Over the past quarter century, large corporations have paid hundreds of billions of dollars in fines and settlements for a wide range of misconduct. In Violation Tracker we document many thousands of these cases and place them in various categories. We have just added a new way of looking at the most egregious kinds of wrongdoing.
On the website we now identify clusters of major cases in which companies paid substantial penalties—from $25 million up to the billions—for practices that harmed large numbers of consumers, workers, investors or community members. We call these Mega-Scandals.
Chronologically, the first mega-scandal was the series of accounting and corruption scandals of the early 2000s at companies such as Enron, the high-flying energy trading company that went out of business—taking its auditor Arthur Andersen with it—when it turned out to be engaged in brazen accounting fraud.
Similar misconduct came to light at companies such as WorldCom, a telecommunications provider found to have inflated its assets by billions of dollars; Tyco International, a security systems firm whose CEO was convicted of misusing corporate funds to support a lavish personal lifestyle; and Adelphia Communications, whose principals were found guilty of looting the firm. One of the new mega-deal summary pages in Violation Tracker documents over $6 billion in penalties resulting from these cases.
The magnitude of the Enron era cases would be dwarfed by another mega-scandal which erupted later in the 2000s. It was the outgrowth of a period of financial deregulation that allowed Wall Street to create a slew of complex investment products backed by shaky home mortgages. When the housing market softened and many of those mortgages became delinquent, the value of residential mortgage-backed securities plunged. They came to be known as toxic securities.
The country avoided a complete financial collapse, but those toxic securities brought about significant legal and monetary consequences for the financial institutions held responsible for devising and marketing them. They found themselves the target of major lawsuits brought by the federal government, state governments, institutional investors and others. We estimate that the banks ended up paying more than $148 billion in fines and settlements, making this the most expensive of the mega-scandals.
The legal fallout from the financial crisis was also felt by the financial institutions that originated those shaky home mortgage loans behind the toxic securities. In some cases, they were part of the same banks that marketed the securities. Banks were sued both for luring low-income consumers into unsustainable mortgages and for misleading investors about those practices.
Far and away, the biggest payout in this category came from Bank of America, whose $53 billion total resulted from giant settlements with the U.S. Justice Department, state attorneys general, the loan guarantee agency Fannie Mae and others. JPMorgan Chase and Wells Fargo each racked up close to $9 billion in payouts. Overall, the mortgage abuse cases resulted in fines and settlements of more than $80 billion.
It was not long after the financial crisis that the next corporate mega-scandal burst onto the scene. It began on April 20, 2010 when an explosion occurred at the Deepwater Horizon drilling rig operated by BP in the Gulf of Mexico. The accident killed 11 crew members and released a vast amount of oil into the gulf. It turned out to be the largest oil spill in history.
BP—along with the owner of the rig, Transocean, and Halliburton, which helped construct it—faced a wave of litigation alleging deficiencies in their actions before, during and after the accident. They ended up paying about $36 billion in settlements, with most of that coming from BP.
The pharmaceutical industry is responsible for several mega-scandals, the worst of which is the role drugmakers played in bringing about the opioid epidemic. Much of the blame has fallen on Purdue Pharma, which was relentless in promoting pain killers such as oxycodone, downplaying the risks of addiction even as overdose deaths soared. Purdue finally consented to a settlement in which it agreed to pay $8 billion and effectively go out of business, though the deal has been caught up in controversy over the effort of the Sackler family, which controlled the company, to shield itself from liability.
Other companies such as drug wholesalers and pharmacy chains have also faced major litigation over their alleged failure to question the enormous volume of prescriptions coming from dubious sources such as shady pain clinics known as pill mills. The Violation Tracker tally on the opioid mega-scandal estimates that total payouts have now surpassed $70 billion.
Among the other mega-scandals are:
The emissions cheating controversy centering on Volkswagen: $32 billion.
The wildfire liability controversy centering on PG&E: $18 billion.
The bogus bank account controversy centering on Wells Fargo: $8 billion.
More on these and other mega-scandals can be found on the Violation Tracker Summaries Page. Mega-scandals are also now included in the Offense Type dropdown on the Advanced Search page and thus can be combined with other variables.
web version: https://dirtdiggersdigest.org/archives/7522