If a corporation gets busted for misconduct and no one knows, did it really happen?

Say their names

By Philip Mattera, director of the Corporate Research Project, for the Dirt Diggers Digest 

Regulatory agencies and prosecutors seek to punish misbehaving corporations in the hope they will change their practices and obey the rules. That happens occasionally, but all too often corporate offenders go on to break the law again, sometimes repeatedly.

The prevalence of such recidivism is one of the main conclusions that arises from the data on enforcement actions—numbering more than 600,000—my colleagues and I have collected in Violation Tracker.

Now one of the more aggressive federal regulators is planning to assemble an official resource on rogue corporations. The Consumer Financial Protection Bureau just announced it will create a registry of companies that have broken consumer protection laws and that are subject to court orders regarding their ongoing behavior.

“Too often, financial firms treat penalties for illegal activity as the cost of doing business,” said CFPB Director Rohit Chopra. “The CFPB’s new rule will help law enforcement across the country detect and stop repeat offenders.”

I am happy to report that Violation Tracker played a role in the agency’s development of the registry. As noted on page 405 of the lengthy description of the plan, CFPB made use of data from Violation Tracker to estimate how many companies might be affected.

Given that CFPB’s registry will cover only nonbank consumer finance companies, its scope will be much narrower than that of Violation Tracker, which covers all kinds of corporations, large and small. Yet it is important for there to be official compilations, since they will hopefully provide more pressure on bad actors.

It would be good if the CFPB’s move inspires the Justice Department to do more to respond to calls from members of Congress and corporate accountability advocates to create a comprehensive database on corporate crime.

Last year, DOJ created a page of its website called Corporate Crime Case Database, which initially contained only about a dozen items but was described as being “still in the process of being populated.” 

It’s now been about 12 months since the site went up, but that process is proceeding at a glacial pace. The page currently contains all of 85 case summaries, making it far from a comprehensive database.

It is no surprise that DOJ seems reluctant to do more to highlight its criminal enforcement, given that the department has been emphasizing leniency rather than aggressive prosecution of corporate miscreants. DOJ continues to allow large corporations to escape from criminal investigations with a deferred or non-prosecution agreement under which the company pays a penalty but does not need to plead guilty.

In theory, companies which fail to change their behavior would be subject to a real prosecution in the future, but there are many cases in which one leniency agreement is followed by nothing more than another leniency agreement.

Sometimes DOJ employs another device known as a declination in which the possibility of a prosecution is completely taken off the table. This deal was recently offered to a company called Proterial (formerly known as Hitachi Cable), which misrepresented to customers that the motorcycle brake hose assemblies it sold met federal safety performance standards.

The problem was not that the company failed to test the assemblies. It did the tests but lied to customers about the results, claiming that the assemblies had passed when in fact they had failed. A page on the DOJ website lists 20 declinations, but there may be more that are not disclosed.

When it comes to corporate crime, DOJ needs to engage in more aggressive prosecutions and make sure the public knows about them.