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.

The UN Calls Out Greenwashing

Thirty years ago, the United Nations shut down its Centre on Transnational Corporations. Over the prior two decades, the UNCTC had sought to shine a light on the growing influence and power of giant companies around the world, but especially in what was then called the third world.

After the UNCTC was gone, the United Nations said relatively little about corporations overall and even less of a critical nature. A new report from the international body begins to rectify that. As part of the COP27 climate conference, a group of experts convened by the Secretary-General has issued a critique of the commitments by non-state actors to achieve net zero greenhouse gas emissions in their operations.

Noting that many corporations with net zero pledges are still investing heavily in fossil fuels, the report calls for an end to what it does not hesitate to label as greenwashing—a term that was once used only by environmental activists. The title of the document, Integrity Matters, is a rebuff to companies that purchase dubious carbon offsets rather than making serious reductions in their own greenhouse gas emissions.

At the heart of the report are ten recommendations designed to make net zero commitments more meaningful. These include items such as setting short-term targets along with longer-term goals, engaging in better disclosure, and investing in just transitions.

But to my mind, the most important recommendation is the call for moving from voluntary pledges to enforceable rules. “Regulation is therefore needed,” the report states, “to level the playing field and transform the groundswell of voluntary commitments into ground rules for the economy overall.”

Even more promising is that the report urges cooperation among regulators in different countries to promote and enforce global standards. In fact, the document calls for the creation of a task force to convene a community of international regulators.

It is encouraging to see the United Nations take this posture. It will not be easy to get big business to move from self-serving and essentially meaningless promises to serious obligations.

Keep in mind that the phenomenon of greenwashing has been around for a long time. It was back in 1992 that the problem was first highlighted in a publication titled The Greenpeace Book of Greenwash written by environmental activist Kenny Bruno.

That report showed how corporations such as Shell were already pretending to be leaders in the effort to address global warming. Yet the deception was also taking place with regard to a slew of other environmental issues. Among the leading greenwashers cited by Bruno were General Motors, Westinghouse, Sandoz and DuPont.

Perhaps the most brazen of these was DuPont, which sought to divert attention from the extensive harm its chlorofluorocarbon products did to the ozone layer by running a series of television ads in which animals were made to look like they were applauding the company’s environmental initiatives while Beethoven’s Ode to Joy played in the background.

The lesson then, as today, is that large corporations will go to great lengths to give the impression that they are a key part of the solution when it comes to the environment, when in fact they are major contributors to the problem and will continue to do so until they are forced to change.

Tracing the Climate Culprits

We know that industries which produce fossil fuels or make heavy use of them in their production processes are major contributors to greenhouse gas emissions. A new tool identifies which of their operations are the biggest culprits.

Climate TRACE, a coalition of  researchers and NGOs, has just released a website that contains estimates of emissions by more than 70,000 individual facilities around the world. It has accomplished this amazing feat by amassing extensive data from remote sensing satellites and combining that with a variety of other public and commercial information. The process includes the use of artificial intelligence and machine learning.

The result is a resource that allows us to see, for example, which chemical and steel plants account for the most emissions. Users can also zoom into a specific geographic area and see how much individual power plants, mines, and oil fields are contributing to the climate crisis. The information can be broken down by the type of greenhouse gas, and it extends back to 2015.

Climate TRACE is not the only facility-level inventory of greenhouse gas emissions, but it appears to be the most detailed. Its great strength is that does not rely on company-reported data, which can too easily be manipulated.

By using satellites flying high above the earth, Climate TRACE is capturing unfiltered data directly from the facilities. It is, in effect, getting the power plants, refineries and the rest to confess the true impact they are having on the planet. A press release announcing the database claims that the use of AI will create increasingly accurate analyses of the satellite imagery.

What makes the tool even more powerful is that it incorporates ownership information about the facilities. It includes data on more than 4,000 companies, including state-owned enterprises, in 234 countries and administrative regions. A methodology document indicates that automated methods were used in compiling the data but few details are provided.

The website would be even more valuable if it added a feature allowing searches by facility and parent name and if it followed the lead of the Greenhouse Gas 100 and displayed emissions totals for large corporations.  These types of tabulations put more pressure on the companies with the worst results and help climate campaigners identify the most urgent targets.  

The extensive geographic scope of the data in Climate Trace will serve many purposes. For example, it reveals the extent to which emissions in Global South countries are caused by facilities owned by foreign investors. It also allows more accurate estimates of greenhouse gases being generated at various points in global supply chains.

The database arrives at a crucial time. One of the key questions being asked at the COP27 climate conference in Egypt is who will pay for the damage global warming is already creating as well as the cost of the adjustments needed to limit future damage. A substantial portion of that cost should fall on large corporations. Climate TRACE helps us determine which companies should get the biggest bills.

Getting Tougher with the Monopolists

The Antitrust Division of the Justice Department has announced that the former president of a paving and asphalt company based in Montana has pleaded guilty to criminal charges of attempting to monopolize the market for highway crack-sealing services in that state and Wyoming.

It is encouraging to see DOJ take aggressive action against an individual executive, especially since this action was the first criminal case to be brought under the Section 2 anti-monopoly provisions of the Sherman Act in decades.

Yet it is difficult to get too excited about the case, given that it involves a pretty small culprit in a minor market. DOJ should set its sights higher.

In doing so, prosecutors may want to look back at a case that shook up the corporate world 60 years ago. In what became known as the great electrical equipment conspiracy, dozens of executives from companies such as Westinghouse and General Electric were charged with colluding to fix prices and rig bids in the sale of transformers and other gear to industrial customers.

The defendants included a variety of vice presidents, division managers and other fairly high-level managers in the companies. Faced with incontrovertible evidence gathered by the DOJ during the Eisenhower Administration, they pleaded guilty or no contest and threw themselves on the mercy of the court. As Time magazine reported in 1961, defense attorneys argued for leniency:

One by one, as the sentencing went on, lawyers rose to describe their clients as pillars of the community. William S. Ginn, 45, vice president of General Electric, was the director of a boys’ club in Schenectady, N.Y. and the chairman of a campaign to build a new Jesuit seminary in Lenox, Mass. His lawyer pleaded that Ginn not be put “behind bars with common criminals who have been convicted of embezzlement and other serious crimes.”

Federal District Judge J. Cullen Ganey was not swayed. He sentenced Ginn and half a dozen other defendants to 30-day jail sentences, while many of the others received suspended sentences for reasons of age or health. A month was not a long stretch, but it was shocking at the time to see prominent businessmen being led off in handcuffs. In fact, it was the first time in the 70 years following the enactment of the Sherman Act that executives of large companies were incarcerated for antitrust offenses.

In the ensuing years, DOJ vacillated in its position on individual criminal charges for cartel activity. In the 1970s Congress revised the Sherman Act to allow violations to be prosecuted as felonies rather than just misdemeanors, but those provisions were not always applied.

Today the Antitrust Division regularly brings charges against individuals under Section 1 of the Sherman Act for price-fixing and bid-rigging, but the case volume is low and the sentences are not much harsher than those meted out by Judge Ganey. Moreover, the defendants in those cases are rarely high-level executives at large companies.

DOJ’s new willingness to bring Section 2 criminal cases is encouraging, but in order to shake up the business world the way the electrical equipment prosecutions did, the Antitrust Division will have to take aim at high-level executives at some of the mega-corporations that dominate our economy.

Poultry Concentration and Collusion

In the debate over the causes of today’s persistent inflation, corporate profiteering tends to get put far down on the list, well below factors such as supply-chain bottlenecks and the war in Ukraine. While corporate practices may not be the primary driver of rising prices, they are something government officials can actually do something about.

In fact, they already are trying to do so. One of the primary arenas is agribusiness, especially poultry processing. For instance, the Washington State Attorney General just announced that Tyson Foods has agreed to pay more than $10 million to settle its role in a lawsuit alleging that a dozen broiler chicken producers conspired to manipulate prices.

The U.S. Justice Department has also been targeting the broiler producers. It has run into difficulty proving its allegations against specific executives and has dropped a slew of individual charges. That doesn’t necessarily mean price fixing hasn’t been occurring. One of the major corporate defendants, Pilgrim’s Pride, pled guilty to criminal charges and paid a penalty of $107 million.

DOJ’s case against the chicken industry is not a response to recent inflation. It is an attempt to address many years of inflated prices resulting from collusion among a small group of companies in a highly concentrated industry.

Whatever happens with the government’s case, the industry is still facing a slew of private antitrust lawsuits that have been consolidated in federal court in Illinois. Last May, the judge presiding over the sprawling case certified three classes of plaintiffs: direct purchasers, indirect purchasers and end-user consumers. The plea by Pilgrim’s Pride in the DOJ case will make it much easier for the various plaintiffs to win substantial relief beyond the several hundred million dollars already paid out in partial settlements.

Chicken producers have also been accused of anti-competitive employment practices. In July, Cargill Meat Solutions, Sanderson Farms and Wayne Farms agreed to pay a total of $84.8 million to settle a civil antitrust case alleging that they engaged in a long-running conspiracy to depress wages by improperly exchanging information and coordinating their pay practices. A court-appointed monitor will oversee their behavior over the next decade.

The potential for future collusion, however, is now greater. Over the summer, a joint venture of Cargill and Continental Grain, the parent of Wayne Farms, acquired Sanderson and combined it with Wayne to form Wayne-Sanderson Farms. This deal creates another mega-producer alongside Tyson and Pilgrim’s Pride. The three will together control over 50 percent of the chicken market.

Diminished competition by itself serves to push prices higher. The effect is intensified in an industry whose dominant players have shown an inclination to engage in collusion as well. Anti-competitive practices by themselves do not account for mounting inflation, but they are a significant part of the story that deserves more attention—and more intervention by regulators and prosecutors.

Violation Tracker UK Year One

Corporate responsibility and ESG issues are receiving more attention than ever in the United Kingdom. Numerous services now exist to help investors pick ethical companies to add to their portfolios.

 Yet what about the irresponsible companies—the ones that break the rules and which investors may wish to shun? That’s where Violation Tracker UK comes in.

The free database, which is one year old this month, is a unique resource for identifying the companies that have been sanctioned by government regulators for infringements in areas extending from environmental compliance and employment standards to consumer protection and accounting fraud. Along with investors, users of the database include activists, journalists, lawyers, academics and public officials. VT UK is modeled on the U.S. Violation Tracker, which was launched in 2015.

VT UK collects data from four dozen regulatory agencies, ranging from the Health and Safety Executive and the Financial Conduct Authority to lesser known bodies such as the Groceries Code Adjudicator and the Gangmasters and Labour Abuse Authority. The latest agency to be added is the Jersey Financial Services Commission.

Since its launch, VT UK has grown to 77,000 entries dating back as far as 2010. We are constantly on the lookout for new datasets. For example, HM Revenue and Customs recently released a list of about 200 companies fined for having inadequate protections against money laundering. Their names are now in VT UK.

Every three months, we add new entries to the database and tag those that are subsidiaries of a group of more than 700 large UK and foreign parent companies, including those in the FTSE 100 and 250. This allows us to show which firms have the highest aggregate penalty totals. Those at the top of the list include aerospace giants Airbus and Rolls-Royce as well as major banks such as NatWest, Barclays and Lloyds.

The linkages are modified when there is a change of ownership. For example, the entries previously associated with the aerospace company Meggitt PLC now have Parker-Hannifin as their parent, given that company’s recent acquisition of Meggitt.

Every entry in VT UK is tagged with one of six broad offense groups. Safety-related cases account for the most cases–40,000—reflecting the heavy caseload of HSE. The second largest group, employment-related cases, contains 24,000 entries.

Although it has fewer cases, we have to spend a lot more time on the employment category. The reason is the difference in the way the major agencies in the two groups report their data. HSE posts its enforcement information on standardized pages that we are able to scrape fairly easily. The Employment Tribunal, on the other hand, reports its cases in individual PDF decision documents, which are often quite lengthy. Our lead UK researcher, Anthony Kay Baggaley, must read each decision—about 300 per month–and extract the key facts. His works allows us to determine, for example, that the companies with the largest number of employment-related offenses are the Royal Mail Group and Tesco.

The offense groups with the most cases don’t account for the largest aggregate monetary penalties. That distinction goes to competition-related offenses, with £5.4 billion paid by companies in just 320 cases. This is the result of the relatively heavy fines imposed by the Competition and Markets Authority, including a recent £63 million action against the U.S. drug company Pfizer, as well as some substantial bribery cases brought by the Serious Fraud Office.

When the penalty totals are viewed by parent industry, the financial services sector is in first place by far, with a total of £5 billion. That’s because the big banks have been hit with large fines across multiple offense groups, especially competition and, of course, financial cases. These offenders include not only the major UK financial institutions but also foreign banks headquartered in Europe (UBS, Deutsche Bank, etc.) and the United States (especially JPMorgan Chase and Citigroup).

We will continue to update and expand VT UK, but it is also a stepping-stone to a multi-country version of Violation Tracker we plan to create over the next couple of years. Stay tuned for Violation Tracker Global.

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.

DOJ’s Not-So-Hard Line on Corporate Crime

Last year, Deputy Attorney General Lisa Monaco gave a speech promising a crackdown on corporate criminals, especially repeat offenders. That gave rise to hopes that the Justice Department, after having gone soft on corporate prosecutions during the Trump years, would return to a more aggressive stance.

After months of consultation with various parties, Monaco has just given another speech to signal what is coming next. The new approach, explained in more detail in a memo to federal prosecutors, has some laudable features, but it does not go far enough in bringing down the hammer on rogue companies and their executives.

For example, Monaco’s 2021 statement included a vow to take into account a company’s past behavior when deciding on a prosecution strategy. As someone who spends his time documenting corporate non-compliance, I was eager to see DOJ take a harder line on companies that break the law over and over again.

That commitment remains in the new policy, but there are hedges. Monaco writes: “Not all instances of prior misconduct, however, are equally relevant or probative. To that end, prosecutors should consider the form of prior resolution and the associated sanctions or penalties, as well as the elapsed time between the instant misconduct, the prior resolution, and the conduct underlying the prior resolution.”

Monaco specifies that criminal offenses that occurred more than ten years ago or civil offenses more than five years old can be given less weight. But then she acknowledges that “depending on the facts of the particular case, even if it falls outside these time periods, repeated misconduct may be indicative of a corporation that operates without an appropriate compliance culture or institutional safeguards.”

This “on the one hand, on the other hand” language sends a mixed message. It would have been preferable to tell prosecutors to give serious consideration to previous bad acts and leave it at that.

Then there’s the issue of individual accountability. Now, as last year, Monaco encouraged prosecutors to bring cases against culpable corporate executives and to expedite the handling of those cases. That sounds fine, but the main way Monaco wants to accomplish this is by giving corporations incentives to cooperate more thoroughly with investigations.

Getting companies to turn in wrongdoers is a good idea, but Monaco’s approach could come at too high a cost. She states that, “absent the presence of aggravating factors, the Department will not seek a guilty plea where a corporation has voluntarily self-disclosed, fully cooperated, and timely and appropriately remediated the criminal conduct.” Her memo also states that the imposition of an independent compliance monitor need not occur when a cooperating company “demonstrates that it has implemented and tested an effective compliance program.”

Keep in mind that the kind of cases involved here are mainly ones in which an unscrupulous executive was taking actions that benefited the company and that should have been prevented by internal controls. Such corporations need to be held fully accountable and put under close supervision.

They also should not be allowed to go on receiving special deals such as non-prosecution and deferred prosecution agreements—sometimes more than once. Rather than calling for an end to these practices, Monaco weakly states that multiple deals are “generally disfavored” and goes on to dilute that position even more by suggesting that everything should be done to incentivize voluntary disclosure.

On the plus side, Monaco’s policy would pressure corporations to claw back compensation paid to executives who engage in misconduct. In too many cases, these corrupt individuals have been allowed to keep lavish pay and benefit packages—and often the company would pay their legal expenses.

Overall, Monaco puts too much emphasis on the carrot and not enough on the stick. Corrupt corporations have been treated leniently for too long. Now is the time for a tougher approach.