AG Garland & Corporate Crime
Ramp Up of Corporate Enforcement Predicted to Resume in 2022
Year one of the Biden administration saw tremendous momentum for accountability for corporate lawbreakers.
The Biden administration jettisoned Trump policies that protected corporate wrongdoers. Nominees committed to combatting corporate crime were confirmed, and the agencies under the new nominees announced new policies to enhance corporate oversight.
Public Citizen research documented that Trump’s last year in office saw corporate crime enforcement plummet. Corporate prosecutions fell to a quarter-century low while Justice Department agreements that help corporations avoid prosecution were used more than ever.
Deputy Attorney General Lisa Monaco, second in command in Biden’s DOJ under Attorney General Merrick Garland, in the fall announced what she described as “the first steps” toward a strengthened approach to corporate enforcement. Monaco pledged in particular to focus the department’s prosecutorial efforts on repeat offenders. In the following months, country’s top law enforcement agency did just that.
Since then, however, disappointing enforcement numbers and policy decisions have complicated the narrative of Biden’s DOJ prioritizing the fight against corporate wrongdoers.
A report by PEER (Public Employees for Environmental Responsibility) found that criminal anti-pollution enforcement has not rebounded since Trump left office – and that criminal referrals for prosecution from the EPA actually fell further in 2021. Meanwhile, polluter-friendly Senate Republicans like Sens. Bill Cassidy (R-La.) and Cynthia Lummis (R-Wyo.) are blocking the confirmation of Biden’s top environmental law enforcement nominees.
The DOJ’s fraud section also reported a decline in corporate enforcement actions. The section reported just eight corporate resolutions in 2021, down from 13 in 2020.
Top prosecutor vacancies across the Justice Department’s U.S. Attorney’s Offices remain – leaving those offices in the hands of holdovers and career staff, who may be less likely to embrace policy shifts like Monaco’s corporate crime crackdown.
Calls by Public Citizen and other advocates for Attorney General Merrick Garland to release the DOJ’s corporate crime enforcement data remain unanswered.
The DOJ blocked an effort by plane crash victims to reopen the agreement the department inked in the final days of the Trump administration with Boeing to resolve the case regarding the 737 Max crashes, which killed 346 people. In so doing, the DOJ claimed the family members of those who died in the crashes do not meet the technical legal definition of “crime victims” – and so are denied the right to confer with the department about the case.
But there are signs things may be getting back on track.
Today Attorney General Garland gave a speech on prosecuting corporate crime. "As a prosecutor, defense attorney and judge, I have also seen the Justice Department's interest in prosecuting corporate crime wax and wane over time,” he told the audience of white-collar defense attorneys. “Today it is waxing again."
Garland described the DOJ’s corporate crime enforcement efforts as ramping up – noting that the Antitrust Division “is now trying or preparing to try 18 indicted cases against 10 companies and 42 individuals, including 8 current or former CEOs or company presidents” and the Environment and Natural Resources Division “currently trying or preparing to try 11 indicted cases against 11 companies and 34 individuals – including 14 current or former company executives – for a wide range of criminal environmental offenses.”
“We expect that our enforcement activity will only accelerate as we come out of the pandemic,” he added.
This is good news for how corporate oversight under Biden will progress in year two of the administration. Of course — as always — the proof will be the prosecutions.
Big Business Blotter news roundup:
TOP NEWS
What Biden’s Message Should Be - Jeff Hauser in Democracy Journal
What Biden and his party need is an agenda that excites people—not just the Democratic base, but also disillusioned Independents and even many Republicans. If Biden spends the next year investigating and penalizing wrongdoing by corporations and the ultra-wealthy, he will have just that. He will definitively clarify who he stands against, and thus, who he stands for—the little guy (and gal), beaten down for far too long by rampant corporate greed. Biden should then proclaim it loudly.
U.S. says Ericsson breached 2019 deal by failing to properly disclose Iraq misconduct - Reuters
Some applauded the tougher stance from U.S. authorities. “It’s a welcome change, though even more welcome would be for the DOJ to cast aside its failed experiment in routinely granting corporate wrongdoers leniency agreements,” said Rick Claypool of the watchdog group Public Citizen.
As the law stands now in Illinois, if someone is seriously injured by reckless or criminal corporate action, they could sue and recover punitive damages. But if someone is killed by corporate recklessness or a corporate criminal behavior – no punitive damages would be available to the victim’s family.
BIG TECH
Facebook parent Meta settles decade-old data-privacy lawsuit - AP
Facebook parent Meta Platforms Inc. has settled a decade-old class action lawsuit over the company’s use of “cookies” in 2010 and 2011 that tracked people online even after they logged off the Facebook platform. As part of the proposed settlement, which must still be approved by a judge, Meta has agreed to delete all the data it “wrongfully collected” during that period. The company, which posted profits of $39.37 billion in 2021, will also pay $90 million to users who filed a claim, after lawyer fees are deducted.
Texas sues Facebook parent Meta over facial recognition data - CBS
Attorney General Ken Paxton filed the lawsuit Monday in a state district court. The suit claims Facebook parent Meta has been "storing millions of biometric identifiers" — identified as retina or iris scans, voice prints, or a record of hand and face geometry — contained in photos and videos people uploaded to its services, including Facebook and Instagram.
Black workers accused Tesla of racism for years. Now California is stepping in - The Guardian
For Black employees at Tesla’s flagship California plant, coming into work could mean being harassed, bullied by a supervisor or finding racist graffiti sprayed on factory walls. That’s according to a new lawsuit filed by California’s Department of Fair Employment and Housing (DFEH), which alleges that Black workers in the company’s Fremont factory experienced “rampant racism” that the company left “unchecked for years”.
SEC Probes Trading by Elon Musk and Brother in Wake of Tesla CEO’s Sales - WSJ
The SEC’s investigation began last year after Mr. Musk’s brother sold shares of Tesla valued at $108 million, one day before Mr. Musk polled Twitter users asking whether he should unload 10% of his stake in Tesla and pledging to abide by the vote’s results. Mr. Musk framed the potential sale as a way to cover any taxes he would need to pay if lawmakers imposed new taxes on unrealized capital gains. Mr. Musk began selling billions of dollars worth of stock a few days after his tweet. His brother, Kimbal Musk, sold 88,500 shares one day before Mr. Musk tweeted about the potential sales of his own. Tesla shares fell sharply in the wake of Mr. Musk’s poll—58% of voters said he should sell—indicating the tweet was viewed as negative news.
CRYPTO CRIME
BitConnect founder indicted by Justice Department has disappeared - engadget
SEC officials do not know the whereabouts of Satish Kumbhani, the founder of crypto trading platform BitConnect, who was charged last week with defrauding investors of $2.4 billion in a Ponzi scheme. This puts the SEC in quite a bind, since they have to serve the 36-year old entrepreneur with his court papers. In a court filing from Monday, the SEC stated that they did not have an address for Kumbhani, an Indian citizen, and suspected that he likely fled to another country.
Founders Of Cryptocurrency Exchange Plead Guilty To Bank Secrecy Act Violations - DOJ
"The opportunities and advantages of operating in the United States are legion, but they carry with them the obligation for those businesses to do their part to help in driving out crime and corruption. Arthur Hayes and Benjamin Delo built a company designed to flout those obligations; they willfully failed to implement and maintain even basic anti-money laundering policies. They allowed BitMEX to operate as a platform in the shadows of the financial markets. Today’s guilty pleas reflect this Office’s continued commitment to the investigation and prosecution of money laundering in the cryptocurrency sector.”
The Justice Department on Thursday announced its first director of the National Cryptocurrency Enforcement Team, Eun Young Choi, who will be charged with prosecuting criminal cases related to the use of cryptocurrency and digital assets.
Coinbase Joins Robinhood, Fidelity and Others to Fight Crypto Crime - The Ascent
A group of well-established firms active in cryptocurrencies in the U.S., including Coinbase, Fidelity and Robinhood, have joined to bring digital assets in step with global anti-money laundering (AML) rules. A key component of those AML requirements is the Financial Action Task Force’s “Travel Rule,” which says all crypto transactions above a certain amount must be accompanied by identifying information.
SEC, states hit crypto lender BlockFi with $100M penalty - Politico
The Securities and Exchange Commission and 32 states said Monday that cryptocurrency startup BlockFi will pay $100 million to settle charges that it operated an illegal lending business, in what officials called a first-of-its-kind crackdown in digital asset trading.
BANKS
You Shouldn’t Really Be Banking on WhatsApp - The Washington Post
It’s not that banks or regulators think they can block people from quick and easy modern technology, it’s about ensuring that complete records are kept. Banks need to be able to show that inside information has been controlled and procedures for things like risk management were followed – for banks’ own financial safety as well as for preventing wrongdoing.
GUN MANUFACTURER ACCOUNTABILITY
Attorney General James Fends Off NRA’s Repeated Efforts to Dismiss Fraud Lawsuit - NY AG
“Today, the court affirmed my office’s right to pursue its long-standing claims that fraud, abuse, and greed permeate through the NRA and its senior leadership. While we’re heartened that the judge rejected the NRA’s attempts to thwart most of the claims in our case against the NRA, we are disappointed that the judge ruled against the dissolution portion of the case. We are considering our legal options with respect to this ruling. We remain committed to enforcing New York law regardless of how powerful any individual or organization may be.”
POLLUTERS
The state's criminal case against the driller dates to 2020, when Attorney General Josh Shapiro — a Democrat now running for governor — charged Texas-based Cabot Oil & Gas with violating the law by allowing methane from the company’s faulty gas wells to escape into drinking-water aquifers in Dimock and nearby communities.
Liquor distributor slapped with fine for dumping expired drinks into Oahu stream - Hawaii News Now
The state Department of Health issued a $75,000 fine to a Hawaii liquor distributor for dumping expired drinks and other pollutants into a stream in Waipio. Officials said the pollution of Waiawa Stream was linked to Paradise Beverages’ Waipio distribution facility. The company is the state’s largest distributor of liquor and alcoholic beverages. [...] Hawaii News Now also tested a sample of the water with an independent laboratory ― FQ Labs ― which found that as much as 1.2% of the water was alcohol. The water also contained sugar ― about .04% of its content.
ANTITRUST
While many individuals and businesses across various sectors in the economy have responded and will continue to respond to supply chain disruptions caused by the pandemic with laudable ingenuity — bringing goods to communities in need, expanding existing capacity and developing products and services to meet new needs — others may seek to use supply chain disruptions as a cover for collusive schemes. For those who seek to exploit supply chain disruptions for their own illicit gain, the Antitrust Division, along with the FBI, will investigate and prosecute criminal violations of the antitrust laws, including agreements between individuals and businesses to fix prices or wages, rig bids or allocate markets.
Justice Department Sues to Block UnitedHealth Group’s Acquisition of Change Healthcare - DOJ
The Department of Justice, together with Attorneys General in Minnesota and New York, filed a civil lawsuit today to stop UnitedHealth Group Incorporated (United) from acquiring Change Healthcare Inc. (Change). The complaint, filed in the U.S. District Court for the District of Columbia, alleges that the proposed $13 billion transaction would harm competition in commercial health insurance markets, as well as in the market for a vital technology used by health insurers to process health insurance claims and reduce health care costs.