Koch Industries and the Attack on Regulation

Donald Trump’s rants about the deep state are designed to deflect attention away from his own transgressions. An even more sinister attack on the legitimacy of the federal executive branch is taking place in the U.S. Supreme Court, and the result could strike a serious blow against corporate accountability.

The Court just heard oral arguments in two cases that were purportedly brought by commercial fishermen protesting their obligation to help pay for the cost of monitoring compliance with the Magnuson-Stevens Fishery Conservation and Management Act.

Instead of addressing that narrow issue, the cases are being used to challenge one of the bedrocks of federal regulation—the 40-year-old Chevron doctrine under which courts have given deference to agencies in interpreting laws relating to the environment, consumer protection, and the like.

It is standard procedure for Corporate America to use small businesses as a wedge for achieving changes that provide a lot more benefit to large companies. There was little doubt this was the dynamic at play in the fishing case.

The New York Times made this even more evident in an article revealing that the supposed public interest law firm bringing the fishing case is closely linked to billionaire Charles Koch, who has long sought to weaken government oversight of business as part of a broad rightwing agenda. Charles Koch and his late brother David bankrolled libertarian think tanks such as the Heritage Foundation and the Cato Institute as well as activist groups such as Americans for Prosperity.

This crusade has not been solely a matter of ideology. There is also a great degree of self-interest involved. That’s because Koch is the chairman of Koch Industries, a privately held industrial conglomerate that has for decades clashed with regulators and prosecutors.

In the period since January 2000, the company has, as documented in Violation Tracker, been involved in hundreds of federal, state and local regulatory cases and has had to pay more than $1 billion in fines and settlements.

Most of these penalties have been paid by Koch’s numerous subsidiaries, which do business in industries that often run afoul of environmental and workplace safety rules. These include Flint Hills Resources (petroleum), Georgia-Pacific (pulp and paper), Guardian Industries (glass and coatings), and Invista (polymers and fibers).

Koch Industries has long used its political influence to try to protect the company against the consequences of its regulatory infringements. For example, in 2000 a federal grand jury in Texas returned a 97-count indictment against the company and four of its employees for violating federal air pollution and hazardous waste laws in connection with benzene emissions at the Koch refinery near Corpus Christi.

The company was reportedly facing potential penalties of some $350 million, but in early 2001 it got the newly installed Bush Administration’s Justice Department to agree to a settlement in which many of the charges were dropped and the company pled guilty to concealing violations of air quality laws and paid just $10 million in criminal fines and $10 million for environmental projects in the Corpus Christi area.

Now Koch is trying to achieve a lot more through its friends on the Supreme Court. A decision that overturns the Chevron doctrine would severely weaken the ability of federal regulators to do their job and would be a boon to serial offenders such as Koch.

Targeting the Poultry Conspirators

High food prices have been one of the most contentious issues of the past few years, causing many people to remain negative about the U.S. economy even as other indicators have improved. Grocery inflation has several cases, but one that does not receive enough attention is the ability of large corporations to set prices at will.

Price escalation is possible because of the enormous amount of concentration in the food sector. Not only can major producers hike up prices on their own, they conspire with their few competitors to do so in tandem. This is known as price-fixing, and since the passage of the Sherman Act of 1890 the practice has been illegal under federal law. States bring prosecutions as well.

One state that has been particularly aggressive in this arena is Washington. Its Attorney General, Bob Ferguson, has targeted the poultry industry, which is believed to be a hotbed of anti-competitive practices. In 2021 Ferguson’s office sued 19 companies said to account for 95 percent of the broiler chickens sold in the entire country, alleging they conspired to restrain production, manipulate price indices, rig bids and exchange proprietary information with one another. The defendants included familiar names such as Tyson Foods, Pilgrim’s Pride and Perdue Farms.

Over the past two years, Ferguson has racked up an impressive record. Last April, 14 of the corporate defendants agreed to pay settlements totaling $35 million. The largest shares came from Pilgrim’s Pride ($11 million), Tyson ($10.5 million) and Perdue ($6.5 million).

Since then, Ferguson has kept up the pressure on the other defendants. Most recently, House of Raeford Farms agreed to a $460,000 settlement. The two remaining holdouts, Foster Farms and Wayne-Sanderson Farms, are scheduled to go on trial later this year.

They may change their minds about going to court. All of the settling defendants have agreed to cooperate with Ferguson’s office in producing evidence that can be used in that trial. Those defendants have also signed consent decrees under which they commit to changing their practices and acknowledge that the AG can seek additional fines if they fail to do so.  

Ferguson wants to have even stronger tools at his disposal. Recently, he joined with several state legislators to propose legislation that would increase the maximum penalty for price-fixing and other anti-competitive practices.

At the same time the big poultry companies work to keep prices high, they have been accused of conspiring to keep pay low. The U.S. Justice Department has been targeting the industry for the improper exchange of compensation date, a practice that amounts to wage-fixing. One company, George’s Inc. agreed last year to pay $5.8 million to DOJ. The feds are seeking other settlements.

There has also been private litigation on this issue, resulting in large settlements such as a $29 million payout by Pilgrim’s Pride and $12 million by Simmons Foods.

It remains to be seen whether the federal and state prosecutors, together with plaintiffs’ lawyers, can get the poultry industry to stop colluding on prices and wages. Yet these cases should serve as a reminder of the extent to which food inflation is the result of corporate power and greed.

A New Emissions Cheating Scandal

Cummins Inc. waited until just before the Christmas holiday to announce that it had “reached an agreement in principle to resolve U.S. regulatory claims regarding its emissions certification and compliance process for certain engines primarily used in pick-up truck applications.” After insisting it cooperated fully with regulators, the company went on to claim it “has seen no evidence that anyone acted in bad faith and does not admit wrongdoing.”

That vague and tortuous statement was clarified when the U.S. Justice Department put out its own release saying that Cummins was close to signing an agreement with DOJ and the State of California under which it would pay $1.7 billion to settle allegations it violated the Clean Air Act by installing defeat devices on hundreds of thousands of engines.

Cummins, which produces engines for trucks and heavy equipment, has thus joined the roster of large companies accused of installing technology meant to yield deceptive results on emissions tests and thus conceal the true amount of pollution being generated. DOJ stated that the devices installed by Cummins allowed the engines to produce thousands of tons of excess emissions of nitrogen oxides, which are linked to respiratory conditions such as asthma.

The defeat device revelations began, of course, with Volkswagen. The German automaker has paid out over $20 billion in fines and settlements around the world since the accusations of emissions cheating first emerged in 2015.

Yet there are a number of other large companies that have faced similar allegations. In 2019 Fiat Chrysler (now Stellantis) reached an agreement with federal and California regulators under which it paid over $300 million in fines and spent about $200 million to recall vehicles and make them compliant.

In 2020 Daimler AG (now the Mercedes-Benz Group) reached a similar settlement under which it agreed to pay $945 million in penalties and spend $534 million on vehicle modifications.

Automotive suppliers have also gotten caught up in the controversy. Robert Bosch has paid several hundred million dollars in settlements for its role in producing the defeat devices for Volkswagen. In 2018 IAV GmbH, a German company that designs automotive systems, pled guilty to one criminal felony count and paid a $35 million criminal fine as a result of its work for VW.

After-market companies have also been targeted. The EPA has fined dozens of small firms around the country for illegally installing defeat devices, while the DOJ has gone after some medium-sized suppliers. For example, in 2022, Allied Exhaust Systems, which sells to individuals nationwide, agreed to pay a $1.1 million penalty.

Such cases suggest a remarkable willingness of companies large and small to violate environmental regulations. These are not situations in which firms accidentally exceeded emissions limits. From Volkswagen and Cummins down to the small automotive shops, the defendants were accused of deliberately thwarting emission controls.

The use of defeat devices does not simply involve infringement of abstract standards. They cause vast amounts of extra pollution to be spewed into the air and thus represent a corporate crime against the public’s health.

The 2023 Corporate Rap Sheet

The splashiest corporate crime prosecutions in 2023 came in the crypto sector. Binance pleaded guilty to charges of violating anti-money-laundering regulations and paid over $4 billion in criminal and civil penalties; its founder and CEO Changpeng Zhao was also charged personally and admitted guilt. The Justice Department won a conviction on fraud and conspiracy charges of crypto mogul Sam Bankman-Fried in connection with the collapse of his FTX exchange.

Otherwise, the DOJ has not had many blockbuster cases this year, and many of its bigger successes have involved foreign-based corporate defendants. Among the latter are a $1.4 billion settlement with the Swiss bank UBS in a toxic securities case that originated during the financial crisis a decade ago and a $629 million settlement with British American Tobacco involving a scheme to evade economic sanctions against doing business with North Korea.

While major convictions and settlements lag, DOJ has stepped up its dubious policy of corporate leniency. This includes frequent use of non-prosecution and deferred prosecution agreements under which companies are allowed to sidestep criminal pleas by agreeing to pay monetary penalties and promising to change their behavior—promises that are often broken.

During this year, DOJ has offered companies NPAs and DPAs at least 17 times. Among these are the British American Tobacco case cited above, a price-fixing case against Teva Pharmaceuticals, and a foreign bribery case against the chemical company Albemarle. A DPA was also used by the Occupational Safety and Health Administration to resolve a case against a construction company called Skinner Tank on charges of willfully ignoring safety regulations and creating conditions that led to the death of a worker.

DOJ is also making increasing use of another form of leniency known as a declination. Companies that self-report illegal behavior that occurred under their roof are given a guarantee they will not be prosecuted and are allowed to pay a reduced fine. A DOJ webpage lists three declinations for this year, but a report by Public Citizen suggests that the department may be agreeing to keep some of these deals confidential.

Among most other federal agencies, this year has seen only a sprinkling of large case resolutions against major companies. For example, the Commerce Department’s Bureau of Industry and Security fined Seagate Technology $300 million for export control violations in its sale of disk drives to China’s Huawei Technologies. The Federal Reserve fined Deutsche Bank $186 million for failing to comply with previous consent orders involving sanctions compliance and anti-money-laundering practices.

Although most of its penalties are below $100 million, the Consumer Financial Protection Bureau has brought a steady stream of cases against financial predators. These include a $90 million penalty against Bank of America for imposing unfair overdraft fees, withholding reward bonuses explicitly promised to credit card customers, and misappropriating sensitive personal information to open accounts without customer knowledge or authorization.

The Securities and Exchange Commission has kept up its case volume, but the number of large resolutions in 2023 has been down from the previous year. And a larger portion of those major cases involve civil add-ons to criminal bribery cases brought by the Justice Department under the Foreign Corrupt Practices Act. There are also signs that the SEC is joining the leniency bandwagon. Recently, the agency waived a $40 million penalty against the drug company Mallinckrodt in a case related to its failure to disclose loss contingencies linked to an investigation of its Medicaid billing practices.

The Federal Trade Commission has also tended toward smaller settlements this year, though that agency handles many matters—including merger reviews—that may not involve monetary penalties. The biggest fine it imposed this year was $25 million in a case against Amazon.com for violating the Children’s Online Privacy Protection Act Rule.

The Environmental Protection Agency has held steady in 2023. Its largest settlement has been a $242 million deal with BP in which the oil giant paid a $40 million penalty and agreed to spend $197 million on emission control upgrades at its Whiting refinery in Indiana.

Major cases have been down at the state level. There have been about two dozen resolutions involving penalties of $50 million or more, compared to the previous year’s total of 50, which included numerous opioid-related settlements. This year there has been one such settlement involving a $1.4 billion deal with supermarket chain Kroger.

Year to year changes do not tell the whole story, yet it is discouraging to see a drop-off in successful major enforcement actions.  Let’s hope that in 2024 both federal and state regulators and prosecutors find the means to step up the pressure on rogue corporations.

Note: Details on the cases cited above and many more are in Violation Tracker.

The Other Problem with Airline Mergers

A proposed acquisition of Hawaiian Airlines by Alaska Airlines would be bad news for those traveling between the U.S. mainland and Hawaii. The combined company would have a huge share of that market and would thus be in a position to keep fares sky high.

Another negative feature of the deal is that it would enhance the position of a company with a checkered regulatory compliance record. As shown in Violation Tracker, Alaska Air and its subsidiaries have been cited more than 200 times by the Federal Aviation Administration for a variety of safety violations involving issues such as maintenance, hazardous waste and security practices.

All the airlines have such violations, and the larger carriers have been fined more times, reflecting their wider operations. But in relation to its size, Alaska Air’s record is worse than that of its counterparts. Its total of 220 FAA violations is not far behind that of Southwest’s total of 270, even though Southwest carries about four times as many passengers.

Alaska Air’s violations also tend to be more serious. Its 220 cases have generated more than $10 million in fines (the FAA’s penalty structure is not very onerous), while the total from the 539 fines paid by the much larger Delta Air Lines is below $9 million. (All the FAA statistics are limited to cases with fines of at least $5,000.)

Alaska Air has also racked up a series of penalties from the Transportation Department’s Aviation Consumer Protection Division. Including matters involving Virgin America, which Alaska Air acquired in 2016, there have been 13 of those cases with total fines of $777,500.

Then there is the issue of employment practices. Earlier this year, a federal judge in California ordered Alaska Air to pay nearly $31 million to a class of flight attendants who had sued Virgin for failing to pay proper overtime pay and failing to pay for break time as required under California law. The workers originally won $77 million in damages, but the company appealed and got part of the award overturned. Alaska Air also tried to get the U.S. Supreme Court to throw out the rest of the award but the high court declined to hear the case. The matter thus went back to the trial court, where the judge settled on the $31 million payout.

Hawaiian Airlines has a somewhat less egregious regulatory track record. It has been fined 31 times by the FAA and five times by the Transportation Department’s consumer division. There is every reason to suspect that if the merger goes through, its compliance practices would come to look more like that of its new parent.

When antitrust regulators review a proposed merger, they have to give primary consideration to the potential market impacts. Yet it is also worth keeping in mind that as companies grow larger, they often tend to become less mindful of safety matters and other regulatory obligations. Or if they already have a lax approach to compliance, that problem is likely to become worse. All this is just one more reason bigger is usually not better.

Getting Tougher on Product Safety

For most of its history, the Consumer Product Safety Commission has not been the most aggressive federal regulator. Created in 1972, the agency has depended primarily on voluntary recalls of dangerous products by manufacturers. Its budget is below $200 million and its staff numbers around 500, both tiny by DC standards.

While the CPSC has the ability to use monetary penalties when companies fail to disclose hazards, it is relatively restrained in its use of that power. As shown in Violation Tracker, the agency has imposed a total of $397 million in fines against companies since 2000. More than half of that total has come since the Biden Administration took office. By comparison, the Consumer Financial Protection Bureau, which started operating in 2011, has racked up more than $17 billion in fines and settlements.

For all these reasons, it is significant that the CPSC and the Justice Department recently announced that a federal jury in Los Angeles had returned a guilty verdict in the first-ever criminal prosecution brought against corporate executives under the Consumer Product Safety Act.

The defendants in the case were the chief administrative officer and the chief executive officer of Gree USA, Inc., a subsidiary of the Chinese-owned Hong Kong Gree Electric Appliances Sales Co., Ltd. The two men were charged with deliberately withholding information about defective dehumidifiers that could catch fire and selling these units with false certification marks that the products met applicable safety standards. They were convicted of conspiracy to defraud the CPSC and failure to meet reporting requirements, though they were acquitted of wire fraud.

Gree itself has also been targeted by the CPSC. The company has paid more in fines to the CPSC than any other company over the past two decades. That includes a $91 million penalty that was by far the largest single fine brought by the agency during this period. It was also the first criminal enforcement action under the Consumer Product Safety Act.

The impact of that was softened by the decision of the Justice Department to offer Gree a leniency deal in the form of a deferred prosecution agreement by which the company was able to avoid pleading guilty to the charges.

On the other hand, DOJ and CPSC took the bold step of going after the two Gree officials individually. It took four years from the time the two men were indicted, but their conviction sends a powerful message to executives that they can be held personally responsible for brazen disregard of product risks. The Gree executives are scheduled to be sentenced next March and could receive up to five years in prison.

The debate over how to deal with corporate crime is often framed as a choice between penalizing the company and prosecuting executives. The Gree case shows the value of using both approaches at the same time. That makes it more likely the message will get through to everyone in a rogue company that it has to change its practices in a fundamental way.

The CFPB Fights On

The Washington Post recently published a long examination of the obstacles facing the Consumer Financial Protection Bureau in its effort to rein in payday lenders which prey on low-income families. The leading companies in the industry have managed to block various investigations of their practices.

The agency’s difficulties mainly stem from a lawsuit brought by financial industry groups challenging the way in which the CFPB is funded. It is based on disingenuous arguments about the separation of power between the executive branch and Congress. The case made its way to the U.S. Supreme Court, which heard oral arguments last month but has not yet issued a ruling.

The good news is that the CFPB, which is no stranger to opposition from powerful corporate and Congressional foes, is not backing down. While the payday lending cases may be stalled, the agency is aggressively targeting other bad actors.

Last month, the CFPB fined the credit reporting giant TransUnion $23 million for violating the Fair Credit Reporting Act by failing to ensure the accuracy of the information it supplies to landlords for screening of tenant applications. Last week, the agency fined Citibank over $25 million for intentionally discriminating against Armenian Americans in reviewing credit card applications and then lying to those applicants about the reason for the denial.

In its latest action, the CFPB goes after the online lender Enova International Inc. for what the agency calls “widespread illegal conduct including withdrawing funds from customers’ bank accounts without their permission, making deceptive statements about loans, and cancelling loan extensions.”

This is not the first time the CFPB has targeted Enova. In 2019 it fined the company $3.2 million for many of the same practices. That penalty apparently did not get Enova to change its ways. The CFPB found that more than 100,000 customers have been subjected to abuses during the past four years.

To its credit, the CFPB is not just issuing another cease-and-desist order and imposing a larger fine ($15 million) this time around. It is also restricting some of Enova’s business and putting a crimp in the wallets of the company’s top managers.

Specifically, the CFPB is banning Enova for a period of seven years from offering or providing closed-end consumer loans that must be substantially repaid within 45 days. It is also requiring the company to reform its executive pay practices so that compensation is determined in part by compliance with federal consumer financial law.

This approach of restricting a rogue corporation’s business is potentially more effective than simply upping the fine. The same goes for making top executives personally feel some financial pain as a result of their failure to end the misconduct.

In its dozen years of existence, the CFPB has an impressive track record of policing misconduct in the financial services sector. As shown in Violation Tracker, it has imposed more than $17 billion in penalties against miscreants large and small. Let’s hope it is able to go on performing this essential mission.

Banking on Stereotypes

There are about half a million people in the United States with Armenian surnames. Managers at Citigroup apparently decided that all of them are criminals and went to great lengths to deny them credit cards.

That accusation is the basis of a $25 million penalty just imposed on Citi by the Consumer Financial Protection Bureau. The agency alleges that supervisors at the bank ordered employees to discriminate against credit applicants deemed to be of Armenian origin based on the spelling of their family name—especially those living in and around Glendale, California, home to the country’s largest concentration of Armenian-Americans. To hide the blacklisting, applicants were given bogus reasons when their applications were denied.

Individual Armenian-Americans have been involved in organized crime. Earlier this year, a reputed Armenian mafia figure in the Los Angeles area was sentenced to 40 years in prison in connection with a scheme to fraudulently claim more than $1 billion in refundable renewable fuel tax credits.

Yet the existence of mobsters who belong to a particular ethnic group is hardly a justifiable basis for discriminating against everyone who shares that national origin. Citi’s alleged practices constituted a textbook violation of the Equal Credit Opportunity Act.

The CFPB enforcement action is a reminder that not all corporate discriminatory practices involve hiring, pay levels, promotion and other conditions of employment. Companies can also discriminate against customers based on race, gender, national origin, etc. In Violation Tracker we document more than 500 such cases dating back to 2000.

Many of these involve financial institutions accused of unfair treatment of African-American and Latino borrowers. Some of these are holdovers of the longstanding practice of redlining, in which credit is denied to those living in communities with demographic characteristics banks regard as undesirable. Earlier this year, Park National Bank paid $9 million to settle Justice Department allegations it redlined parts of Columbus, Ohio.

There have also been some cases involving other minorities. In 2016 Toyota Motor Credit was fined $21.9 million by CFPB for charging higher interest rates to Asian and Pacific Islander borrowers (as well as African-Americans) on automobile loans.

The cases I found that were closest to Citi matter were actions involving discrimination against Arab-Americans in the wake of 9/11. The most relevant was a 2006 settlement reached by the Massachusetts Attorney General and Bank of America to resolve allegations that Fleet Bank, which BofA acquired in 2004, had improperly closed the accounts of customers with Arabic names, supposedly to guard against the channeling of funds to terrorist groups.

It is ironic to see the likes BofA and Citi portraying themselves as so concerned about potential bad actors that they stereotype entire ethnic groups. If any group deserves to be so stereotyped it is the big banks themselves.

BofA is by far the most penalized company in the United States, with over $87 billion in cumulative fines and settlements since 2000. Citi ranks sixth with nearly $27 billion in penalties. They need to clean up their own houses rather than making assumptions about the behavior of others.

The Missing Crackdown

Joe Biden came to office vowing to get tough on corporate abuses, reversing the soft-on-white-collar-crime approach of his predecessor. Biden went on making those promises, and they were echoed by Attorney General Garland and other Justice Department officials.

That crackdown, however, has not materialized. A new report from Public Citizen shows that the Justice Department concluded only 110 corporate criminal prosecutions in 2022—lower than in any year of the Trump Administration. In fact, it was the smallest number since 1994.

In addition to the decline in overall cases, Public Citizen points out a drop in the number of those cases in which the defendant company received a leniency deal. These are arrangements known as non-prosecution and deferred prosecution agreements in which a firm can avoid a guilty plea by paying a penalty and promising to change its behavior.

Those pledges are frequently broken, and the companies are charged again. Instead of throwing the book at these recidivists, DOJ often offers them a new leniency agreement, making the whole process a farce.

As Public Citizen notes, a decline in leniency agreements would be a good thing if it went along with an increase in the overall volume of prosecutions. Instead of replacing leniency agreements with conventional cases, the DOJ statistics suggest that the agency is simply choosing not to prosecute at all in many instances.

Public Citizen says DOJ may be making greater use of a process called declination, which is essentially a form of super-leniency in which no charges are brought. Some of these deals are made public, but the best corporate defense lawyers can negotiate declinations that are kept secret.

The analysis done by Public Citizen focuses on criminal cases. I decided to check comparable civil cases brought by the Securities and Exchange Commission. According to data collected in Violation Tracker, the SEC collected $1.4 billion in penalties from companies in 2021. This was down from the totals in the final two years of the Trump Administration. In 2022 the SEC’s total jumped to $4.4 billion, thanks in large part to a single case involving a $1 billion settlement with the German insurance company Allianz.

This year the SEC total through mid-October is $1.5 billion. Unless the agency announces some very large cases in the next nine weeks, its 2023 total will also fall behind the final Trump years.

While case and penalty totals do not tell the whole story, what we see in both the criminal and civil areas is something less than a major assault on corporate misconduct. There have been some laudable steps taken by other agencies such as the Federal Trade Commission and the Consumer Financial Protection Bureau, but both of those regulators have faced legal challenges to their enforcement powers. At the same time, the whole system of business regulation is threatened by Republican defunding efforts.

Overall, the Biden Administration has yet to show that it can overcome these obstacles and make good on the promises of a crackdown on rogue corporations.

Whose Advantage?

Progressive Democrats such as Bernie Sanders have long promoted Medicare for All as the solution to the country’s health insurance problems. Given the popularity of Medicare among the seniors it serves, extending the program to other age groups has a great deal of appeal.

The problem, though, is that Medicare is not a single program. It is an assortment of coverage options that can be bewildering to those turning 65 and to participants during the open enrollment period each year when they must decide whether to stick with their current plan or jump to another. The 2024 open enrollment period began on October 15th and ends December 7th.

Seniors are currently being bombarded with coverage offers, not from the federal government, which oversees Medicare, but from the private insurance companies which have gained a significant foothold in a nominally public program.

That involvement may take the form of supplemental coverage for the 20 percent of medical costs Medicare does not cover. Prescription drugs coverage, which was not part of traditional Medicare, was added in 2006 through a system that requires most participants to purchase plans from private insurers.

Most problematic is the coverage designated as Medicare Part C, which is more commonly known as Medicare Advantage (MA). Whereas traditional Medicare operates much like the fee-for-service health insurance many Americans receive through their employer, MA is more akin to a health maintenance organization or HMO. Instead of paying doctors and others for providing service, MA gives plan providers, which are usually commercial insurers, a lump sum for each beneficiary. They are then responsible for managing patient care. Around half of Medicare participants are in MA plans.

MA providers claim that they can offer improved care, including services such as dental and vision which are not included in traditional Medicare. They also depict themselves as the solution to runaway medical costs. To the extent this is true, the MA providers achieve these results through many of the same ruthless practices that gave HMOs and managed care a bad name starting in the 1990s.

That means erecting roadblocks to care by limiting beneficiaries’ choice of providers, requiring prior authorization for many procedures and refusing authorization at a high rate.

It turns out that MA also fails to deliver on the promise of reducing healthcare costs for the Medicare program. A recent report from Physicians for a National Health Program estimates that the way MA’s capitated system is structured causes taxpayers to overpay the plans at least $88 billion per year and perhaps as much as $140 billion.

Along with these technical reasons is old-fashioned fraud. The Justice Department recently announced that Cigna  would be paying $172 million to settle allegations that it submitted “inaccurate and untruthful” diagnosis codes to the federal government to inflate risk adjustments and thus boost the MA payments it received.

Cigna is not alone. As shown in Violation Tracker, Sutter Health paid $90 million to resolve allegations of submitting inaccurate information about the health status of its MA beneficiaries in order to get its payments increased. It had previously paid $30 million for similar misconduct.

An analysis last year by the New York Times found that all but one of the top ten MA providers had been accused by the federal government of fraud or overbilling.

When we talk of Medicare for All, we need to be clear that means an extension and ideally an enhancement of traditional Medicare–not the false promise of Medicare Advantage.