Dirt Diggers Digest

Too Big to Be Honest

breakingup For a long time the big financial institutions of the United States had an unrelenting urge to grow bigger. Acting on the principle that only the big would survive, banks and related entities spent the 1990s and the early 2000s gobbling up one another at a furious pace. The result was a small group of mega-institutions such as Citigroup and Bank of America that nearly brought down the whole financial system in 2008.

Federal regulators declined to break up the giants, which in recent years have grown only larger. But now some of the rules put in place in the wake of the meltdown are having the desired effect. Some major financial players are deciding to split themselves up in the hope of evading the more stringent capital requirements imposed on companies designated as systemically important (SiFi) institutions.

The latest firm to bow to this pressure is insurance behemoth MetLife, which just announced it is exploring a spinoff of its retail life and annuity business in the U.S. into a new presumably non-SiFi company. The move comes in the wake of moves by General Electric to dismantle large parts of its huge GE Capital business. Among the businesses that contributed to GE Capital’s heft was the banking operation it purchased from MetLife in 2011 as part of a previous move by the insurer to reduce its regulatory oversight.

Now other large insurers such as Prudential Financial and American International Group, the latter the recipient of a $180 billion federal bailout, may take similar steps. Apart from the regulatory pressures, AIG has been dealing with breakup calls from investors such as John Paulson and Carl Icahn, who dubbed it “too big to succeed.”

It remains to be seen whether the big banks will succumb to the breakup. For the moment they are resisting, but that’s the stance MetLife had long maintained. Their sagging stock prices make them susceptible to a move by someone like Icahn.

It’s gratifying to see regulation working as designed to make the country less vulnerable to large reckless institutions and a bit less enthralled with financialization. GE’s announcement that it is moving its headquarters to Boston is part of its retreat from finance.

Yet more still needs to be done to get the banks to clean up their act. Stricter capital rules are fine, but the likes of B of A and JPMorgan Chase need to feel more pressure to obey the law. They’ve had to cough up larger and larger financial settlements and in a few cases have even had to plead guilty to criminal charges. Yet they haven’t gotten the message.

Perhaps what’s needed are “honesty requirements” to go along with the more stringent capital requirements. In other words, banks that break the law would have to sell off the businesses involved in the misconduct. This would accelerate the move away from overly large financial institutions and hopefully put more operations in the hands of firms that are willing to play by the rules.

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Note: the Dirt Diggers Digest Enforcement page, which provides links to the compliance data posted by more than 50 federal regulatory agencies, has just been updated and expanded.

DOJ’s Sputtering Case Against Volkswagen

There’s a scene in “The Wolf of Wall Street” in which a federal prosecutor tells Jordan Belfort (played by Leonardo DiCaprio) that the case against him for securities fraud was a “Grenada,” meaning that it was as unloseable as the 1983 U.S. invasion of that poorly defended Caribbean island.

The Justice Department has had another Grenada in recent months with the case against Volkswagen for systematically cheating on auto emissions tests. As the scope of the deception broadened to include millions of vehicles, VW effectively admitted guilt and put aside the equivalent of about $7 billion to resolve the issue, later acknowledging that sum would not be enough.

After three months of preparation, Justice has filed its case yet is failing to make full use of its leverage against the automaker. As a result, it could end up with only a modest win against one of the most egregious cases of corporate environmental fraud this country has ever seen.

The biggest disappointment is DOJ’s decision to forgo criminal charges and handle this solely as a civil matter. Admittedly, prosecutors were confronted with the fact that a little known loophole in the Clean Air Act exempts the auto industry from criminal penalties. Yet there appeared to be ways to get around this limitation by alleging fraud, for instance, given that there was apparently a deliberate effort to deceive the federal government about emissions. It’s not clear why DOJ rejected this approach and did not even use the frequent gambit of pursuing a criminal case and then offering the company a deferred- or non-prosecution agreement. Those options are problematic, but with them criminal charges are at least part of the picture rather than being left out entirely.

Also frustrating is the failure of Justice to bring charges (civil or criminal) against individual VW executives. This flies in the face of the department’s hyped announcement in September of a new policy of holding individuals accountable for corporate misconduct. Charging senior VW officers was all the more important in light of indications that the company has been seeking ways to place the blame on lower-level engineers.

It is disturbing to think that VW may have intimidated DOJ away from an aggressive prosecution. Although the scope of the scandal has widened, taking in more of the company’s brands in more countries, VW seems to be adopting a less conciliatory posture than it did earlier in the case. In fact, the DOJ complaint accuses the company of impeding and obstructing the investigation through “material omissions and misleading information” — accusations that make the absence of criminal charges all the more bewildering.

It is likely that VW will have to pay billions of dollars to resolve the charges against it. This is right and proper, but is it enough? Corporations from BP to Bank of America have gotten used to buying their way out of legal jeopardy, treating fines and settlements as (often tax deductible) costs of doing business. Those costs have been rising — BP has had to pay out more than $24 billion in connection with its Gulf of Mexico disaster — but there is little evidence that the penalties are having the intended deterrent effect.

Criminal charges are not a panacea. They’ve been brought against BP, several large banks and other companies yet no longer have the same bite. Several banks, for instance, have received waivers from SEC rules barring criminals from the securities business.

Yet at least there is the possibility of applying criminal penalties more aggressively. Going the purely civil route, as Justice is doing with VW, guarantees from the start that the case will be little more than a financial transaction. In a case of deliberate and widespread deception with severe environmental and health impacts, that’s simply not good enough.

The 2015 Corporate Rap Sheet

The ongoing corporate crime wave showed no signs of abating in 2015. BP paid a record $20 billion to settle the remaining civil charges relating to the Deepwater Horizon disaster (on top of the $4 billion in previous criminal penalties), and Volkswagen is facing perhaps even greater liability in connection with its scheme to evade emission standards.

Other automakers and suppliers were hit with large penalties for safety violations, including a $900 million fine (and deferred criminal prosecution) for General Motors, a record civil penalty of $200 million for Japanese airbag maker Takata, penalties of $105 million and $70 million for Fiat Chrysler, and $70 million for Honda.

Major banks continued to pay large penalties to resolve a variety of legal entanglements. Five banks (Citigroup, JPMorgan Chase, Barclays, Royal Bank of Scotland and UBS) had to pay a total of $2.5 billion to the Justice Department and $1.8 billion to the Federal Reserve in connection with charges that they conspired to manipulate foreign exchange markets. The DOJ case was unusual in that the banks had to enter guilty pleas, but it is unclear that this hampered their ability to conduct business as usual.

Anadarko Petroleum agreed to pay more than $5 billion to resolve charges relating to toxic dumping by Kerr-McGee, which was acquired by Anadarko in 2006. In another major environmental case, fertilizer company Mosaic agreed to resolve hazardous waste allegations at eight facilities by creating a $630 million trust fund and spending $170 million on mitigation projects.

These examples and the additional ones below were assembled with the help of Violation Tracker, the new database of corporate misconduct my colleagues and I at the Corporate Research Project of Good Jobs First introduced this year. The database currently covers environmental, health and safety cases from 13 federal agencies, but we will be adding other violation categories in 2016.

Deceptive financial practices. The Consumer Financial Protection Bureau fined Citibank $700 million for the deceptive marketing of credit card add-on products.

Cheating depositors. Citizens Bank was fined $18.5 million by the CFPB for pocketing the difference when customers mistakenly filled out deposit slips for amounts lower than the sums actually transferred.

Overcharging customers. An investigation by officials in New York City found that pre-packaged products at Whole Foods had mislabeled weights, resulting in grossly inflated unit prices.

Food contamination. In a rare financial penalty in a food safety case, a subsidiary of ConAgra was fined $11.2 million for distributing salmonella-tainted peanut butter.

Adulterated medication. Johnson & Johnson subsidiary McNeill-PPC entered a guilty plea and paid $25 million in fines and forfeiture in connection with charges that it sold adulterated children’s over-the-counter medications.

Illegal marketing. Sanofi subsidiary Genzyme Corporation entered into a deferred prosecution agreement and paid a penalty of $32.6 million in connection with charges that it promoted its Seprafilm devices for uses not approved as safe by the Food and Drug Administration.

Failure to report safety defects. Among the companies hit this year with civil penalties by the Consumer Product Safety Commission for failing to promptly report safety hazards were: General Electric ($3.5 million fine), Office Depot ($3.4 million) and LG Electronics ($1.8 million).

Workplace hazards. Tuna producer Bumble Bee agreed to pay $6 million to settle state charges that it willfully violated worker safety rules in connection with the death of an employee who was trapped in an industrial oven at the company’s plant in Southern California.

Sanctions violations. Deutsche Bank was fined $258 million for violations in connection with transactions on behalf of countries (such as Iran and Syria) and entities subject to U.S. economic sanctions.

Air pollution. Glass manufacturer Guardian Industries settled Clean Air Act violations brought by the EPA by agreeing to spend $70 million on new emission controls.

Ocean dumping. An Italian company called Carbofin was hit with a $2.75 million criminal fine for falsifying its records to hide the fact that it was using a device known as a “magic hose” to dispose of sludge, waste oil and oil-contaminated bilge water directly into the sea rather than using required pollution prevention equipment.

Climate denial. The New York Attorney General is investigating whether Exxon Mobil deliberately deceived shareholders and the public about the risks of climate change.

False claims. Millennium Health agreed to pay $256 million to resolve allegations that it billed Medicare, Medicaid and other federal health programs for unnecessary tests.

Illegal lobbying. Lockheed Martin paid $4.7 million to settle charges that it illegally used government money to lobby federal officials for an extension of its contract to run the Sandia nuclear weapons lab.

Price-fixing. German auto parts maker Robert Bosch was fined $57.8 million after pleading guilty to Justice Department charges of conspiring to fix prices and rig bids for spark plugs, oxygen sensors and starter motors sold to automakers in the United States and elsewhere.

Foreign bribery. Goodyear Tire & Rubber paid $16 million to resolve Securities and Exchange Commission allegations that company subsidiaries paid bribes to obtain sales in Kenya and Angola.

Wage theft. Oilfield services company Halliburton paid $18 million to resolve Labor Department allegations that it improperly categorized more than 1,000 workers to deny them overtime pay.

A Chemical Industry Marriage Not Made in Heaven

dow-dupont A corporation once known as the Merchant of Death because it dominated the gunpowder market wants to unite with a company that became notorious for its production of napalm and Agent Orange during the Vietnam War. The proposed merger of DuPont and Dow Chemical is not a marriage made in heaven.

The more recent track records of the two chemical giants are also seriously tarnished, raising questions as to whether the plan for a merger and then breakup is really a ploy to evade liability — something each of the companies has done in the past.

DuPont’s feel-good postwar campaign promoting “better living through chemistry” gave way to a series of environmental controversies. In the 1970s and 1980s the issue was the company’s production of chlorofluorocarbons (CFCs) like Freon, which were destroying the earth’s ozone layer. After resisting for years, DuPont finally agreed to phase out production of CFCs but sought to use substitutes that were also harmful.

In 1989 evidence emerged that the Savannah River nuclear weapons plant, which DuPont had built and operated for the federal government since 1951, had serious structural flaws and safety problems that the company failed to report. Numerous accidents at the South Carolina facility, which made plutonium and the tritium gas needed in nuclear warheads, were also kept secret.

DuPont was a pioneer in developing perfluorinated compounds (PFCs), one of the most highly toxic, extraordinarily persistent and likely carcinogenic group of chemicals that work their way into the bloodstream of humans and wildlife. DuPont’s highest profile PFC-based product was Teflon, best known for its use in non-stick cookware. In 2004 the EPA charged that for two decades DuPont failed to report signs of health and environmental problems linked to perfluorooctanoic acid (or PFOA), the PFC used in making Teflon. Residents living near the plant in West Virginia where DuPont produced PFOA sued the company, which agreed to pay about $100 million to settle the case and spend up to $235 million on medical monitoring of residents, which is ongoing. DuPont also paid $16.5 million to settle the EPA charges and later agreed to gradually phase out PFOA.

In 2014 a leak of methyl mercaptan (used in the production of pesticides) at a DuPont plant in LaPorte, Texas caused the death of four workers. In July 2015 OSHA proposed fines of $273,000 in connection with the accident and put DuPont on its severe violator list.

This year, DuPont spun off numerous facilities with tainted environmental and safety records into a new company called Chemours. There was immediate concern expressed by groups such as Keep Your Promises DuPont that the ownership change would impair the commitments DuPont had made to deal with toxic waste sites and other contaminated areas. One of those areas was Parkersburg, West Virginia, where DuPont had produced Teflon.

DuPont’s initial SEC filing about Chemours disclosed that the new company would begin life with some $298 million in environmental liabilities but acknowledged that the total could rise to 3.5 times that amount.

Dow Chemical was involved in one of the most controversial cases of liability evasion: its decision to do nothing for the victims of the Bhopal disaster after acquiring Union Carbide, the company whose subsidiary operated the pesticide plant where in 1984 a vast quantity of highly toxic methyl isocyanate gas was released. More than 8,000 people died in the immediate aftermath of the incident, and many thousands more suffered serious harms from exposure to the gas, including genetic damage that affected their offspring.

Union Carbide paid compensation of $470 million, far below what many advocates felt was necessary to care for the victims and their families. After the merger, Bhopal advocates began to pressure Dow to do more, but the company insisted that it had not assumed Union Carbide’s liabilities and thus had no responsibility to help.

Dow’s sins are not all inherited. In the 1980s its Dow Corning subsidiary was hit with class action lawsuits filed by women claiming that they had developed autoimmune diseases as a result of silicone leakage from breast implants produced by the company. In 1992, following a review of Dow Corning internal company documents suggesting that the implants had been rushed to market without complete safety tests, the U.S. Food and Drug Administration called for a moratorium on new implants. The New York Times reported that the documents revealed that Dow Corning executives had delayed conducting critical safety studies for more than a decade.

In 2011 Dow had to pay $2.5 million to settle EPA allegations that the company’s complex in Midland, Michigan violated the Clean Air Act and Clean Water Act in a host of ways at its chemical, pharmaceutical, and pesticide plants.

Given the histories of these two companies, the proposed merger of DuPont and Dow deserves the utmost scrutiny so that the needs not only of shareholders but also their victims are addressed.

The Corporate Wrongdoers Sticking with ALEC

If a group of major drug dealers, identity thieves and bank robbers were to put out a statement calling for relaxation of the criminal code, no one would take it very seriously.

Yet complaints about the regulatory system coming from large corporations — including many with repeated environmental and safety violations — are regarded as important pronouncements by too many policymakers and political candidates. Corporate interests don’t simply complain. They use their money and influence to urge lawmakers to alter the rules in their favor.

One of the main vehicles by which big business pushes its deregulatory agenda is the American Legislative Exchange Council. ALEC, which is currently holding one of its periodic gatherings of corporate lobbyists and legislators, takes aim at agencies such as the EPA, which it likes to call a “regulatory train wreck.”

Since my colleagues and I at the Corporate Research Project of Good Jobs First released our Violation Tracker database recently, I’ve been comparing notes with the ALEC watchers at the Center for Media and Democracy. What we’ve found is a substantial overlap between the corporations that remain loyal to ALEC (more than 100 have left in response to public pressure) and the companies in Tracker with the largest penalty totals. Mary Bottari of CMD has posted a piece that focuses on the energy companies in the two groups. Here I look at the full overlap.

The current list of ALEC corporate members includes 11 corporations that rank in the Violation Tracker top 100 (in a few cases the membership is held by a subsidiary). These parents and their subsidiaries have racked up a total of $1.7 billion in federal environmental, health and safety penalties and settlements since the beginning of 2010:

Pfizer: $563,357,650
Novartis: $422,569,368
WEC Energy Group: $310,621,475
Duke Energy: $112,150,534
Honeywell International: $93,641,829
Berkshire Hathaway: $46,810,063
Exxon Mobil: $46,285,706
Energy Transfer: $25,467,251
Dominion Resources: $14,168,658
Norfolk Southern: $11,675,325
Chevron: $11,373,376

Pfizer is in the news because of its deal to merge with a smaller drug company and move its legal headquarters to Ireland, all to dodge federal taxes. It has amassed more than half a billion dollars in penalties in the past five years largely because of cases involving the illegal marketing of drugs for purposes not approved as safe by the Food and Drug Administration. In 2009, the year before Violation Tracker’s coverage begins, Pfizer had to pay $2.3 billion to settle Justice Department civil and criminal charges relating to the illegal marketing of the painkiller Bextra and three other medications. John Kopchinski, a former Pfizer sales representative whose complaint helped bring about the federal investigation, told the New York Times: “The whole culture of Pfizer is driven by sales, and if you didn’t sell drugs illegally, you were not seen as a team player.”

Novartis has also been accused of illegal marketing of drugs and has had to pay more than $400 million in penalties. Not yet included in Violation Tracker is a case in which federal prosecutors are seeking $3 billion in penalties from the company for paying illegal kickbacks to get pharmacies to encourage use of expensive drugs for kidney-transplant patients covered by Medicare and Medicaid.

WEC Energy Group, whose subsidiaries North Shore Gas and Peoples Gas are ALEC members, is on the top violators list mainly because of a $307 million settlement another subsidiary, Wisconsin Public Service Corporation, reached with the Justice Department and the EPA to resolve Clean Air Act violations at two of its power plants. Most of the settlement involves mandatory spending on new pollution control technology at the facilities.

Duke Energy earned its spot on the top violators list mainly because of a case from earlier this year in which three of its subsidiaries pled guilty to criminal violations of the Clean Water Act and paid $102 million in penalties in connection with a massive coal ash spill into the Dan River in North Carolina.

The largest portion of Honeywell International‘s $93 million in penalties comes from a 2013 case in which it agreed to pay a $3 million civil penalty and spend $66 million on new pollution control equipment to resolve Clean Air Act violations at its plant in Hopewell, Virginia.

Conglomerate Berkshire Hathaway is on the list because one of its major subsidiaries, BNSF Railway, is an ALEC member. While it has not been involved in any large cases like those above, since 2010 BNSF has accumulated more than 600 violations from the Federal Railroad Administration with total penalties of $7 million (the FRA’s fines tend to be less than onerous). BNSF was also pressured by OSHA to change its practices that the agency said discouraged workers from reporting on-the-job injuries.

Exxon Mobil‘s penalty total comes largely from its subsidiary XTO Energy, which focuses on fracking. For example, in 2013 XTO had to pay $20.1 million to the EPA to settle Clean Air Act violations linked to the discharge of wastewater in Pennsylvania.

These cases illustrate the track record of the companies that are sticking with ALEC, presumably with the hope that the organization can bring about policy changes that will allow them to continue business as usual and pay less in the way of penalties. ALEC may be correct that the regulatory system is a “train wreck,” but that’s because the rules are too weak, not too stringent.

Violation Tracker and Toy Safety

The holidays are nearly upon us, and that means that millions of parents are facing the annual ordeal of shopping for toys. Along with designating children as naughty or nice, shoppers may want to pay attention to the track record of the companies producing and selling the items that show up on wish lists.

Violation Tracker, the new database of corporate misconduct, can help identify which companies have the worst safety records when it comes to toys and other items for children. Among the agencies from which the database has collected environmental, health and safety enforcement data is the Consumer Product Safety Commission, which pays close attention to hazards in items used by young people.

The CPSC maintains a database of voluntary recalls and sends letters to companies asking for corrective action, but it also imposes civil penalties in cases of egregious violations. The following list, taken from Violation Tracker, shows the companies with the largest CPSC penalties since the beginning of 2010.

Techtronic Industries, headquartered in Hong Kong, was, via its subsidiary One World Technologies, fined $4.3 million for violating CPSC reporting rules in connection with its Baja Motorsports mini-bikes and go-carts. The CPSC said that gas caps on the vehicle could leak or detach from the fuel tank, posing fire and burn hazards, and that sticky throttles could result in sudden acceleration.

Discount clothing retailer Ross Stores was fined $3.9 million in connection with the sale of thousands of children’s garments with neck or waist drawstrings that posed a strangulation risk. The CPSC had previously determined that such garments created a “substantial product hazard.”

Phil & Teds, a manufacturer of strollers and related baby gear, was fined $3.5 million for failing to report that its MeToo clip-on high chair could detach from a table and cause an infant to fall to the ground. If only one side of the high chair detached, a child’s fingers could become crushed between the bar and the clamping mechanism, resulting in amputation. The company had received multiple reports of such accidents, including two amputation cases, but did not report them to the CPSC in a timely manner.

The American subsidiary of Japan’s Daiso Industries was fined $2.05 million and had to stop importing children’s products and toys into the United States. The CPSC had determined that the company was distributing and selling toys with illegal levels of lead content, lead paint and phthalates; toys intended for young children containing small parts that posed choking hazards; and products that lacked required warning labels.

Michigan-based retailer Meijer was fined $2 million for selling a dozen different recalled consumer products, most of which were for children. Among these were SlingRider Baby Slings (risk of suffocation), Refreshing Rings Infant Teethers/Rattles imported by Sassy (ingestion hazard), and the Harmony High Chair manufactured by Graco Children’s Products (fall hazard).

Burlington Coat Factory, owned by Bain Capital, was fined $1.5 million for the same violation as Ross Stores: selling children’s clothing with drawstrings deemed to be a strangulation hazard. Among the garments were hooded jackets and sweatshirts involved in a 2010 recall announced by the CPSC in cooperation with the company. Macy’s was fined $750,000 in another drawstring case.

Spin Master Inc. was fined $1.3 million for failing to reports hazards associated with its product called Aqua Dots, a children’s craft kit and toy that consisted of tiny beads of different colors that stuck together when sprayed with water. According to the CPSC, Spin Master had received reports that children (and a dog) had become ill and received emergency medical treatment after ingesting Aqua Dots, which contained a substance that could damage kidneys and the central nervous system.

Henry Gordy International, a subsidiary of Exx Inc., was fined $1.1 million for failing to report that its toy dart gun sets contained parts that could be inhaled into a child’s throat and cause suffocation. The CPSC also alleged that the company made a material misrepresentation to agency staffers during their investigation.

Violation Tracker data currently goes back only to the beginning of 2010, but toy safety problems began well before that. One perennial problem was the sale of items containing lead or lead paint, especially by the dollar store chains. In 2009 Dollar General was fined $100,00 and Family Dollar (now owned by Dollar Tree) $75,000 as part of a CPSC crackdown on the dangerous practice.

Santa Claus may put lumps of coal in some children’s stockings, but unscrupulous corporations can do a lot worse.

Using Violation Tracker to Research Oil Transport Hazards

In their disappointed responses to President Obama’s rejection of the Keystone XL project, proponents argued that the decision would do nothing more than force tar sands oil producers to use more dangerous forms of transport such as rail.

It’s true that freight railroads have had their share of accidents, but pipelines are hardly risk-free. The new Violation Tracker database provides documentation on the hazards of both modes of moving dirty oil.

Pipeline regulation is under the purview of the Pipeline and Hazardous Materials Safety Administration (PHMSA), a division of the U.S. Department of Transportation. Violation Tracker has collected data on more than 200 significant enforcement cases brought by the agency since the beginning of 2010. These cases have resulted in total penalties of $28 million.

The largest share of that total comes from Enbridge, the Canadian pipeline giant with extensive operations in the United States. It has had five PHMSA cases with total penalties of $6.3 million. These include a $3.7 million penalty linked to a 2010 accident that spewed more than 800,000 gallons of oil into Michigan’s Kalamazoo River, a major waterway that flows into Lake Michigan. The agency followed the penalty announcement with a statement that there was a “lack of a safety culture” at Enbridge, which had previously been fined $2.4 million for an accident in Minnesota in which two workers were killed when the oil in a leaking pipeline ignited. (For more on Enbridge’s dubious track record, see its Corporate Rap Sheet.)

Second among the top PHMSA violators is BP with $4.6 million in penalties, most of which came from a provision of a larger settlement also involving the Justice Department and the EPA concerning a spill on the North Slope of Alaska. Third is Buckeye Partners with 18 cases involving just under $2 million in PHMSA penalties. Four other companies have been penalized in excess of $1 million by the agency since 2010: Kinder Morgan, Enterprise Products Partners, Exxon Mobil and Marathon Petroleum.

The biggest single penalty from this group was the $1,045,000 fine imposed on Exxon Mobil in connection with a 2011 rupture of a pipeline in Montana that sent more than 40,000 gallons of crude oil into the Yellowstone River.

This is the track record that Keystone XL advocates seem to think argues in favor of pipelines. As noted, they are on stronger ground when criticizing railroads. They can point to incidents such as the derailment of a CSX oil train in West Virginia that caused a fire that burned for days and forced the evacuations of hundreds of people.

The Federal Railroad Administration tends to impose modest penalties but Violation Tracker shows that half a dozen lines have managed to accumulate $1 million or more in safety fines since 2010. In the lead is Union Pacific, with $11.1 million in penalties, including the agency’s single largest fine of $565,000. Second is Berkshire Hathaway (parent of BNSF) with $7.4 million, followed by CSX with $2.7 million and Norfolk Southern with $3.4 million. All of the Class I railroads are well represented on the penalty list.

The debate between pipelines and supposedly safer railroads is a false one. The major companies in both industries have track records that make oil transport a hazardous proposition.

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New in Corporate Rap Sheets: Dollar Tree, now leading the retail sector targeting those too poor to shop at Walmart.

Also note: POGO’s Federal Contractor Misconduct Database, one of the inspirations for Violation Tracker, has been revamped.

Using Violation Tracker to Analyze Workplace Safety and Labor Relations

It’s widely known that BP has a terrible workplace safety record, especially at its Texas City refinery, where 15 workers were killed in a 2005 explosion blamed in large part on management. In 2010 BP had to pay a record $50 million to settle OSHA allegations relating to the incident and the serious deficiencies in its subsequent remediation efforts.

Figuring out which other companies have created the greatest hazards for their workers has been more difficult — until now, that is. Violation Tracker, a new database on corporate misconduct, brings together information on some 100,000 environmental, health and safety cases filed by OSHA and a dozen other federal regulatory agencies since 2010. The database links the companies involved in the individual cases to their corporate parents, and the penalties are aggregated. Here I look at the largest OSHA violators identified by Violation Tracker and discuss a key characteristic they tend to have in common.

Companies with the most OSHA penalties, 2010-August 2015

BP: $63,860,860
Louis Dreyfus (parent of Imperial Sugar): $6,063,600
Republic Steel: $2,635,000
Tesoro: $2,532,355
Olivet Management: $2,359,000
Dollar Tree: $2,153,585
Ashley Furniture: $1,869,745
Kehrer Brothers Construction: $1,822,800
Renco: $1,535,475
Black Mag LLC: $1,218,500

(Source: Violation Tracker. Amounts are totals of “current penalties” for serious, willful or repeated violations of $5,000 or more after any negotiated reductions in OSHA’s initial proposed fines.)

Last February, members of the United Steelworkers union walked off the job at BP refineries in Ohio and Indiana as part of a strike focusing on safety problems in the industry. USW president Leo Girard stated at the time: “Management cannot continue to resist allowing workers a stronger voice on issues that could very well make the difference between life and death for too many of them.” BP’s $63 million in OSHA fines and settlements since 2010, far more than any other company, have put it at the forefront of that deadly resistance.

Tesoro, another unionized oil refiner criticized by the USW for its safety shortcomings, has the fourth highest OSHA penalty total ($2.5 million) among the companies in Violation Tracker. In 2014 the union called on the company to develop a “comprehensive, cohesive safety program” after an accident at a California refinery in which two workers were seriously injured. The USW also took the company to task for disputing a report by the U.S. Chemical Safety Board citing “safety culture deficiencies” among the causes of a 2010 explosion at a Tesoro refinery in Anacortes, Washington that killed seven workers.

Kehrer Brothers Construction, on the top-ten list of OSHA violators with $1.8 million in penalties, is nominally a union contractor, but it was the subject of a 2010 lawsuit by the Roofers union complaining about wage theft. Earlier this year, OSHA accused the company of bringing in non-English speaking workers under H-2B visas and knowingly exposing them to asbestos on the job.

Not all of the largest OSHA violators are rogue unionized employers. Some are firms that have managed to keep unions out. Chief among those is Imperial Sugar, which in 2010 had to pay $6 million to settle more than 120 violations linked to a 2008 explosion at its non-union plant in Port Wentworth, Georgia that killed 14 people and seriously injured dozens of others. (Imperial, acquired by Louis Dreyfus in 2012, had unions at some of its other facilities.)

Dollar Tree, which has racked up more than $2 million in OSHA fines since 2010, is one of the large deep-discount retailers that target the portion of the population that cannot afford to shop at Walmart. The non-union chain has been cited repeatedly for piling boxes in storage areas of its stores to dangerous heights and blocking emergency exits.

Ashley Furniture was fined $1.8 million by OSHA earlier this year at its non-union plant in Arcadia, Wisconsin for 38 willful, serious or repeated violations stemming from the company’s failure to protect workers from moving equipment parts. One worker lost three fingers while operating a woodworking machine lacking required safety protections. OSHA recently proposed another $431,000 in fines for similar problems at another Ashley facility in Wisconsin.

A more obscure company in the OSHA top ten is Olivet Management, a real estate developer fined more than $2.3 million for exposing its own workers and contractor employees to asbestos and lead during clean-up activities at the site of the former Hudson Valley Psychiatric Center in Dover Plains, New York. The company was created by Olivet University, which calls itself “a private Christian institution of biblical higher education.”

There’s a smaller third category of top OSHA violators, represented by Republic Steel: a company with decent union relations that appears to have gotten sloppy in its safety practices. In 2014 Republic agreed to pay $2.4 million as part of a settlement with OSHA resolving violations at its facilities in Ohio and New York. The settlement, which also involved the creation of a comprehensive illness and injury prevention program, was praised by the USW. Yet this year Republic was fined another $162,400 for repeated and serious violations at its plant in Lorain, Ohio.

The lesson of all this seems to be that workers face the greatest hazards in non-union companies and rogue unionized firms, but they also need to be vigilant in workplaces with decent labor-management relations.

Note: This is the first in a series of posts using information from the new Violation Tracker database. For more on Violation Tracker, see the Huffington Post.

Introducing Violation Tracker

Violation Tracker , the first national database on corporate crime, has arrived. For me it is the culmination of nine months of work collecting enforcement data, matching some 25,000 companies in the agency records to their corporate parents and designing the site, all of this done with the help of Rich Puchalsky of Grassroots Connection.

My involvement in this kind of project actually goes back 35 years. While a young researcher for Fortune magazine, I was assigned to a story whose dubious premise was that lawbreaking was a lot more common among small businesses than large corporations. I had serious doubts about that notion and set out to collect as much information as I could about wrongdoing by the Fortune 500.

Even with a narrow definition of misconduct, I found that 117 of the companies that had appeared on the 500 list during the previous decade–including Fortune’s parent company Time Inc.–had been convicted (or signed a consent decree) for bribery, criminal fraud, illegal political contributions, tax evasion or criminal antitrust violations. My editors were not happy, but to their credit they published the full list (as part of an article written by Irwin Ross) in the December 1, 1980 issue of the magazine.

The urge to document and tabulate corporate crime has been with me ever since. I’ve given in to that urge numerous times, most notably in 2012, when I began producing Corporate Rap Sheets on many of the worst violators under the auspices of the Corporate Research Project of Good Jobs First.

Now I’m able to take it to the next step with Violation Tracker, a database that in its initial form covers all environmental, health and safety cases with penalties of $5,000 or more brought since the beginning of 2010 by 13 federal regulatory agencies, including those they referred to the Justice Department. Additional violation categories (bribery, price-fixing, financial offenses, wage & hour infractions, etc.) will be added in the future.

Violation Tracker uses the same parent-subsidiary matching system my colleagues and I at Good Jobs First created for our Subsidy Tracker database. In Violation Tracker the companies named in the individual violations are linked to more than 1,600 parent companies. The site has summary pages for each of the parents (along with the individual entries) as well as overviews by industry, agency and parent headquarters location.

Along with the database the Corporate Research Project is releasing a report entitled BP and Its Brethren summarizing what the information in Violation Tracker shows about the biggest violators (using a broad definition of penalties that includes both fines and other mandatory outlays such as supplementary environmental projects that are often part of settlements). Here are some highlights from the report:

The corporations with the most penalties are: BP ($25.4 billion), Anadarko Petroleum ($5.2 billion), GlaxoSmithKline ($3.8 billion), Johnson & Johnson ($2.4 billion), Abbott Laboratories ($1.5 billion), Transocean ($1.4 billion), Toyota ($1.3 billion) and Alliant Energy ($1.0 billion). The penalty total of all entries in Violation Tracker is about $60 billion.
BP’s $25 billion puts oil and gas at the top of the ranking of industries by total penalties. The pharmaceutical industry is second, due to a series of major cases involving the promotion of medications for uses not approved as safe by the Food and Drug Administration. Utilities rank third, due to cases involving power plant emissions. In fourth place is the auto industry, thanks mainly to a $1.2 billion penalty paid by Toyota and a $900 million fine against General Motors, both for safety issues. The chemical industry, with a wide range of violations, is fifth.
Large corporations are responsible for the vast majority of the penalties. Companies on the Fortune 500 and the non-U.S. portion of the Fortune Global 500 together account for 81 percent of Violation Tracker’s total penalty universe.
Foreign companies operating in the United States represent a large share of the violations. In fact, given that BP is one of those foreign parents, the penalty total for that group is larger than for U.S.-based firms: $34 billion vs. $21 billion. Even without BP, foreign parents account for $9 billion in penalties. Companies that have reincorporated abroad for tax reasons are excluded from this breakdown.
There are substantial overlaps between the companies penalized by the different agencies, especially between EPA and OSHA. Some companies show up on more than one of the lists of top-ten penalized firms by agency. BP shows up on four: EPA, OSHA, the Pipeline & Hazardous Materials Safety Administration, and multi-agency cases handled by the Justice Department.
A comparison of the 100 parents with the most penalties in Violation Tracker to the 100 most-subsidized in Subsidy Tracker finds 16 overlaps, mainly automakers such as Toyota and General Motors.
Along with actual foreign companies, the most penalized parents include some companies that have “inverted” (reincorporated or merged abroad) and thus claim to be foreign to dodge U.S. taxes. The tax runaway with the largest penalty total is Transocean, which leased the ill-fated Deepwater Horizon drilling rig to BP and which was fined a total of $1.4 billion in connection with the accident. “Inverted” firms have $2.9 billion in penalties.
Leading federal contractors are among the most-penalized companies. Of the 100 largest contractors in FY2014, ten are also among the biggest penalty parents in Violation Tracker, including: four pharmaceutical producers (GlaxoSmithKline, Merck, Pfizer and Sanofi); two oil giants (Royal Dutch Shell and Exxon Mobil) and three military contractors (Honeywell, General Electric and Boeing). Conglomerate Berkshire Hathaway is also on the list.

We’re living in an age of widespread corporate misconduct, illustrated most recently by the Volkswagen scandal. Violation Tracker is designed not only to help people keep track of which company was involved in which wrongdoing but also to serve as a tool for a wide range of campaigns promoting corporate accountability.

Reining in the Beltway Bandits

A New York Times op-ed by lawyer Eric Havian argues that the best way to punish corporate fraudsters is to bar them from government contracts. Debarment of companies is an established practice, but it’s usually been employed in a half-hearted way such as the temporary exclusion of BP in the wake of the Deepwater Horizon disaster.

Havian, however, highlights the little known power of federal agencies to exclude individual executives from working in regulated industries, sometimes for life, if they are shown to have engaged in unsavory practices. He argues that bringing about such exclusions is much easier than prosecuting executives on criminal charges, as the Justice Department says it plans to do more often.

This is an intriguing idea but the problem is always the uncertainty as to whether getting tough with executives, even high-level ones, will succeed in changing corporate behavior. Ultimately, all individuals are expendable in large corporations, so the desire to boost profits by breaking the rules is likely to trump any inclination to behave properly to protect those in the executive suite.

The need to do something to prevent rogue companies from getting or keeping government contracts is highlighted in some of the data my colleagues and I at the Corporate Research Project of Good Jobs First have collected for our Violation Tracker database, which will be released next week.

Following the path blazed by the Project On Government Oversight’s Federal Contractor Misconduct Database, we found that ten of the 100 largest federal contractors are also among the 100 companies accounting for the most environmental, health and safety violations since 2010 (the scope of the initial version of Violation Tracker).

Four of the group are pharmaceutical manufacturers (GlaxoSmithKline, Merck, Pfizer and Sanofi); two are oil and gas giants (Royal Dutch Shell and Exxon Mobil) and three are big military contractors (Honeywell, General Electric and Boeing). Conglomerate Berkshire Hathaway is also on the list.

The drug company penalties stem mainly from cases in which they had to pay big settlements to resolve cases in which they were accused of marketing medications for uses not approved as safe by the Food and Drug Administration. GlaxoSmithKline, for instance, pled guilty to three criminal counts in 2012 and had to pay $3 billion to resolve allegations concerning the unlawful promotion of Paxil and Wellbutrin, failure to report certain safety data to the FDA, and false price reporting. That marketing allegedly included kickbacks paid to doctors and other health professionals to get them to prescribe and promote the drugs for those unauthorized uses.

In FY2014 GSK was awarded federal contracts worth more than $780 million, mostly from the Department of Health and Human Services and the Pentagon. Those agencies apparently had no problems dealing with a corporate criminal.

The penalty amounts attributable to federal contractors are likely to be much greater when we expand Violation Tracker to include other offenses such as false claims against government agencies. Such fraud is pretty much the basic business model of many of the large military contractors, for example.

Federal agencies need to use Havian’s exclusion idea, criminal prosecutions and all other tools at their disposal to rein in the Beltway Bandits.