Here We Go Again
Tougher Penalties Are Needed to Stop Corporate Repeat Offenders
Wells Fargo office tower. Photo by Ken Teegardin.
My first post is about corporate recidivism. Some corporations keep breaking the law over and over again, and it’s infuriating.
The standard law enforcement approach to recidivism is to increase the penalty on the violator for each subsequent violation.
The idea is that stronger penalties should deter repeat offenses.
For low-level offenders, law enforcement sometimes takes this principle to extreme degrees, such as for infamous “three strikes” laws that fuel mass incarceration.
But for corporations — whose violations can have catastrophic consequences for the public — inadequate penalties companies offend over and over again. Only the most egregious violators face real consequences. And by then the damage has been done.
I wrote a report in 2019 about the Department of Justice’s failure to prosecute corporate repeat offenders. Mostly when it comes to big companies, the Justice Department too often just gives them leniency agreements over and over again. It’s a problem.
When you observe the actual behavior of big corporations that have broken the law and face the supposed threat that they need to clean up their acts or else face tougher consequences, it’s clear that in many cases corporations don’t take these threats or the consequences seriously.
Wells Fargo earlier this month added $250 million to the over $5 billion and counting in penalties stemming from its infamous cross-selling fraud over the past five years, according to Bloomberg News. Sen. Elizabeth Warren has called on the Federal Reserve to use its authority to break it up.
Facebook is facing off with Lena Khan’s Federal Trade Commission over the social media giant’s alleged longstanding antitrust violations. This is after in 2019 imposed a $5 billion penalty on Facebook for egregious violations of a settlement the company made with the agency back in 2012.
Even Purdue Pharma, which is facing the ultimate consequence of being dissolved and turned into a public benefit corporation, is a story of a repeat offender evading accountability. Its Sackler family owners and executives have so far avoided criminal charges and piggybacked on Purdue’s Chapter 11 bankruptcy to secure immunity from civil liability.
In 2007, the DOJ convicted a division of the privately held prescription opioid corporation Purdue Pharma and three executives for misbranding drugs, eschewing the stronger felony charges DOJ staff recommended in a 2006 memo. Twelve years of the Oxycontin maker’s catastrophic criminality later, Purdue Pharma finally did plead guilty to felony charges.
How much of Purdue Pharma’s subsequent criminality — and the devastation the opioid epidemic wrought — could have been prevented if the corporation and its owners took the consequences of being prosecuted again seriously?
If the DOJ does not continue its criminal investigation of the Sacklers and file charges if evidence of crimes is found, then it certainly looks like what these business owners did was gamble with thousands and thousands of lives and win.
If the authorities charge with holding corporate criminals and lawbreakers accountable want to succeed in deterring future crimes, they must take future enforcements a step further.
Where crimes are committed, it means prosecuting both the executives and the corporations on whose behalf they work.
Where civil violations are concerned, it means calculating fines in a way to make sure crime doesn’t pay by forcing corporations to disgorge ill-gotten gains.
Here’s the Big Business Blotter news roundup:
EXECUTIVE ACCOUNTABILITY
The DOJ Moves To Block The Purdue Pharma Bankruptcy Deal That Shields The Sacklers - NPR
A division of the Justice Department that serves as a watchdog over the federal bankruptcy system filed an appeal late Wednesday seeking to block the controversial Purdue Pharma bankruptcy plan. [...] The Sacklers, who are not bankrupt, were granted releases from liability after agreeing to contribute roughly $4.3 billion of their private wealth to the deal.
Former Boeing Pilot Expected to Face Prosecution in 737 MAX Probe - Wall Street Journal
Federal prosecutors plan to criminally charge a former Boeing Co. pilot they suspect of misleading aviation regulators about safety issues blamed for two fatal crashes of the 737 MAX, according to people familiar with the matter.
Lawyer for Indicted Trump CFO Weisselberg Says He Suspects More Charges on Way - NBC
Scarlatos raised the issue of more possible indictments while arguing for adequate time to review up to 6 million pages of documents that he said prosecutors are turning over as evidence, calling it “a herculean task” and saying new indictments would create a ”moving target." Prosecutors said Weisselberg is “no stranger” to many of the documents because they include Trump Organization business records that the executive likely produced or reviewed as part of his job.
Mr. Mattis, who served on the board for several years, said he had supported the start-up’s mission of cheap, fast and easily accessible blood tests but lost faith after The Wall Street Journal exposed major issues with the technology in 2015. It became clear to him, he said, that Ms. Holmes had not been forthcoming with Theranos’s directors about the problems.
WELLS FARGO
Wells Fargo Gets Fresh Sanction Under Scharf With OCC’s Fine - Bloomberg
Wells Fargo & Co. was handed a fresh regulatory action and a $250 million fine over its lack of progress addressing long-standing problems, the first such sanction under Chief Executive Officer Charlie Scharf. The penalty adds to the more than $5 billion in fines and legal settlements that the firm has paid over the last five years tied to a series of scandals that began with fake accounts in its branch network.
Wells Fargo asset cap to remain in place, Fed chair says - The Hill
Powell said the cap, which mandates that the bank keep its assets below $1.95 trillion, would remain in place until the company has fixed multiple problems, Reuters reported. He suggested that Wells Fargo still has a ways to go before this is achieved.
POLLUTERS
Summit Midstream Partners pleads guilty in largest U.S. inland spill from oil drilling - Reuters
Pipeline operator Summit Midstream Partners pleaded guilty in federal court in Bismarck, North Dakota, on Wednesday to criminal water pollution charges stemming from what prosecutors call the largest-ever land-based spill from oil drilling.
Commission levies $2 million-plus fine against K.P. Kauffman oil company - Denver Gazette
Denver-based oil company K.P. Kauffman Company must pay $2.01 million in fines to the state of Colorado after its Oil and Gas Conservation Commission ruled the company engaged in a “pattern of violation” concerning spills, leaks and well site cleanups in Weld County. The commission announced the ruling late Tuesday. It’s the company’s second $1 million fine by state regulators in less than two years, and the second-largest ever levied by the commission.
BIG TECH
The S.E.C. has opened an investigation into Activision Blizzard. - New York Times
Activision spent the summer grappling with accusations of sexual misconduct and workplace discrimination. In July, it was sued by a California employment agency, which accused it of fostering a “frat boy workplace culture” in which men joked about rape and women were harassed and underpaid compared with their male colleagues. Later that month, over 1,500 workers staged a walkout and signed a letter protesting Activision’s initially dismissive response to the accusations of misconduct.
Tesla to reverse solar price hike for some customers, legal filing says - CNBC
The price hikes were not trivial. For example, plaintiff Matthew Amans’ solar roof price shot up from around $72,000 per his original contract to around $146,000, according to lawsuit filings. Those lawsuits were later consolidated into Amans v Tesla, Inc.
Twitter will pay over $800 million to settle a class action suit - Engadget
Twitter has agreed to pay $809.5 million to settle a class action suit filed by shareholders in 2016. Investors alleged that Twitter masked the company's slowing growth while executives including former CEO Dick Costolo and co-founders Evan Williams and Jack Dorsey (the current CEO) sold stock “for hundreds of millions of dollars in insider profits.”
WORKER RIGHTS / SAFETY
Tyson Foods, Inc., a worldwide food company based in Springdale, Arkansas that produces approximately 20% of the beef, pork, and chicken in the United States, violated federal law when it refused to rehire a former employee for a job because she had previously filed an EEOC discrimination charge against the company, the U.S. Equal Employment Opportunity Commission (EEOC) charged in a lawsuit it filed yesterday.
Pittsburgh McDonald’s sued after manager charged with raping worker - Pittsburgh Post-Gazette
A lawsuit alleging negligence has been filed against McDonald’s Corp. and a Pittsburgh-based franchise after a manager was accused of raping a then-14-year-old employee. [...] The lawsuit alleges that the corporation and franchisee failed to adequately train staff on how to identify and report incidents of sexual harassment or assault and failed to perform a background check on employees.