A Boom Decade for Corporate
Misconduct
By Phil Mattera for the Dirt Diggers Digest
Business journalists are looking
back with amazement at the stock market’s track record over the past decade.
Yet the 2010s were also a boom period for corporate crime and misconduct.
In Violation
Tracker my colleagues and I have documented more than 240,000
cases for that period representing $442 billion in fines and settlements—more
than twice the $161 billion total for the previous decade. (The numbers are not
adjusted for inflation.)
The cases from the 2010s include 574
with a penalty of $100 million or more, 147 with a penalty of $500 million or
more, and 67 with a penalty of $1 billion or more.
The top tier of these mega-cases is dominated by four corporations. BP is linked to the largest single case on the list—the $20.8 billion settlement with the federal government and five states to resolve civil claims stemming from the massive 2010 Deepwater Horizon oil spill in the Gulf of Mexico. BP paid out numerous other mega-penalties and smaller ones to put its total for the decade at nearly $28 billion.
The second biggest single penalty
during the decade was Bank of America’s $16.65 billion settlement with the
Justice Department in 2014 to resolve claims relating to fraud in the period
leading up to the financial crisis, including such behavior on the part of
Merrill Lynch and Countrywide Financial, which BofA acquired during that
crisis. BofA also had plenty of other penalties during the decade—including two
in excess of $10 billion—bringing its total for that period to an eye-popping
$62 billion.
The third of the penalty leaders is
Volkswagen, which in 2016 reached a $14.7 billion settlement with the
federal government and the state of California to resolve allegations relating
to systematic cheating on diesel pollution emission testing through the use of
defeat devices. VW paid out several other multi-billion penalties related to
the cheating and racked up a penalty total of more than $23 billion for the
decade.
Rounding out the list of companies
with individual penalties in excess of $10 billion is JPMorgan Chase, which in
2013 reached a $13 billion settlement to resolve
federal and state claims relating to the sale of toxic mortgage-backed
securities by the bank itself and by its acquisitions Bear Stearns and
Washington Mutual. JPMorgan also had several other penalties of $1 billion or
more, along with smaller ones, that pushed its penalty total for the decade to
more than $29 billion.
Other big domestic banks had a
substantial share of mega-penalties. These include Citigroup, with a $7 billion toxic securities settlement
in 2014 (and a penalty total of $16 billion for the decade) and Wells Fargo,
with a similar $5.3 billion settlement in 2012 (and a
penalty total of $15 billion stemming from issues such as the creation of bogus
accounts to generate illicit fees).
The decade also saw a slew of
mega-cases involving foreign banks such as BNP Paribas, Deutsche Bank, Royal
Bank of Scotland and Credit Suisse for offense such as violations of economic
sanctions and their own toxic securities abuses.
Financial services companies of all
kinds dominated the mega-penalty list, accounting for 41 of the 67
billion-dollar cases. Also worthy of mention are the pharmaceutical companies,
including settlements by GlaxoSmithKline for $3 billion and Johnson & Johnson
for $2.2 billion, both for marketing drugs for
purposes not approved as safe by the Food and Drug Administration. That
industry will end up paying much more when the pending multistate opioid
litigation is resolved.
The list could continue. Suffice it
to say that the decade’s major cases made it clear that corporate misconduct
perseveres through good times and bad.