DOJ is also Defying Trump on Foreign Bribery

Millions of words have been published about Donald Trump’s feud with the Justice Department over the Mueller investigation. Little is being written about another way in which DOJ is thwarting the president’s will: the ongoing prosecution of foreign bribery.

Starting before he became a candidate for the White House, Trump has railed against the Foreign Corrupt Practices Act, the 1977 law that allows for both civil and criminal cases to be brought against officials that engage in bribery and related practices committed anywhere in the world as long as their company does business in or has securities trading in the United States. He continued to complain about FCPA’s supposed unfairness after taking office.

These complaints seem to have had little effect on DOJ or on the Securities and Exchange Commission, which enforces the civil side of the law. Data collected for Violation Tracker, including a forthcoming update, show that since Trump took office DOJ and SEC have announced more than a dozen case resolutions with total penalties of more than $1.5 billion.

Several of those resolutions have been announced during the past two months. In early July DOJ and SEC each announced cases with combined penalties of $76 million against Credit Suisse and one of its subsidiaries for improperly winning banking business by giving jobs to family members and friends of Chinese government officials. Just the other day, the SEC announced that the French pharmaceutical company Sanofi would pay $25 million to resolve allegations that its subsidiaries in Kazakhstan and the Middle East made corrupt payments to win business.

It is true that many of the cases announced under Trump have involved foreign companies. Others include Japan’s Panasonic, Sweden’s Telia, and Canada’s Kinross Gold. Yet the culprits have also included some U.S.-based companies. Last year, for example, Halliburton had to pay $29 million to resolve allegations relating to its actions in Angola. Earlier this year, Dun & Bradstreet paid $9 million in connection with two of its subsidiaries in China. Most recently, investment manager Legg Mason agreed to pay more than $34 million to settle allegations that one of its subsidiaries was involved in a scheme to bribe officials in Libya.

While DOJ and SEC seem to be carrying out their mission of investigating FCPA violations by a wide range of companies, it remains to be seen whether that includes the Trump Organization, which according to various media reports may have corrupt practices act liability in a variety of countries (see, for example, The New Yorker piece on Azerbaijan).

This may be another test of whether Trump – and his business interests – are exempt from the law, but for now it is good to see that Trump has not succeeded in undermining an important tool in prosecuting other corporate bad actors.

Trump’s Law and Order Campaign Skips the Workplace

The Trump Administration has left little doubt that one of its main missions is to roll back the regulatory initiatives of the Obama years, especially the Clean Power Plan and the Consumer Financial Protection Bureau. Although Trump has been less overt about it, his corporate-friendly approach also includes weakening rules that have been around for decades.

An important case in point concerns the Fair Labor Standards Act, the key federal wage and hour law that was signed into law 80 years ago by President Franklin Roosevelt. The culmination of decades of struggle over excessive workweeks, inadequate pay levels and child labor, the FLSA put the federal government in the business of combatting wage theft and other forms of workplace exploitation.

It accomplished that through a system of workplace investigations and the imposition of financial penalties on employers large and small. In a move that has received limited attention, the Trump Labor Department is seeking to replace rigorous enforcement with a system called Payroll Audit Independent Determination (or PAID) that puts employers on the honor system. Beginning with the dubious premise that wage and hour violations mainly derive from inadvertent mistakes made by managers, PAID will encourage employers to report irregularities on their own. When they do they will still have to pay back wages but will not be assessed damages or penalties.

Such a system makes a mockery of real enforcement. What makes matters worse is that PAID, which is being billed as a pilot program for now, is being pursued right after the U.S. Supreme Court’s disastrous Epic Systems ruling. That decision affirms the right of employers to compel workers to sign mandatory arbitration agreements that would severely curtail their ability to bring collective action lawsuits. As my colleagues and I at the Corporate Research Project and Jobs With Justice Education Fund showed in a recent report, these lawsuits have allowed workers to recover billions of dollars from large corporations.

PAID was featured in a recent NBC News feature on how the Trump Administration is relaxing regulatory enforcement in numerous areas. This prompted a group of Democratic Senators to express concern about PAID to the DOL, whose spokesperson responded that it was “premature to comment” on the program.

The controversy over PAID comes amid growing concern about the prevalence of wage theft. Some of those abuses apparently exist right inside the federal government. The Labor Department, which has not yet left the investigation business, is reported to be examining the practices of a company called Seven Hills, which manages the food court at the Pentagon.

Faced with the prospect of diminished DOL enforcement and restrictions on lawsuits, activists are looking to other solutions. Some of the most encouraging work is happening at the local and state levels. For example, Centro de Trabajadores Unidos en la Lucha (Center for Workers United in Struggle) is pressing Minneapolis Mayor Jacob Frey and the City Council to pass an ordinance dealing with wage theft.

In some parts of the country, law enforcement officials are taking the term wage theft literally and treating it as a criminal offense. For example, after a joint investigation by the Washington State Attorney General’s Office and the Department of Labor & Industries, a construction company and its owner pled guilty last month to a criminal charge of first-degree theft. Earlier this month, the New York Attorney General and the Inspector General of the Port Authority announced the arrest of a contractor for failing to pay prevailing wages at a publicly-funded construction project at LaGuardia Airport.

While it would be terrible to see DOL’s wage and hour enforcement system dismantled, there are other ways rogue employers can be brought to justice.

Can Large Corporations Be Made Accountable?

Kudos to Sen. Elizabeth Warren for introducing a piece of legislation that filters out all the political noise and goes to the heart of one of the most pressing issues of the day: what can be done to change the behavior of large irresponsible corporations? Her answer: quite a lot.

The key to Warren’s newly introduced Accountable Capitalism Act is a proposal – similar to one pushed by Ralph Nader starting in the 1970s – to end the monopoly that states have had on the chartering of corporations. Beginning in the late 19th Century, that system brought about a disastrous race to the bottom as states competed with one another for registrations by lowering their standards toward the vanishing point. Delaware won that competition and is now the chartering mecca for big business.

Warren’s bill would not eliminate state charters but would require large corporations, defined as those with $1 billion or more in gross receipts, to obtain a federal charter from a new agency created within the Department of Commerce. These “United States corporations” would be subject to a strict set of controls. First of all, they would be required to act in a way that creates “a general public benefit” and that balances the interests of shareholders with those of employees, consumers, communities and the environment.

To promote that end, employees of these corporations would get to choose two-fifths of the members of the board of directors. To discourage policymaking aimed at short-term stock gains, directors and officers would be prohibited from selling their shares for five years after obtaining them. To discourage improper involvement in the political process, these corporations would be barred from using company funds for political expenditures unless 75 percent of the board and 75 percent of shareholders approve.

Yet perhaps most important are the provisions relating to charter revocation. In theory, states have the power to revoke the charter of a corporation that engages in serious misconduct, but they almost never exercise that power. Warren’s bill would allow a state attorney general to petition the federal corporation office to revoke the charter of a company that has engaged in “repeated, egregious, and illegal misconduct” that has caused harm to customers, employees, shareholders or the communities in which the firm operates. That sounds a lot like the track record of a corporation like Wells Fargo.

Warren’s bill would go a long way to rein in large corporate miscreants. Of course, it has little chance of passage in the current Congress. Those circumstances may change, in which case Warren might want to consider some alterations to the bill to address a danger that would exist if someone like Donald Trump were in the White House.

We’ve just seen how Trump is using the power of his office to punish a critic such as former CIA director John Brennan by revoking his security clearance. If Warren’s federal chartering system were in effect, someone like Trump might try to revoke the charter of a corporation he dislikes. If Warren is going to use the federal government to restrain rogue corporations, she needs to make provisions for a rogue president as well.

Fake Environmental Regulation?

The Trump Administration likes to play with fire. Now it may be playing with a fire-resistant material that is also a deadly carcinogen. After years of receding as a public health threat, asbestos could make a comeback.

When Donald Trump joined his father in the New York real estate business in the late 1960s, the use of asbestos in high-rise construction was widespread. Yet within a few years it was revealed that the substance was highly dangerous for those who mined it, those who processed it and those who applied it. The hazard had actually been known for decades but had been kept secret by companies such as Johns-Manville in one of the most egregious corporate deceptions of the 20th Century. Paul Brodeur’s 1985 book on the subject was called Outrageous Misconduct.

Asbestos producers and users were hit with tens of thousands of lawsuits, which forced Manville and other companies into bankruptcy. Use of the material was largely eliminated and vast sums were spent to remove existing asbestos from countless buildings.

Donald Trump appears to be ignorant of this history. In 2012 he tweeted his support for asbestos, claiming that if it had been more widely used in the old World Trade Center the Twin Towers would have survived the 9/11 attack. He did not mention that asbestos fibers were present in the dust clouds generated by the disaster and are believed to be among the causes of the high rate of cancer among first responders and Ground Zero workers.

In recent days there have been reports suggesting that Trump’s Environmental Protection Agency might be putting the president’s pro-asbestos sentiments into action.  In early July the EPA issued what is known as a significant new use rule (or SNUR), inviting manufacturers to petition the agency to seek approval for asbestos products. An article in Fast Company sounded the alarm, stating that the EPA “has made it easier for companies to begin using asbestos again.”

The EPA is vehemently denying that is the case, insisting that it is actually strengthening asbestos regulation. An agency scientist told CNN that “the SNUR is really a good news story for public health protection.” The argument is that the rule would allow the EPA on a case-by-case basis to impose restrictions that may not currently exist. Unfortunately, it’s true that the United States, unlike many other countries, never fully banned the use of asbestos.

It is difficult to believe that the EPA, which has engaged in a deregulatory frenzy since Trump took office, will suddenly abandon its industry friends and embrace public health considerations in responding to new asbestos proposals.

One industry player, the Russian asbestos producer Uralasbest, apparently does not think so. The company, encouraged by the EPA’s reluctance to push for a total ban on the material, is decorating its shipments with a seal of approval containing Trump’s face and the statement “Approved by Donald Trump, the 45th President of the United States.”

A Brazen Corporate Miscreant

The Justice Department and the federal regulatory agencies have been less than energetic in prosecuting corporate crime and misconduct lately, so it was interesting to see the DOJ announcement that it had gotten Wells Fargo to fork over $2 billion to resolve a case involving mortgage-backed securities.

Before thinking that the Trump Justice Department is getting tougher on business offenders, it is important to keep in mind that this is a holdover matter from the prosecution of the big banks by the Obama DOJ in the wake of the financial meltdown. Most of the other banks settled their toxic securities cases long ago.

Wells held out and has now been rewarded by the Trump DOJ with a settlement that is substantially smaller than the ones that preceded it. JPMorgan Chase settled for $13 billion in 2013 and Bank of America for $16 billion the following year.

If anything, Wells should have been forced to pay out more to penalize it for its resistance. Moreover, during the years since its competitors resolved their cases, a tsunami of negative revelations have occurred regarding the other misconduct of Wells.

In fact, it has almost seemed that Wells was in a contest with Volkswagen to be crowned the most brazen corporate miscreant. Nearly two years ago, the scandal erupted regarding the bank’s widespread practice of secretly opening vast numbers of unauthorized customer accounts in order to generate illicit fees (the number of bogus accounts would turn out to be several million). This was followed by a series of other allegations such as charging 800,000 car loan customers for insurance they did not need.

Earlier this year, the Federal Reserve took the unprecedented step of barring Wells Fargo from growing any larger until it cleaned up its business practices. The agency also announced that the bank had been pressured to replace four members of its board of directors.

The actions of Wells were so egregious that even Mick Mulvaney, who took over the Consumer Financial Protection Bureau with the aim of defanging it, agreed in April to have the agency join with the Office of the Comptroller of the Currency to fine the bank a total of $1 billion for selling unnecessary products to customers and other improper practices.

The recent misdeeds of Wells share characteristics with the behavior outlined in the DOJ’s case. The bank appears to have been just as systematic and shameless in its deceptive mortgage practices as it was in generating bogus accounts. It seems that Wells managed to incorporate fraud into its business model in a seamless manner.

If any defendant was undeserving of preferential treatment, Wells Fargo is it.

Corporate Impunity

In the early days of the Trump era, there was speculation that the new administration would be tough on corporate crime. Attorney General Jeff Sessions gave a speech in April 2017 in which he vowed that his Justice Department “will continue to investigate and prosecute corporate fraud and misconduct; bribery; public corruption; organized crime; trade-secret theft; money laundering; securities fraud; government fraud; health care fraud; and Internet fraud, among others.’ He added that DOJ has “a responsibility to protect American consumers.”

A new report from Public Citizen and the Corporate Research Project of Good Jobs First called Corporate Impunity shows just how hollow that promise was. Based on data from Violation Tracker, it shows that during the first year of the Trump Administration there was a substantial drop in regulatory enforcement and prosecution of corporate criminal offenses. In contrast to the zero-tolerance attitude toward migrants and refugees, the administration is showing considerable indulgence when it comes to corporate offenders.

In making a comparison to the previous administration, it is worth recalling the mixed record of the Obama years. That administration had a poor record with regard to holding top corporate executives personally responsible for serious offenses such as the abuses leading to the financial meltdown and the Deepwater Horizon oil spill disaster in the Gulf of Mexico. It continued the misguided policy of offering corporate miscreants deferred-prosecution and non-prosecution agreements.

Yet at least the Obama Administration took steps to increase the financial penalties levied on corporations for their misdeeds. For the first time, billion-dollar fines and settlements became a common occurrence.

Corporate Impunity judges the Trump Administration by that same measure—the level of monetary penalties imposed on companies. It finds, for example, that such penalties imposed by the Trump DOJ in its first year were less than one-tenth the level in each of the last two years of Obama.

The report limits its analysis of regulatory agencies to those which were headed by a Trump appointee for most of 2017. Of the 12 agencies examined, ten showed a decline in the number of enforcement actions. In some cases, those drops were steep. The Federal Trade Commission and the Securities and Exchange Commission had decreases of more than 40 percent, and five others dropped more than 25 percent.

For some agencies, the decline in the number of cases was much less severe than the drop in penalty amounts. At the Environmental Protection Agency, for example, the caseload in Trump’s first year was down 12 percent while the penalty total plunged more than 90 percent.

The results for Trump’s second year are likely to be even more dismal once results are tabulated for agencies such as the Consumer Financial Protection Bureau, which racked up an impressive record during the Obama years and attempted to do the same under Trump until the agency was captured in late 2017 by the White House and subsequently neutered.

Trump’s enforcement record shows that he really is a populist—a corporate populist creating a society in which large companies reign supreme and in many ways are above the law.

The Benefits of Hubris

As customary restraints on corporations and high-level public officials increasingly fall by the wayside in Trump’s America, we may have to rely on the likelihood that their greed will cause them to go simply too far.

That’s what happened with Scott Pruitt at the EPA: he ultimately brought about his own undoing through his inability to limit his covetousness for things large and small. The unbridled pursuit of self-interest may yet bring about the downfall of other Administration figures such as Jared Kushner and Wilbur Ross.

In a remarkable development, overreach also appears to be dooming a major media merger: the audacious effort by Sinclair Broadcast to take over Tribune Media and achieve a virtual stranglehold over local television broadcasting in the United States.

Sinclair seemed to have it made. The company embraced Trump during the 2016 campaign and offered itself up as a propaganda arm of the new administration, hiring Trump crony Boris Epshteyn to produce unabashedly pro-MAGA commentaries that the company compelled its affiliates to air.

The acquisition of Tribune, announced in May 2017, would have given Sinclair an unprecedented share of the local TV market, yet it appeared that the deal would sail through the Federal Communications Commission now that the agency was headed by Trump-appointed regulatory zealot Ajit Pai. Among the rules Pai was eager to eliminate were those involving ownership limits.

Sinclair, however, overplayed its hand. Rather than rubber-stamping the deal, the FCC has just decided to refer it to an administrative law judge, a move that is widely expect to doom the merger.

The company gave the agency little choice when it engaged in a dubious maneuver in its proposal on how to satisfy remaining ownership rules. While claiming that it would divest 23 stations, Sinclair would actually retain operational control over those properties. The FCC’s order suggested that the company’s proposal may have included “misrepresentation or lack of candor.” Translation: Sinclair is a big fat liar.

An article in Politico, describing what it called “a tale of stunning hubris,” quoted a broadcast industry official as saying: “Sinclair’s style in Washington is Exhibit A of how to squander the most favorable regulatory environment in decades.”

While this is a major setback for Sinclair, the defeat of the merger is a boon for media diversity. It is also a hopeful sign amid the deregulatory onslaught and corporate empowerment that have marked so much of the first year and a half of the Trump Administration.

It would be preferable if public interest groups could defeat business abuses directly, but for now we may have to stand by and wait for corporate hubris to do the job for us.

Turmoil On the Road to Autarky

Donald Trump got elected in 2016 essentially by promising everything to everyone except immigrants and environmentalists. In the economic realm he vowed to resurrect dying industries such as coal, to achieve trade supremacy over the rest of the world, to dismantle the regulatory state, and to bring about growth rates not seen for decades. Now those corporate executives who sold their soul to Trump are realizing he cannot deliver on all those promises.

This is most apparent with regard to trade. Companies such as Harley-Davidson and General Motors are complaining about the consequences of Trump’s ham-handed use of tariffs, which instead of bringing about concessions from U.S. trading partners are prompting retaliatory moves. A front-page story in the New York Times headlined “Industries in U.S. Feel Undermined by Trade Policies” states: “Even as the president’s pro-business stance is broadly embraced by the corporate community, in some significant cases the very industries that Mr. Trump has vowed to help say that his proposals will actually hurt them.”

This epiphany took a while to happen because most of Trump’s previous dubious initiatives were domestic in nature. Large corporations stood by as the administration and Congressional Republicans went after the Affordable Care Act because the main victims were individuals who did not get employer-sponsored coverage but were not poor enough to qualify for Medicaid. They went along with the tax bill because it enriched them handsomely even as it set the stage for future fiscal distress. They were largely silent as Trump’s plans to rebuild infrastructure and to address the opioid crisis fizzled out.

Yet trade involves other countries, whose leaders and citizens are a lot less in thrall to Trump and don’t seem to take his bullying routine very seriously. Even mild-mannered countries such as Canada are showing plenty of backbone. Meanwhile, countries such as China, which have engaged in unfair practices that should be addressed in a more coherent way, are able to take the moral high ground.

While Trump is not budging, this foreign resistance is starting to close markets and raise costs for a long list of domestic industries. Globalized companies cannot afford to follow Trump on the road to autarky. For some big firms the European market, for instance, is as important or even more important than the domestic one.

Yet it is not clear that Corporate America is willing to stand up to Trump in a major way. Rather than challenge the president directly, they may simply shift investment and sourcing to lessen the impact of the trade barriers. We need not worry too much about GM and Harley.

The problem is that the trade standoff will eventually take its toll on the U.S. economy as a whole, threatening the delicate balance of low unemployment and mild inflation while hastening the arrival of the next recession. And that will hurt Trump’s individual supporters a lot harder than his corporate backers.

The Skullduggery Continues

Donald Trump seems to live in a world in which there is global trade but no foreign direct investment. He recently denounced BMW imports at a South Carolina rally while ignoring the German automaker’s production facility a short distance away in Spartanburg, which has been in operation since 1994.

The president also seems to be less than fully informed when it comes to the foreign operations of U.S. corporations. He has been berating Harley-Davidson for announcing plans to shift some production to Europe to circumvent the tariffs the EU is imposing on selected American products in response to Trump’s trade policies. In his tweet tirade, Trump demand that Harleys “never be built in another country—never.”

In fact, Harley already has offshore production facilities. One of those is in India, which was originally announced in connection with President Obama’s November 2010 trip to that country to promote U.S. commercial interests. Republicans denounced the trip, not because of job offshoring but rather because of exaggerated reports of the cost of the delegation.

Harley initially used the Indian operation to assemble bikes shipped in knocked-down form from U.S. plants, but later it began using locally produced components. In 2012 Harley outsourced much of its IT work to the Indian company Infosys, some of whose employees on the account worked in the U.S. There were reports in 2014 that Harley IT workers were being asked to train Infosys employees on H-1B visas who were replacing them.

The company also has an assembly facility in Brazil and a manufacturing plant in Australia that produces high-finish wheels. In its 10-K filing Harley states: “The motorcycles assembled at the Company’s international facilities have the same authentic look, sound, feel and quality of a motorcycle manufactured by the Company’s U.S. facilities.” Moreover, Harley announced earlier this year that it is shifting some production from a plant in Kansas City to one in Thailand.

The Harley situation is just the latest in a series of tiffs between Trump and large corporations in which it is difficult to support either side. Harley certainly needed to be called out for engaging in more and more offshore outsourcing while continuing to promote an all-American image.

Trump’s criticism of the company, however, is far from coherent. It seems to be based mostly on his feeling that he was personally betrayed by a firm that he touted as a symbol of American greatness. Trump seems to have picked a fight with Harley in the same way he has gone after other companies, starting with Carrier soon after his election. He has done so mainly to burnish has own tough-guy image while in the end failing to extract any real concessions. The same goes for is supposed battles with pharmaceutical producers, aerospace manufacturers, automakers and others.

Trump’s objective is to give the impression he is taking a hard line against big business, while he is actually catering to every desire of corporate America when it comes to regulation and taxes. It is the flip side of his posture toward workers, in which he pretends to be their defender but is in reality undermining employment safeguards and labor rights. How long can the skullduggery continue?

Bayer and Monsanto: Another Dubious Chemical Industry Marriage

If the chemical industry spent as much time on product safety as it does on corporate restructuring, the world would be a healthier place. In 2015 DuPont spun off a bunch of its operations with tainted environmental and safety records into a new company called Chemours. Then DuPont engineered a merger with its longtime rival Dow Chemical, which had its own checkered history, to form DowDuPont. The combined company is now making more structural adjustments.

More changes are in the works in connection with the recently completed merger of German chemical giant Bayer and Monsanto. This is another case of a marriage between two highly controversial corporations.

Bayer was one of the German companies that combined in the 1920s to form IG Farben, which would go on to use slave labor during the Nazi period and was then split up after the Second World War. The largest of the resulting companies were Bayer, BASF and Hoechst (now part of Sanofi).

As Bayer has stepped up its U.S. involvement over the past two decades it has gotten embroiled in one scandal after another. In 1997 one of its subsidiaries based in New Jersey pled guilty to criminal price-fixing and had to pay a $50 million fine. In 2000 Bayer had to pay $14 million to the federal government and the states to settle allegations that it inflated prices on drugs sold to the Medicaid program. In 2001 it was accused of price-gouging on the antibiotic Cipro, which was then in high demand because of the anthrax scare. It later had to pay $257 million to settle a federal lawsuit on Cipro overcharging.

In 2003 documents emerged suggesting that Bayer was aware of serious safety problems with its cholesterol drug Baycol long before the medication was withdrawn from the market. In 2004 Bayer had to pay a $66 million fine in another criminal price-fixing case. A 2008 explosion at a Bayer pesticide plant in West Virginia that killed two workers led to regulatory penalties including a $5.6 million settlement with the EPA. A report found that management deficiencies played a significant role in creating the conditions that caused the explosion. Environmental and workplace safety fines have continued in recent years.

Monsanto, now absorbed into Bayer, was long one of the most hated corporations in the United States, due to the hardball tactics its employed in marketing genetically modified seeds and Roundup herbicides to farmers. It brought aggressive lawsuits against farmers accused of violating its patents. The company somehow managed to avoid antitrust charges, but in 2016 it was fined $80 million by the Securities and Exchange Commission for accounting violations relating to Roundup.

Bayer’s pursuit of Monsanto is part of its effort to brand itself as a life sciences company rather than merely a chemical producer. Its three main divisions are Crop Science, Pharmaceuticals and Consumer Health (the latter being what used to be known as over-the-counter medications such as aspirin, which Bayer is credited with inventing).

Of these, the most problematic is crop science. Bayer, along with DowDuPont and ChemChina (which bought Syngenta), increasingly dominate world markets for seeds, pesticides and related agribusiness products, giving them unprecedented control over the global food supply. This may give us a headache no amount of aspirin can relieve.