Archive for December, 2018

The 2018 Corporate Rap Sheet

Thursday, December 13th, 2018

The Trump Administration has been taking steps to weaken its enforcement activities against corporate criminals and regulatory violators, but diligent prosecutors and career agency administrators are still trying to do their job. Over the course of 2018 there has been a steady stream of announcements of substantial penalties imposed on major corporations for a wide range of offenses. The following is a selection of significant cases resolved during the year:

Sale of Toxic Securities: In cases left over from the financial crisis of the 2000s, three major banks agreed to pay ten-figure settlements to the Justice Department to resolve allegations of misleading investors in residential mortgage-backed securities: $2 billion by Barclays, $2.1 billion by Wells Fargo and $4.9 billion by The Royal Bank of Scotland.

Interest Rate Benchmark Manipulation: The French bank Societe Generale agreed to pay $475 million to settle allegations by the Commodity Futures Trading Commission that it manipulated or attempted to manipulate LIBOR and other interest rate benchmarks.

Foreign Exchange Market Manipulation: The French bank BNP Paribas pleaded guilty to participating in a price-fixing scheme in the foreign exchange market and paid the U.S. Justice Department a criminal fine of $90 million.

Anti-Money Laundering Deficiencies: U.S. Bancorp agreed to a $453 million civil forfeiture to resolve a case brought by the U.S. Attorney for the Southern District of New York alleging that it violated the Bank Secrecy Act by failing to file required suspicious activity reports.

Foreign Corrupt Practices Act: The Securities and Exchange Commission required Panasonic Corporation to pay $143 million to resolve allegations of making improper payments and committing accounting fraud in connection with its global avionics business. It paid an additional $137.4 million to settle related criminal charges brought by the Justice Department.

Consumer Financial Protection Violation: Wells Fargo agreed to pay a total of $1 billion to the Consumer Financial Protection Bureau and the Office of the Comptroller of the Currency in connection with abuses relating to a mandatory insurance program tied to auto loans, mortgage interest-rate-lock extensions and other practices.

Product Safety Violation: Polaris Industries agreed to pay a $27.25 million civil penalty to settle Consumer Product Safety Commission allegations that it failed to immediately report to the agency that some of its recreational off-road vehicles contained defects that could create a substantial product hazard or that they created an unreasonable risk of serious injury or death.

Controlled Substances Act Violations: Rite Aid agreed to pay $4 million and CVS agreed to pay a total of $2.5 million in two cases, all to resolve allegations of improper distribution of controlled substances.

Sexual Harassment: Poultry processor Koch Foods agreed to pay $3.75 million to settle allegations made by the Equal Employment Opportunity Commission involving sexual harassment, national origin and race discrimination and retaliation at a plant in Mississippi.

Clean Air Act Violations: The Justice Department, the Environmental Protection Agency and the Louisiana Department of Environmental Quality announced that Shell Chemical would pay penalties of $350,000 and spend $10 million to install pollution control equipment to reduce harmful emissions at its plant in Norco, Louisiana.

False Claims Act Violations: Toyobo Co. of Japan and its American subsidiary agreed to pay $66 million to resolve claims under the False Claims Act that they sold defective Zylon fiber used in bulletproof vests that the United States purchased for federal, state, local, and tribal law enforcement agencies.

Bid-Rigging: South Korea-based companies SK Energy, GS Caltex, and Hanjin Transportation agreed to plead guilty to criminal charges and pay a total of approximately $82 million in criminal fines for their involvement in a decade-long bid-rigging conspiracy that targeted contracts to supply fuel to United States Army, Navy, Marine Corps, and Air Force bases in South Korea

Investor Protection Violations: AEGON USA Investment Management and three other Transamerica affiliates agreed to pay $97 million to the Securities and Exchange Commission to resolve allegations that they misled investors through the use of faulty financial models.

Hiring of Undocumented Workers: Waste Management Texas agreed to forfeit $5.5 million and entered into a non-prosecution agreement with the U.S. Attorney’s Office for the Southern District of Texas to resolve allegations that it hired numerous undocumented workers at its Houston operation.

Tax Evasion: The Swiss bank Zurcher Kantonalbank agreed to pay $98.5 million and entered into a deferred prosecution agreement to resolve charges that it conspired to help U.S. taxpayer-clients file false federal tax returns and hide hundreds of millions of dollars in offshore bank accounts.

Data Breach: Uber agreed to pay $148 million to settle allegations that emerged from a nationwide investigation of a 2016 incident in which a hacker gained access to personal information on 57 million riders and drivers.

Note: Additional details on most of these cases can be found in Violation Tracker, which now contains 327,000 entries with total penalties of $440 billion, or in the next update of the database, scheduled to appear in mid-January.