Archive for September, 2019

Bipartisan Corporate Crime Fighting by the States

Monday, September 16th, 2019

A new report from the Corporate Research Project of Good Jobs First on lawsuits filed by state attorneys general shows that the current cases against the drug companies and the tech sector are part of a long-standing practice of bipartisan cooperation in fighting corporate misconduct.

The report focuses on 644 cases in which AGs from multiple states took on companies over issues ranging from mortgage abuses to illicit marketing of prescription drugs and collected more than $100 billion in settlements over the past two decades.

These multistate cases are a subset of more than 7,000 state AG actions compiled for the latest expansion of Violation Tracker and now available for searching on the database.

In at least 260 multistate cases, a majority of the states signed on as plaintiffs. In 172 of the cases, 40 or more states participated. State AGs are split almost evenly between Democrats and Republicans, meaning that the cases with large numbers of state participants are necessarily bipartisan.

In 362 of the cases, the defendants were giant companies included in the Fortune 500 or the Fortune Global 500. The parent company with the most cumulative multistate AG penalties is, by far, Bank of America, with more than $26 billion in settlements over issues such as mortgage abuses and the sale of toxic securities. It is followed by the Swiss bank UBS ($11 billion), Citigroup ($8 billion), JPMorgan Chase ($6 billion) and BP ($4.9 billion).

The most frequent defendant has been CVS Health, which has paid out more than $215 million in 14 settlements, most of them involving the alleged submission of false claims to state Medicaid programs and the payment of illicit kickbacks to healthcare providers.  Another 47 parent companies have been involved in three or more multistate AG cases.

In 118 multistate AG cases, corporations have paid penalties of $100 million or more; in 19 of these the amount exceeded $1 billion. The biggest individual settlement was an agreement by UBS to repurchase $11 billion in investments known as auction-rate securities whose safety it allegedly misrepresented to investors. The second largest was an $8.7 billion agreement by Bank of America to resolve claims relating to predatory home mortgage practices by its Countrywide Financial subsidiary. (The recently announced multistate settlement with Purdue Pharma is not included because it is still tentative.)

Banks and other financial services companies account for far and away the largest monetary share of penalties paid in multistate AG cases — $70 billion from 122 settlements involving 65 different parent companies. In second place is the pharmaceutical industry with $10.4 billion in penalties from 137 settlements.

Consumer protection and price-fixing cases are the most numerous kinds of multistate AG lawsuits, but investor protection and mortgage abuse lawsuits against the big banks have generated the greatest monetary penalties.

In 243 of the multistate cases, the U.S. Department of Justice or another federal agency was also involved in the settlement and often led the negotiations. These actions, which accounted for $31 billion of the $105 billion in total penalties, include cases in which the federal entity, usually DOJ, initiated the investigation and brought in the states — as well as ones in which federal and state prosecutors were involved from the start.

Multistate AG lawsuits originated in the 1980s, when state prosecutors grew concerned at rollbacks in federal enforcement by the Reagan Administration and decided they needed to fill the gap. They scored a big win with the master tobacco settlement of the late 1990s and continued their actions through both Republican and Democratic presidential administrations.

There is every reason to believe that the number of multistate AG settlements will continue to grow. The pending cases against opioid and generic drug producers, as well as emerging antitrust investigations of the tech sector, could add billions more to the penalty totals.

Crossing Party Lines to Fight Corporate Crime

Thursday, September 12th, 2019

The state attorneys general seem to be divided on how big a settlement they should extract from the Sackler family and Purdue Pharma to resolve a lawsuit concerning their involvement in the opioid crisis. According to one report, the split is largely on party lines, with Democratic AGs calling for a bigger payout and Republican prosecutors settling for less.

More on the diverging negotiating positions will probably come to light in the days ahead. This disagreement should not, however, obscure the bigger story: states with very different partisan orientations have been cooperating for years on cases involving corporate misconduct.

On policy issues, state AGs exhibit strong ideological tendencies. Democratic AGs have been suing the Trump Administration repeatedly over issues such as the travel ban and migrant family separation. In the same way, Republican AGs went to court to try to undermine Obama Administration initiatives such as the Affordable Care Act.

Yet in the area of corporate crime-fighting, bipartisanship is the norm.

My colleagues and I at the Corporate Research Project of Good Jobs First have been documenting this fact in the course of collecting data for the latest expansion of our Violation Tracker database. We’ve compiled more than 600 cases in which two or more state AGs successfully sued a corporation and collected monetary penalties, usually in the form of a settlement in which the company did not admit guilt.

Next week we will post the data on Violation Tracker and publish a report that analyzes the multistate AG cases. I can’t give away the main findings until then, but I can say that the new entries will make a major addition to penalty totals in the database.

Currently, there are 61 parent companies with $1 billion or more in cumulative penalties (our entries go back to the beginning of 2000). With the AG cases, that number increases to 84.

The penalty totals for many of the individual corporations, especially the big banks, will rise dramatically. The combined state and federal penalty total for Bank of America, for instance, will be in excess of $80 billion.

Although the report will focus mainly on the multistate AG cases, we also collected data on 7,000 single-state AG cases from across the country that will be added to Violation Tracker. These include lots of relatively minor consumer protection cases (crooked used car dealers and the like), but there are also plenty of major settlements, including 70 cases with corporate payouts of $100 million or more.

There have been a few state AGs who have shown less enthusiasm about pursuing corporate miscreants. One example was Scott Pruitt, when he held that post in Oklahoma before being chosen as the Trump Administration’s first administrator of the EPA.

As state AG, Pruitt brought few actions against companies on his own and did not sign on to many of the multistate cases. Fortunately, he was far from typical, even among the reddest states.  

Exorcising Evil at Google

Thursday, September 5th, 2019

For the past two decades, Google’s Code of Conduct has included the phrase Don’t Be Evil. It used to be at the beginning of that document but now it is relegated to the end, appearing almost as an afterthought.

That turns out to be appropriate, given that Google can no longer pretend to be a paragon of virtue. The latest example of this move to the dark side is the announcement by the Federal Trade Commission and the New York State Attorney General that Google is paying $170 million to settle allegations that its subsidiary YouTube committed serious violations of the Children’s Online Privacy Protection Act. It was said to have done this by collecting personal information from under-age viewers of online videos without their parents’ consent.

Google and its parent company Alphabet Inc. will be facing more headaches. There have been recent reports that a large group of state attorneys general are getting ready to announce a major antitrust investigation of Google, whose search engine is essentially a monopoly and which has dominant positions in other areas as well.

The company has already been targeted in Europe. Last year the EU hit Google with a $5 billion fine for abusing its control over cellphone operating systems, and earlier this year the Europeans imposed a $1.6 billion penalty for abusing its control over web searches.

Google’s misconduct is not all of recent vintage. In 2012 it paid a $22 million fine to the FTC to settle allegations that it misrepresented to users of Apple’s Safari Internet browser that it would not place tracking cookies or serve targeted ads to them, violating an earlier privacy settlement between the company and the agency. The following year it had to pay $17 million to a group of three dozen state AGs to settle allegations of unauthorized placement of cookies on web browsers. Around the same time it paid $7 million to another set of AGs for the unauthorized collection of data from unsecured wireless networks across the country.

In 2014 it paid to $19 million the FTC to resolve allegations that it unfairly billed consumers for in-app charges incurred by children without their parents’ consent.

For a long time, Google promoted itself as an outstanding place to work. Yet that image has eroded as well. In 2015 it and three other tech giants had to pay $415 million to settle a lawsuit alleging that they conspired to suppress salary levels by secretly agreeing not to hire one another’s employees.

Last year Google faced an unprecedented walkout by thousands of its employees around the world who were protesting what they saw as the company’s lax treatment of sexual harassment claims.

The positive side of this is that it inspired a new form of activism among tech workers previously thought to be too individualistic to act collectively. Google employees have also been outspoken on other issues such as providing services to the repressive Chinese government.

If the evil is ever to be exorcised at Google, it will be done not by a corporate motto but by pressures brought to bear by federal regulators, state prosecutors and the company’s own workforce.