“Corporate America, meet consequences”
DOJ prosecutes agreement breach, warns environmental offenders may face jail
Flickr photo via Die Grunen Karnten.
Things are busy here at Big Business Blotter hq. There’s a lot of notable corporate crime and wrongdoing news below, so I’ll keep today’s post brief and focus on two things.
First, we have what looks like the first instance of a corporation facing the “serious consequences” Deputy AG Monaco warned would be coming for corporations that breach their leniency agreements:
This is a big deal. In my deep dive into more than 500 agreements over more than 20 years, I found only three previous instances when a corporation was prosecuted for breaching its leniency agreement.
This is the first time this has happened since 2015.
Second, the Todd Kim, chief of the DOJ’s environmental division, gave a speech warning corporate polluters that the department’s renewed emphasis on individual accountability means the environmental division “will prioritize prosecuting individuals who commit and profit from corporate malfeasance.”
Kim isn’t talking about slap-on-the wrist penalties. He says corporations must identify all individuals involved in the misconduct “regardless of their position, status or seniority” – suggesting that high-ranking managers and executives who are responsible for ensuring business is conducted in a lawful manner don’t get get-out-of-jail-free cards.
“Only individuals can go to jail,” Kim continues. “[W]e have found that criminal corporate accountability starts with accountability for individuals responsible for criminal conduct.”
It’s a truly remarkable (and welcome) change from the soft-on-corporate-crime policies of Kim’s predecessor.
Big Business Blotter news roundup:
TOP NEWS
Justice Department Told Deutsche Bank Lender May Have Violated Criminal Settlement - WSJ
If U.S. authorities pursue Deutsche Bank for a breach of the agreement, the bank could lose its earlier deal and, in the worst case, face indictment and prosecution, according to the agreement.
Judge: Prison company to pay Washington $4.5M in legal fees - AP
The private prison company The GEO Group has been ordered to pay the Washington state Attorney General’s Office nearly $4.5 million in legal fees after the state sued to force the company to pay detainees at its immigration lockup in Tacoma minimum wage for work they perform there. A federal jury ruled in October that detainees held at the Northwest detention center are entitled to minimum wage for cooking, cleaning and other tasks, rather than $1 per day. The company was ordered to pay former detainees as well as the state more than $23 million in all.
3M loses latest in series of military earplug cases - Minneapolis Star Tribune
A $22.5 million jury verdict against 3M is the largest penalty yet in a series of trials over allegedly defective earplugs manufactured by the Maplewood-based company.
POLLUTERS
A 7,000 gallon saltwater leak from a pipeline operated by Summit Midstream Partners occurred near a Missouri River tributary contaminated in a record 2014-2015 spill by the same company. Summit recently entered a settlement agreement of more than $35 million with North Dakota and the federal government for that spill.
Solutia Inc. and Pharmacia LLC, successors to Monsanto Company, will complete the cleanup of four former landfills and waste lagoons in Sauget, Illinois, across the Mississippi River from St. Louis. The settlement will require the companies to reimburse EPA $700,000 in past costs spent at the sites and take responsibility for implementing EPA’s cleanup plan estimated to cost $17.9 million.
TRUMP ORGANIZATION
Trump Fraud Inquiry’s Focus: Did He Mislead His Own Accountants? - NYT
If the prosecutors seek an indictment, the case’s outcome could hinge on whether they can use the documents to prove that a defining feature of Mr. Trump’s public persona — his penchant for hyperbole — was so extreme and intentional when dealing with his lenders that it crossed the line into fraud.
New York A.G. to Subpoena Trump to Testify in Fraud Investigation - NYT
Ms. James, whose office is also participating in the criminal investigation being run by the Manhattan district attorney, Cyrus R. Vance Jr., wants to question Mr. Trump on Jan. 7 as part of her separate civil inquiry into his business practices.
WORKER RIGHTS / SAFETY
Since 2016, the department’s Occupational Safety and Health Administration has proposed more than $3.3 million in penalties in 54 inspections at Dollar General locations nationwide. Typical violations include blocked electrical panels, obstructed exits, forklift, housekeeping and sanitation violations. Each of these violations represent hazardous and unsafe conditions, placing workers at risk of injury. In Alabama, where the company opened its first location there in 1965, a June 2021 federal inspection at Dollar General Store 7196 in Mobile found the store’s operator, Dolgencorp LLC again failed to keep the main storeroom orderly to allow safe exit during an emergency, exposed workers to slip and trip hazards and being struck by falling boxes and prevented access to electrical panels. OSHA identified three repeat violations in the Mobile inspection and proposed $321,827 in penalties.
SF Burger King Franchisee Owes $1.9M In Wage-Theft Case - SFist
Golden Gate Restaurant Group, which operated five Burger King locations in SF between 2016 and 2019, allegedly failed to pay minimum wages, overtime, or allow for proper breaks for its employees. And now, company owner Monu Singh reportedly owes $1.9 million in payments to compensate former employees, in addition to just over $800,000 in a 2020 settlement with the city over healthcare payments.
Six more women sue Tesla over workplace sexual harassment - The Verge
In the wake of Jessica Barraza’s lawsuit last month, six more current and former female employees have come forward to accuse Tesla of fostering a culture of rampant sexual harassment at its Fremont factory in California. In separate complaints filed on Tuesday with the Superior Court in Alameda County, the women said they were consistently subjected to catcalling, unwanted advances, physical contact and discrimination while at work.
PHARMA
“Today’s action puts money back in the pockets of drug patients fleeced by a monopolistic scheme,” said FTC Chair Lina M. Khan. “Martin Shkreli masterminded an elaborate plan to dramatically jack up the price of life-saving drug Daraprim by blocking cheaper options. While litigation against Shkreli continues, the order shuts down the illegal enterprise run by his companies, Vyera and Phoenixus, and bans his associate from the industry. This strong relief sets a new standard and puts corporate leaders on notice that they will face severe consequences for ripping off the public by wantonly monopolizing markets.”
FRAUD / CORRUPTION
Bogus numbers still cloud company accounts - FT
Nearly all S&P 500 companies use non-GAAP numbers to change their financial story. In May 2016, the SEC issued new guidance to tighten slack that had developed since it relaxed rules in 2010. SEC staff used a bully-pulpit approach and even slapped a few wrists. However, the steady stream of SEC staff comments about inappropriate use of non-standard metrics became a trickle in 2017 under the Trump deregulatory agenda.
Morgan Stanley, Others Pay $105 Million to Exit Rate Rigging Row - Bloomberg Law
Morgan Stanley and three Australian banks will pay a combined $105 million to resolve antitrust claims over their alleged scheme to manipulate an Australian interest benchmark used to value financial derivatives, according to a federal court filing in Manhattan.
In his first extensive interview as CEO, Strah explained why the company agreed to pay $536 million in fines and refunds as part of a three-year deferred prosecution agreement with the Department of Justice and discussed FirstEnergy's effort to impose new ethics and compliance rules and training.
FINANCE
JPMorgan Set to Pay $200 Million Fine Over Lax Staff Monitoring - Bloomberg
JPMorgan Chase & Co. is preparing to pay roughly $200 million to resolve U.S. regulatory investigations into lapses over monitoring employee communications. A settlement with the Securities and Exchange Commission and Commodity Futures Trading Commission could be reached before year-end, according to people familiar with the matter, although the figure is preliminary and could change.
AmEx Pitched Business Customers a Tax Break That Doesn’t Add Up - WSJ
The Justice Department’s civil fraud and criminal divisions are investigating AmEx’s business-card sales practices, as are the Office of the Comptroller of the Currency and the inspectors general offices of the Treasury Department, Federal Deposit Insurance Corp. and Federal Reserve. The company has said it is cooperating with the probes.
TECH / ANTITRUST
Factbox: How Big Tech is faring against U.S. lawsuits and probes - Reuters
Big Tech platforms Meta Platforms Inc, formerly known as Facebook, and Google have been hit with a series of antitrust lawsuits by the U.S. federal government and states on charges they are operating monopolies and abusing their power.
Unions Urge FTC Crackdown on Uber, Amazon, Google Practices - Bloomberg Law
Union leaders pressed the Federal Trade Commission Monday to use antitrust laws to address business tactics at large technology companies, including Google, Inc, Amazon, Inc., and Uber Technologies Inc., that they say weaken workers’ competitive power. These practices, the unions say, include widespread worker misclassification at gig companies and Amazon, which classify drivers as independent contractors who fall outside of both traditional labor law and antitrust protections.
RESEARCH
New evidence of widespread wage theft in the H-1B visa program - Economic Policy Institute
Thousands of skilled migrants with H-1B visas working as subcontractors at well-known corporations like Disney, FedEx, Google, and others appear to have been underpaid by at least $95 million. Victims include not only the H-1B workers but also the U.S. workers who are either displaced or whose wages and working conditions degrade when employers are allowed to underpay skilled migrant workers with impunity.
How Nursing Homes’ Worst Offenses Are Hidden From the Public - NYT
The Times this year has documented a series of problems with Medicare’s ratings system. Much of the data that powers the system is wrong and often makes nursing homes seem cleaner and safer than they are. The rating system also obscures how many residents are receiving powerful antipsychotic drugs. But the problems with the inspection process, which are the core of the ratings system, are the most consequential.
CFPB Report Highlights Supervisory Findings of Wide-Ranging Violations of Law in 2021 - CFPB
“Today’s report reveals that irresponsible or mismanaged firms harmed Americans during the COVID-19 pandemic," said CFPB Director Rohit Chopra. "We will continue to supervise firms to halt harmful practices before they become widespread."
COMMENTARY
Call Corporate Crime Corporate Crime - Corporate Crime Reporter
When major corporate crime enforcement agencies put out press releases about corporate crime cases, they openly work to minimize reputational damage. Regularly, the corporate criminal “agreed to pay” a certain amount of money. Look how agreeable they are. They agreed to plead guilty or they agreed to pay.