikely that Walgreens or CVS will suffer the same fate as Purdue Pharma, which had to file for bankruptcy and agree to turn itself into a public benefit company while its owners, the Sackler Family, had to promise to pay out billions. CVS, which generated nearly $8 billion in profits last year, is particularly well positioned to handle the massive settlements to come.

The real question is whether it and Walgreens will own up to their misconduct and get serious about complying with their obligations to prevent opioid abuse.

Another Crooked Bank

When one large corporation is found to be breaking the law in a particular way, there is a good chance that its competitors are doing the same thing. The latest evidence of this comes in an announcement by the Consumer Financial Protection Bureau concerning U.S. Bank.

The CFPB fined the bank $37.5 million for illegally accessing credit reports and opening checking and savings accounts, credit cards, and lines of credit without customers’ permission. U.S. Bank employees were said to have done this in response to management pressure to sell more financial products and thus generate more fee revenue.

If this sounds familiar, it is exactly what came to light in 2016 regarding Wells Fargo, which was initially fined $100 million by the CFPB for the fraudulent practice and subsequently faced a wave of other legal entanglements, including a case brought by the U.S. Justice Department in which Wells had to pay $3 billion to resolve civil and criminal charges.

The U.S. Bank case has not yet generated the tsunami of outrage that accompanied the revelations about the phony accounts at Wells. Perhaps that is because it is the middle of the summer. Yet chances are that the CFPB’s enforcement action will not be the only punishment the bank will face.

U.S. Bank’s practices were no less egregious than those of Wells. According to the CFPB, the management of the bank, which currently has more than half a trillion dollars in assets, was aware for more than a decade that its employees were creating fictitious accounts.

And like Wells, U.S. Bancorp has a long history of questionable behavior. Violation Tracker documents more than $1.2 billion in penalties from 40 cases dating back to 2000. Half of the total comes from offenses involving serious deficiencies in anti-money-laundering practices, including a 2018 case in which the bank had to pay $453 million to settle criminal charges brought by the U.S. Justice Department plus another $75 million to the Office of the Comptroller of the Currency to resolve civil allegations.

In 2014 U.S. Bank had to pay $200 million to settle allegations that it violated the False Claims Act by knowingly originating and underwriting mortgage loans insured by the Federal Housing Administration that did not meet applicable requirements. The bank also had a previous run-in with the CFPB, which penalized it $53 million in 2014 for unfairly charging customers for credit identity protection and credit monitoring services they did not receive.

It is likely that U.S. Bank’s penalty total will rise substantially through additional cases prompted by the CFPB’s latest allegations, which include accusations the bank violated not only the Consumer Financial Protection Act but also the Fair Credit Reporting Act, the Truth in Lending Act, and the Truth in Savings Act.

Apart from monetary penalties, U.S. Bank may face an additional form of punishment applied to Wells: in 2018 the Federal Reserve restricted the growth of the firm until it cleaned up its practices and improved its governance. Since fines have proven to be a weak deterrent against corrupt practices at major financial institutions, more aggressive measures provide the only hope of bringing the big banks under control.

Parent Company Makeovers?

The addition of historical parent data to Violation Tracker, including a list of the most penalized corporations based on that data, may have led some p.r. executives to hope that their employer would look better on the new tally. Many of them will end up disappointed.

In last week’s Dirt Diggers, I compared the 100 most penalized current parents to the 100 most penalized historical parents and found limited differences. This week I expand the focus to the top 1,000.

Among that larger group, nearly half have penalty totals based on historical parent-subsidy linkages that are lower than their totals based on current ownership relationships.

Yet the median difference for those with lower historical totals is just $14 million. Only 34 of the 1,000 companies ended up with zero penalties using the historical basis; another 33 ended up with totals below $1 million. The biggest beneficiary of the different approach is Viatris, almost all of whose $1 billion in penalties based on current linkages were incurred by Mylan and Upjohn before they merged in 2020 to form the new company.

Other parents that look good when switching from current to historical linkages include: Equitable Holdings, whose big penalties occurred when it was owned by AXA, and Daimler Truck, just about all of whose penalties date from the period when it was still part of Daimler AG, now known as Mercedes-Benz Group.

Among the 1,000 most penalized current parents there are more than 400 whose historical total is exactly the same, reflecting the fact that they neither acquired nor spun off penalized subsidiaries. Those in this group with the largest penalty amounts are Deutsche Bank, Purdue Pharma, GlaxoSmithKline, Toyota, Allianz, PG&E, and Barclays. The median penalty total for all the zero-difference parents in the top 1000 list is $59 million.

Sixty-seven of the top 1,000 parents look worse when switching from the current to the historical basis. That is because they divested a heavily penalized subsidiary. Those with the biggest penalty differences include: Abbott Laboratories, which spun off AbbVie with its $1.5 billion in penalties; AXA, which spun off Equitable and its $651 million in penalties; and Daiichi Sankyo, which sold Ranbaxy USA, which had accumulated more than $500 million in penalties.

Another 11 companies—such as BP, which sold its heavily penalized operations in Texas City, Texas to Marathon Petroleum, and General Electric, which has been downsizing in numerous sectors—have historical penalty totals at least $100 million lower than their current totals. Yet all of those still end up with historical totals of more than $300 million, and in four cases—BP, Johnson & Johnson, GE and Boehringer Ingelheim—the amount is above $1 billion.

The upshot of all this is that switching the focus from current to historical parent linkages does not show a dramatic difference in the misconduct track record of most large companies. While the new data may not help much for company makeovers, I hope it will prove useful for those taking a critical look at corporate behavior.

Note: the historical parent data now in Violation Tracker is accessible only to those who purchase a subscription. Searching and displaying the other data remain free of charge.