The "War" on the War on Corporate Crime
After FTC Pledges to Fight Corporate Crime, U.S. Chamber of Commerce Accuses Agency of "Going Rogue"
Flickr photo via Linh Do
One day after the FTC announced it is launching a criminal referral program to combat corporate crime, the U.S. Chamber of Commerce accused the agency of “going rogue.”
FTC chair Khan’s statement announcing the program accurately observes, “Research shows that corporate actors can treat even seemingly high penalties as a cost of doing business, and the stock market price of defendant corporations generally rise in response to the announcement of a fine – suggesting that underenforcement and a lack of deterrence may be pervasive,” citing research by Public Citizen and others.
Chamber president and chief executive Suzanne Clark told The Wall Street Journal, “It feels to the business community that the FTC has gone to war against us, and we have to go to war back.”
FTC spokesperson Peter Kaplan made clear the agency does not intend to back down:
“The FTC just announced we are ramping up efforts to combat corporate crime and now the chamber declares 'war' on the agency. We are not going to back down because corporate lobbyists are making threats.”
That the U.S. Chamber is kicking and screaming about the apparent end to what has been called the “golden age of white collar crime” should come as no surprise. We know the notoriously opaque big business lobby group’s membership includes (or, at least, has very recently included) a number of large corporations – see Public Citizen’s 2016 report on corporations disclosing Chamber membership — that have faced criminal enforcement actions from the DOJ and civil actions from the FTC.
Which corporations does the Chamber represent?
Facebook, for starters, which has a seat on the U.S. Chamber’s board and also happens to be under investigation by the DOJ for potential criminal antitrust violations. The FTC imposed a $5 billion penalty on Facebook in 2019 for alleged privacy violations. A shareholder lawsuit alleges Facebook agreed to pay so much to settle on the condition that CEO Mark Zuckerberg be released from individual liability in the case.
Google, another Big Tech Chamber-backer, apparently has reason to be leery of increased enforcement, as it is already facing antitrust litigation from state attorneys general and European authorities.
Big banks that back the Chamber might also resent the turn toward corporate crime enforcement. JPMorgan Chase, Wells Fargo, and Bank of America, all Chamber backers, all recently resolved criminal investigations into their operations through DOJ leniency agreements, which Deputy AG Lisa Monaco has promised there will be “serious consequences” for breaching.
Other Chamber backers include:
EpiPen manufacturer and infamous price-gouger Mylan, which paid a $465 million penalty for allegedly cheating the government out of Medicaid rebates;
Monsanto, which just this month got out of a leniency agreement it entered to resolve hazardous waste violations (assuming the agreement expired on schedule);
Zimmer Biomet, a repeat offender whose consequence for violating a 2012 leniency agreement it entered over Foreign Corrupt Practices Act violations was to receive a new leniency agreement in 2017.
Perhaps Corporate America feels entitled to the impunity big corporations have long enjoyed. Last year, corporate prosecutions plunged to an all-time low of 94, down two-thirds from their high water mark of 296 in 2000. Now, with agencies from OSHA to the SEC to FinCen affirming their commitments to step up when Big Businesses break the law, the party is over.
And the icing on the cake: New polling from The Revolving Door Project and Data for Progress shows that not only is cracking down on corporate crime good policy — it’s also good politics:
Polling conducted by Data For Progress found that voters agree with the statement “wealthy people and corporations are regularly not punished for breaking the law” by a margin of +67 percentage points. Additionally, with a +80-point margin, likely voters agreed with the statement “when wealthy people and corporations are not punished for breaking laws, people lose trust in the government and the rule of law”. Increasing funding for federal investigations into corporate lawbreaking was backed by a +49-point margin of support. Notably, this support crosses partisan lines: 70 percent of Republicans, 70 percent of Independents, and 70 percent of Democrats surveyed believe the Biden administration should do more to hold lawbreaking corporations accountable.
By all indications, the Chamber’s “war” on the war on corporate crime is only just heating up. The important thing for policymakers and enforcement officials to remember is the public is on their side, not the side of Big Business.
If we want any chance of restoring faith in the US justice system, step one has to be making sure that the powerful are held accountable for their crimes.
Big Business Blotter news roundup:
Top News
Racy Affair Saga Between Jeff Bezos and Enquirer Reaches Final Chapter - WSJ
The probe by the Manhattan U.S. attorney’s office began soon after Mr. Bezos accused the National Enquirer of trying to blackmail him. For American Media, the stakes were high. The publisher had made an agreement with the U.S. attorney’s office to avoid facing campaign-finance charges, under which it could be prosecuted if it committed any crimes in the three years after the deal.
I still wonder, though, about all the money Wells Fargo has already raked in from this practice over the years. If I were a banking regulator, I’d be wondering the same. And I’d be wondering if some restitution is in order.
SEC ENFORCEMENT
SEC Announces Enforcement Results for FY 2021 - SEC
The Securities and Exchange Commission today announced that it filed 434 new enforcement actions in fiscal year 2021, representing a 7 percent increase over the prior year. Seventy percent of these new or "stand-alone" actions involved at least one individual defendant or respondent. The new actions spanned the entire securities waterfront, including against emerging threats in the crypto and SPAC spaces. For example, the SEC charged a company for operating an unregistered online digital asset exchange, charged a crypto lending platform and top executives alleging a $2 billion fraud, and brought an action against a special purpose acquisition company, its merger target, top executives, and others for alleged misconduct in a SPAC transaction. The SEC’s whistleblower program was critical to these efforts and had a record-breaking year.
SEC Enforcement: Public Companies and Subsidiaries - SEC Actions
Not surprisingly the Report concludes that the number of actions brought against public companies and their subsidiaries slowed last year to 53. That is the lowest number of cases brought in this area since fiscal 2014. It is also 15% lower than fiscal 2020 and 32% lower than the average over the past five fiscal years.
The Securities and Exchange Commission today announced that an affiliate of McKinsey & Company that offers investment options exclusively to current and former McKinsey partners and employees has agreed to pay an $18 million penalty for compliance failures. The SEC’s investigation found that the affiliate maintained inadequate policies and procedures to prevent McKinsey partners from misusing material nonpublic information they obtained as consultants to public companies and other McKinsey clients while they were simultaneously overseeing the affiliate’s investment decisions.
PHARMA
PFIZER IS LOBBYING TO THWART WHISTLEBLOWERS FROM EXPOSING CORPORATE FRAUD - The Intercept
The known corporate interests lobbying on the Grassley bill include Pfizer, Amgen, AstraZeneca, Merck, and Genentech. These companies listed the legislation on lobbying disclosures. All five have paid nine-figure settlements over health care fraud brought to light through the False Claims Act.
Walgreens, Walmart and CVS Pharmacies Contributed to Opioid Epidemic, Ohio Jury Finds - WSJ
A federal jury in Cleveland on Tuesday found that the companies owning CVS, Walgreens and Walmart pharmacies were liable for contributing to the opioid epidemic in two Ohio counties—the first, potentially influential verdict among many lawsuits targeting pharmacy chains.
WORKER RIGHTS / SAFETY
Pinterest settles shareholder lawsuit over workplace culture - NBC
The reforms target allegations made by Ifeoma Ozoma and Aerica Shimizu Banks, who first went public in June 2020 with accusations of racism and discrimination at the company. Ozoma, a Black woman who helped lead public policy and social impact at Pinterest, said a white male colleague helped publish her personal information on far-right forums, a process known as doxxing, after she suggested that the company add an advisory warning to content from Ben Shapiro, a conservative political commentator whom she described as a "white supremacist."
Lawsuit says Tesla subjects women to ‘rampant sexual harassment’ - Al Jazeera
Former Tesla employee claims she experienced ‘nightmarish’ sexual harassment conditions and that managers failed to act on her complaints.
As the coronavirus began to spread rapidly across the nation in March 2020, an employee of one of the world’s largest manufacturers of light, medium and heavy-duty trucks told a supervisor of their concerns about exposure to the virus at the Denton facility. In response, a representative of PACCAR Inc. – doing business as Peterbilt Motor Co. – told the employee that the company planned to clean work spaces and continue work as usual. After Paccar later learned the employee expressed concerns publicly about the company’s response and their concern for the safety of other employees, the company fired the employee.
The department found that Gap discriminated against workers by reverifying their permission to work, even though there was no legal reason to do so. The department also determined that Gap discriminated against some non-U.S. citizens because of their immigration status by requesting that they provide specific documents to confirm that they still had permission to work. The department concluded that Gap’s reliance on an electronic human resource management system (which had electronic Form I-9 functions) contributed to the company’s discriminatory conduct.
ANTITRUST
Justice Department Sues to Block U.S. Sugar’s Proposed Acquisition of Imperial Sugar - DOJ
The Department of Justice filed a civil antitrust lawsuit today to stop United States Sugar Corporation (U.S. Sugar) from acquiring its rival, Imperial Sugar Company (Imperial Sugar). The complaint, filed in the U.S. District Court for the District of Delaware, alleges that the transaction would leave an overwhelming majority of refined sugar sales across the Southeast in the hands of only two producers. As a result, American businesses and consumers would pay more for refined sugar, a significant input for many foods and beverages.
JBS USA finalizes settlement for another pork price-fixing lawsuit - Meat + Poultry
Like other negotiations during 2021, JBS USA was once again approved for a settlement regarding its pork price-fixing case, this time for $12.75 million between the company and Commercial and Institutional Indirect Purchaser Plaintiffs (CIIPS).
AMAZON
Amazon agrees to pay $2.5M to settle pesticide sales lawsuit - Seattle Times
Amazon has agreed to pay $2.5 million to settle a lawsuit brought by the Washington state Attorney General’s Office claiming the company allowed industrial-grade pesticides to be sold illegally through its online marketplace.
EXCLUSIVE: FTC Privacy Probe of Amazon Ring Puts Khan’s Agenda in the Spotlight - The Information
Federal Trade Commission staffers earlier this year recommended filing a lawsuit against Amazon over alleged privacy and data security breaches within Amazon’s Ring home security business, according to two people with knowledge of the investigation. But after Amazon lawyers began negotiating a settlement with the FTC, the agency’s chair Lina Khan stepped in to suspend the work, the people said.
POLLUTERS
Maryland AG sues Monsanto, alleges harm to natural resources - AP
Maryland’s attorney general filed a lawsuit Tuesday against chemical company Monsanto and two spinoffs, alleging that chemicals Monsanto manufactured harmed the state’s waters, fish and wildlife and seeking to recover damages and clean-up costs.
Stellantis faces fine, mandates to fix Michigan air-quality violations - Detroit News
The enforcement action follows three violations at the new Jeep assembly plant in Detroit and one at the Warren Truck Assembly Plant. Each plant was found not to have pollution control equipment properly installed according to their air permits. The Mack Assembly Plant in Detroit also faced violations for strong paint odors following complaints from residential neighbors.
COMMENTARY / ANALYSIS
Under Donald Trump, tolerance of corporate malfeasance was baked into the department’s bones and prosecutions plummeted. In 2020, only 94 prosecutions were brought, the lowest number in at least a quarter-century and a two-thirds decline from the high water mark of 296 reached in 2000. Meanwhile, leniency agreements — DPAs and NPAs — became the resolution of choice.
Julie O’Sullivan on Corporate Crime and Corporate Power - Corporate Crime Reporter
“There are a lot of reasons this has evolved. But it has resulted in a situation where there is very little criminal liability for corporations or their executives compared to the apparent costs of their wrongdoing and the apparent scope of their wrongdoing.”