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Rigged Justice 2016 - How Weak Enforcement Lets Corporate Offenders Off Easy, US Senate, 2016

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Rigged Justice: 2016

How Weak Enforcement Lets
Corporate Offenders Off Easy

January 2016
Prepared by the Office of Senator Elizabeth Warren

CONTENTS
I. EXECUTIVE SUMMARY ................................................1
II.	INTRODUCTION...........................................................4
III.	 RIGGED JUSTICE: 2015 CASES................................5
A.	 Financial Crimes and Offenses.................................................. 5
B.	 Education and Student Loans................................................... 6
C.	 Automobile Safety Law Violations........................................... 6
D.	 Occupational Safety Laws.......................................................... 7
E.	 Environmental Laws.................................................................... 7
F.	 Failure to Enforce Trade Laws................................................... 8
G.	Drug Manufacturer Fraud and Misrepresentation................. 8

IV. ENDNOTES........................................................................9

Rigged Justice: How Weak Enforcement Lets Corporate Offenders Off Easy
Prepared by the Staff of Sen. Elizabeth Warren

I. EXECUTIVE SUMMARY
Laws are effective only to the extent they are enforced.
A law on the books has little impact if prosecution is
highly unlikely.
This country devotes substantial resources to the
prosecution of crimes such as murder, assault,
kidnapping, burglary and theft, both in an effort to
deter future criminal activity and to provide victims
with some degree of justice. Strong enforcement
of corporate criminal laws serves similar goals: to
deter future criminal activity by making would-be
lawbreakers think twice before breaking the law and,
sometimes, by helping victims recover from their
injuries.
When government regulators and prosecutors fail to
pursue big corporations or their executives who violate
the law, or when the government lets them off with a
slap on the wrist, corporate criminals have free rein to
operate outside the law. They can game the system,
cheat families, rip off taxpayers, and even take actions
that result in the death of innocent victims—all with no
serious consequences.
The failure to punish big corporations or their
executives when they break the law undermines the
foundations of this great country: If justice means a
prison sentence for a teenager who steals a car, but it
means nothing more than a sideways glance at a CEO
who quietly engineers the theft of billions of dollars,
then the promise of equal justice under the law has
turned into a lie. The failure to prosecute big, visible
crimes has a corrosive effect on the fabric of democracy
and our shared belief that we are all equal in the eyes of
the law.
Under the current approach to enforcement, corporate
criminals routinely escape meaningful prosecution
for their misconduct. This is so despite the fact that
the law is unambiguous: if a corporation has violated
the law, individuals within the corporation must also
have violated the law. If the corporation is subject to
charges of wrongdoing, so are those in the corporation
who planned, authorized or took the actions. But
even in cases of flagrant corporate law breaking,
federal law enforcement agencies – and particularly
the Department of Justice (DOJ) – rarely seek
prosecution of individuals. In fact, federal agencies
rarely pursue convictions of either large corporations

or their executives in a court of law. Instead, they agree
to criminal and civil settlements with corporations
that rarely require any admission of wrongdoing and
they let the executives go free without any individual
accountability.
The Securities and Exchange Commission (SEC) is
particularly feeble, often failing to use the full range
of its enforcement toolbox. Not only does the agency
fail to demand accountability, the SEC frequently
uses its prosecutorial discretion to grant waivers to
big companies so that those companies can continue
to enjoy special privileges despite often-repeated
misconduct that legally disqualifies them from receiving
such benefits. Lax enforcement at other agencies, such
as the Occupational Health and Safety Administration
(OSHA), stems primarily from a lack of important
legal tools and persistent underfunding by Congress
that often turn the legal rules into little more than
suggestions that companies can freely ignore.
The contrast between the treatment of highly paid
executives and everyone else couldn’t be sharper. The
U.S. has a larger prison population than any nation in the
world. People are locked up for long stretches for crimes
that involve thousands—or even hundreds—of dollars.
Even the settlement process is different. For most people
accused of a crime, prosecutors may be willing to plead
out the cases, but they typically require admission of guilt
and, if the crime involves more than a trivial amount of
money, time in jail. Various three-strikes rules frequently
put people away for life for non-violent crimes involving
modest amounts of money. Politicians routinely get
elected promising to be “tough on crime,” and both
federal and state governments devote immense resources
to put and keep criminals in prison.
The Obama Administration has made repeated
promises to strengthen enforcement and hold corporate
criminals accountable, and the DOJ announced in
September that it would place greater emphasis
on charging individuals responsible for corporate
crimes. Nonetheless, both before and after this DOJ
announcement, accountability for corporate crimes is
shockingly weak.
This report prepared for Sen. Warren – the first of
an annual series on enforcement – highlights twenty
criminal and civil cases in 2015 in which the federal
government failed to require meaningful accountability
from either large corporations or their executives
involved in wrongdoing. These twenty cases are not the

Rigged Justice: How Weak Enforcement Lets Corporate Offenders Off Easy
Prepared by the Staff of Sen. Elizabeth Warren

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only examples of prosecutorial timidity when dealing
with well-financed corporate defendants. Instead, they
illustrate patterns across a range of areas from financial
crimes to personal injury to environmental disasters.
Despite the fact that the twenty cases listed here were
among the most highly publicized cases of corporate
misconduct settled in 2015, in only one case was a
corporation taken to trial and an individual indicted or
otherwise required to answer for their contributions to
corporate wrongdoing—and that case involved multiple
deaths.
Because prosecutors took only one of these twenty
cases to trial and, in many cases, did not even require
an admission of guilt as part of the settlement, it is
not possible to officially tag most of these corporations
and their executives for crimes. Even so, each case is
based on widely reported—and widely admitted—facts
that, on their face, raise a prima facie case of unlawful
conduct. These corporations paid millions—or
billions—of dollars to make these cases disappear
before any public hearing. If each of these cases had
gone to trial, it is possible that some of the companies
might have raised a defense that would have created
reasonable doubt in jurors’ minds, but that is precisely
the problem here: because the prosecutors never took
any of these corporations or their executives to trial,
there was never a need for anyone to answer in court
under oath for their actions.
The criminal and civil cases identified include:
•	 Education Management Corporation
(EDMC). In November 2015, DOJ settled
a civil case with EDMC, the second-largest
for-profit education company in the country.
EDMC illegally paid high-pressure recruiters
to enroll students and violated the False Claims
Act by falsely certifying that it complied with
Title IV of the Higher Education Act. EDMC
received $11 billion in payments (90% of it
via federal student grants and loans) from
2003-2011 as a result of these efforts. But
the settlement recovered only $95 million –
less than one percent of this total. The DOJ
settlement did nothing to resolve federal
student loan debts owed by those who were
victims of the illegal recruitment, held no
individual executives at EDMC accountable,
required no admission of wrongdoing, and
did nothing to prevent EDMC from receiving
federal funds in the future.1

•	 Standard & Poor’s (S&P). In February
2015, S&P agreed to pay a $1.375 billion civil
settlement to the DOJ, 19 states, and the
District of Columbia. The settlement came
in response to charges that the ratings agency
engaged in a scheme to defraud investors when
it issued inflated ratings that misrepresented the
true credit risks of residential mortgage-backed
securities and collateralized debt obligations
– one of the chief causes of the 2008 financial
crisis that cost the economy trillions of dollars.
This settlement was less than one-sixth the
size of the fine DOJ and the states originally
sought. 2 The government did not require that
S&P admit to breaking the law, and it failed to
prosecute a single individual.3
•	 “The Cartel”: Citigroup, JPMorgan Chase
& Co, Barclays, UBS AG, and Royal Bank
of Scotland. In May 2015, Citigroup, JP
Morgan Chase & Co, Barclays, UBS AG,
and Royal Bank of Scotland (RBS) agreed
to pay a combined $5.6 billion settlement
to the DOJ. Bank traders from Citicorp, JP
Morgan, Barclays, and RBS created a secret
group known as “The Cartel,” which for more
than five years manipulated exchange rates in
a way that made the banks billions of dollars
at the expense of clients and investors. And,
the fifth bank, UBS separately agreed to plead
guilty to wire fraud charges in connection with
interest rate manipulation. Although DOJ
required admissions of guilt as part of the
settlement – a reflection of the severity of the
charges – not one single individual has yet faced
any DOJ criminal prosecution. Moreover, the
SEC granted waivers to each bank so that the
banks could avoid the collateral consequences
that were supposed to accompany a guilty
plea. Those waivers meant that the banks’
much-hyped guilty pleas were ultimately “likely
to carry more symbolic shame than practical
problems.”4
•	 The Upper Big Branch Mine Disaster.
Donald L. Blankenship, former CEO of Massey
Energy Company, was convicted in December
2015 of only one misdemeanor (conspiring to
willfully violate mandatory mine safety and
health standards) in the Upper Big Branch mine
explosion that resulted in 29 deaths - despite
the fact that his company had a years-long

Rigged Justice: How Weak Enforcement Lets Corporate Offenders Off Easy
Prepared by the Staff of Sen. Elizabeth Warren

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history of safety failures, including 2,400 safety
violations in 2009 alone.5 The penalty in this
case was so small because federal mine safety
laws allow only a misdemeanor charge - not
a felony - even for deadly violations of safety
regulations.6
•	 General Motors (GM). GM’s years-long coverup of ignition switch problems in its vehicles
resulted in at least 124 deaths and 275 injuries.
But the DOJ deferred prosecution agreement in
this case included a fine for GM ($900 million)
that amounted to less than one percent of the
company’s annual revenue, held no individual
accountable for the cover-up, and suspended
the criminal charges against GM - wire fraud
and false statements - to be dismissed if the
company complied with the agreement.7
•	 Trade Law Enforcement. In 2015 the
United States Trade Representative (USTR)
failed to enforce key environmental and
labor requirements in trade agreements with
Guatemala, Colombia, and Peru, despite
substantial evidence of violations. The lack of
enforcement sends a dangerous signal to our
trade partners that they need not honor their
promises on improving labor and environmental
standards.

•	 Novartis. In November 2015, DOJ announced
a $390 million settlement of a civil lawsuit with
Novartis Pharmaceuticals over allegations that
the company engaged in a kickback scheme
with pharmacists to increase sales of their
drugs to Medicare and Medicaid patients.
These kickbacks allegedly were paid even
as Novartis was already under a corporate
integrity agreement for previous violations
of the law. The $390 million represented
just over 10% of the damages sought by the
government. It placed no further restrictions on
Novartis’ participation in federal government
healthcare programs, included no admission of
wrongdoing, did not include an indictment of
any individual responsible for the kickbacks,
and was so paltry that after the settlement,
Novartis’s CEO claimed that “whether we
change our behavior …[in response to the
settlement] remains to be seen.”8
This report contains additional examples of feeble
enforcement against corporate criminals in 2015. The
examples raise the disturbing possibility that some
giant corporations—and their executives—have decided
that following the law is merely optional. For these
companies, punishment for breaking the law is little
more than a cost of doing business.

Rigged Justice: How Weak Enforcement Lets Corporate Offenders Off Easy
Prepared by the Staff of Sen. Elizabeth Warren

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II.	INTRODUCTION
Much of the public and media attention on Washington
focuses on enacting laws. And strong laws are important
– prosecutors must have the statutory tools they need
to hold corporate criminals accountable.  But putting a
law on the books is only the first step.  The second, and
equally important, step is enforcing that law.  A law that
is not enforced – or weakly enforced – may as well not
even be a law at all.
Obama Administration officials routinely discuss the
need for tough enforcement. Former Attorney General
Eric Holder in 2014 said that “instilling in others an
expectation that there will be tough enforcement of all
applicable laws is an essential ingredient to ensuring
that corporate actors weigh their incentives properly
– and do not ignore massive risks in blind pursuit
of profit.”9 In September 2015, Deputy Attorney
General Sally Quillian Yates announced a new DOJ
policy stressing the importance of holding individuals
accountable for corporate crime, stating that “Crime
is crime.  And it is our obligation at the Justice
Department to ensure that we are holding lawbreakers
accountable regardless of whether they commit their
crimes on the street corner or in the boardroom.”10
Despite this rhetoric, DOJ civil and criminal
settlements – and enforcement actions by other federal
agencies – continually fail to impose any serious threat
of punishment on corporate offenders. This is true
regardless of the scope of their crimes or their impact
on the economy, on workers, on investors, or on the
environment. The pattern of weak enforcement extends
beyond the Justice Department to other enforcement
agencies.
The failure to enforce critical financial, environmental,
and public health and safety laws has had a tremendous
impact on the public.  To take just one example,
federal regulators in the Bush Administration and
the independent banking regulatory agencies had
the legal authorities they needed to stop much of the
fraudulent and high-risk conduct that led to the 2008
financial crisis – a crisis that caused millions of people
to lose their homes, their jobs, and their savings.  But
regulators sat on their hands, paving the way for a
devastating economic crisis and billions in taxpayer
bailouts. When federal agencies fail to enforce certain
laws – especially those laws that are intended to curtail

“Mens Rea” Proposals Would Further
Weaken Enforcement
Despite already weak federal enforcement,
Republicans in the House and Senate argue that
the federal government is too tough on corporate
wrongdoers. Currently, Republicans are using
a bipartisan bill intended to reduce mandatory
sentences for low-level drug offenders as a vehicle
for an amendment to make it harder for federal
prosecutors to prove that white collar criminals
violated hundreds of different laws. If adopted,
this amendment would severely weaken the already
anemic enforcement of federal white-collar criminal
laws.11 
misconduct by large corporations and their senior
executives – the consequences can be devastating.
The purpose of this annual report is to highlight
examples of the most egregious enforcement failures
from the previous year.  Sometimes these weak
enforcement cases are the result of laws – such as
OSHA, and the federal mine safety law – that give the
agencies only limited authority and allow only limited
punishment.
But in most instances, these cases are a result of failure
by regulators to use the tools Congress has already
provided to impose meaningful accountability on
corporate offenders. Whether as a result of limited
resources or a lack of political will, this limp approach
to corporate enforcement, particularly in response to
serious misconduct that cost Americans their jobs, their
homes, or, in some cases, their lives, threatens the safety
and security of every American. 
As the examples in this report demonstrate, federal
regulators regularly let big corporations and their highly
paid executives off the hook when they break the law.

Rigged Justice: How Weak Enforcement Lets Corporate Offenders Off Easy
Prepared by the Staff of Sen. Elizabeth Warren

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III.	 RIGGED JUSTICE: 2015 CASES
A.	Financial Crimes and Offenses
•	 Standard & Poor’s (S&P). In February
2015, S&P agreed to pay a $1.375 billion civil
settlement to the DOJ, 19 states, and the
District of Columbia. The settlement came
in response to charges that the ratings agency
engaged in a scheme to defraud investors when
it issued inflated ratings that misrepresented the
true credit risks of residential mortgage-backed
securities and collateralized debt obligations
– one of the chief causes of the 2008 financial
crisis that cost the economy trillions of dollars.
This settlement was less than one-sixth the
size of the fine DOJ and the states originally
sought. The government did not require that
S&P admit to breaking the law, and it failed to
prosecute a single individual.12
•	 “The Cartel”: Citigroup, JPMorgan Chase &
Co, Barclays, UBS AG, and Royal Bank of
Scotland. In May 2015, Citigroup, JP Morgan
Chase & Co, Barclays, UBS AG, and Royal Bank
of Scotland (RBS) agreed to pay a combined $5.6
billion settlement to the DOJ. Bank traders from
Citicorp, JP Morgan, Barclays, and RBS created
a secret group known as “The Cartel,” which for
more than five years manipulated exchange rates
in a way that made the banks billions of dollars
at the expense of clients and investors. And, the
fifth bank, UBS, separately agreed to plead guilty
to wire fraud charges in connection with interest
rate manipulation. Although DOJ required
admissions of guilt as part of the settlement – a
reflection of the severity of the charges – not one
single individual faced any criminal prosecution.
Moreover, the SEC granted waivers to each
bank so that the banks could avoid the collateral
consequences that were supposed to accompany a
guilty plea. Those waivers meant that the banks’
much-hyped guilty pleas were ultimately “likely
to carry more symbolic shame than practical
problems.”13
•	 Deutsche Bank DOJ LIBOR Settlement.
In April 2015, DB Group Services Limited, a
wholly owned subsidiary of Deutsche Bank,
agreed to pay a $775 million settlement to DOJ.
The settlement came in response to charges
that the bank rigged the London Interbank

Offer Rate (LIBOR). LIBOR is a worldwide
benchmark for approximately $10 trillion in
loans including some mortgages, student loans,
and auto loans. DB Group Services pleaded
guilty to wire fraud, and the parent Deutsche
Bank entered into a deferred prosecution
agreement “to resolve wire fraud and antitrust
charges.”14 Deutsche Bank was singled out
as an “especially aggressive participant” in
the LIBOR scheme, and “also was criticized
for failing to cooperate fully with U.S. and
British authorities.”15 Regulators’ investigations
revealed 29 employees to be involved in the
misconduct.16 But DOJ did not prosecute any
individuals and levied a fine that “isn’t likely to
inflict severe damage on Deutsche Bank” and
that merely “dented” Deutsche Bank profits for
the first quarter of 2015.17 And several weeks
after the settlement, the SEC granted Deutsche
Bank a waiver allowing the company to continue
to enjoy special regulatory advantages designed
to be available only to law-abiding banks.18
•	 Citigroup. In August 2015, two Citigroup
affiliates agreed to pay nearly $180 million
to the SEC to settle allegations that they
defrauded investors in the lead-up to the 2008
financial crisis. The two units of Citigroup
were accused of offering and selling risky,
highly leveraged bonds to investors from 2002
to 2008 with false assurances that the bonds
were safe and low-risk. The behavior cost
investors an estimated $2 billion, more than
ten times the amount of the settlement.19 The
settlement did not require Citigroup to admit
to any wrongdoing, the SEC refused to identify
the individuals responsible by name, and no
individuals were prosecuted. In response to
this settlement, New York Times columnist
Gretchen Morgensen asked “How can we
expect Wall Street’s me-first culture to change
when regulators won’t pursue or even identify
the me-firsters who are directly involved?”20
•	 Deutsche Bank SEC Derivatives Settlement.
In May 2015, Deutsche Bank AG agreed to
pay approximately $55 million to the SEC
to settle allegations that the bank hid losses
of over $1.5 billion in 2008-2009. The SEC
stated that Deutsche Bank’s statements did
not accurately reflect the “significant risk” it
faced. Despite the fact that this was the second

Rigged Justice: How Weak Enforcement Lets Corporate Offenders Off Easy
Prepared by the Staff of Sen. Elizabeth Warren

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significant Deutsche Bank settlement of 2015,
the company did not admit any wrongdoing,
no individuals were held accountable, and the
settlement was so small that one analyst stated
that it “isn’t relevant for Deutsche Bank.”21
•	 JP Morgan Conflicts of Interest. In December
2015, JP Morgan Chase & Company agreed
to pay more than $300 million in a settlement
with the SEC and CFTC in which the company
was held responsible for “numerous conflicts of
interest in how it managed customers’ money
over a half decade.”22 According to Bloomberg
Business, the settlement was so weak that
“JPMorgan can continue operating as it has
been in one of its most profitable businesses.
The $307 million fine... account[s]for a bit
more than one percent of the company’s annual
operating profits, or about a month of those
at its asset-management division.”23 And the
SEC almost immediately granted a waiver to
allow JP Morgan continued access to special
regulatory privileges that are designed for lawabiding banks.24 In response to this settlement,
the New York Times concluded, “The settlement
between JPMorgan and the SEC offers little
reason to trust that banks and regulators will be
putting investors’ interests first.”25

B.	 Education and Student Loans
•	 Education Management Corporation
(EDMC). In November 2015, DOJ settled
a civil case with EDMC, the second-largest
for-profit education company in the country.
EDMC illegally paid high-pressure recruiters
to enroll students and violated the False Claims
Act by falsely certifying that it complied with
Title IV of the Higher Education Act. EDMC
received $11 billion in payments (90% of it
via federal student grants and loans) from
2003-2011 as a result of these efforts. But
the settlement recovered only $95 million –
less than one percent of this total. The DOJ
settlement did nothing to resolve federal
student loan debts owed by those who were
victims of the illegal recruitment, held no
individual executives at EDMC accountable,
required no admission of wrongdoing, and
did nothing to prevent EDMC from receiving
federal funds in the future.26

•	 Navient and Student Loan Servicers. In May
2014, the Department of Justice and FDIC reached
a settlement for nearly $100 million with student
loan servicer Navient (formerly known as Sallie
Mae) for “intentional, willful” and systematic
violations of servicemembers’ rights under the
Servicemembers Civil Relief Act.27 The case then
moved to the Department of Education (ED).
Despite the 2014 findings of repeated violations
against America’s active duty and retired military,
ED took no action against Sallie Mae, instead
announcing it would initiate a “thorough” review
of the company’s actions. Before the review was
complete, ED extended the company’s $100
million contract for an additional year. The review
was finally completed in June 2015, but it failed
to examine the full range of cases and violations,
and did not accurately assess whether Navient
and other student loan servicers were following
the law.28 Based on this deeply flawed report, ED
did nothing, so that, despite its 2014 settlement
breaking the law, Navient continues to collect tens
of millions of dollars from the federal government
to service student loans.

C.	 Automobile Safety Law Violations
•	 General Motors (GM). GM’s years-long
cover-up of ignition switch problems in its
vehicles resulted in at least 124 deaths and 275
injuries. But the September 2015 DOJ deferred
prosecution agreement in this case included
a fine for GM ($900 million) that represented
less than one percent of the company’s annual
revenue, held no individual accountable for
the cover-up and included no criminal charges
against any individuals, and suspends the
criminal charges against GM - wire fraud
and false statements - to be dismissed if the
company complies with the agreement.29 One
critic called this settlement “shamefully weak,”
and University of Virginia Law Professor
Brandon Garrett, said he was “horrified” by
the weakness of the deferred prosecution
agreement.30
•	 Honda Airbag Settlement. In January 2015,
Honda was fined $70 million by the National
Highway Traffic Safety Administration
(NHTSA) for failing to disclose more than
1,700 reports of deaths, injuries, and other
“early warning” information to the NHTSA

Rigged Justice: How Weak Enforcement Lets Corporate Offenders Off Easy
Prepared by the Staff of Sen. Elizabeth Warren

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over an 11-year span.31 Honda’s airbag supplier
Takata has now been accused of making
airbags that explode violently when they
deploy. Because Honda failed to tell NHTSA
of reports that it received of airbags rupturing
as far back as 2004, including one death, the
agency—and the public—were denied the
opportunity to head off this problem much
earlier and before more people had been injured.
Honda did not terminate the employment of
anyone after an internal audit found serious
problems with Honda safety reporting to
NHTSA. NHTSA charged Honda on two
counts and fined the company the maximum
permissible under the auto safety law, allowing
the agency to collect the statutory maximum
of $35 million twice.32 This fine amounted to
about one percent of Honda’s 2015 profits. To
date, DOJ has not filed any criminal charges
against the company or any of its executives.
•	 Graco Children’s Products. In March
2015, Graco Children’s Products agreed to
resolve allegations that it refused to recall
approximately four million children’s car
seats with defective buckles.33 Documents
demonstrated that parents began complaining
about the buckles to Graco in 2009, and the
company denied that the problems were due to
a defect for years, telling parents instead that
the buckles should be cleaned while arguing
there was not a safety issue. After determining
that the buckles could endanger children in
an emergency by forcing parents to cut the
straps in order to free their children, NHTSA
demanded a recall in 2014. Graco initially
refused the request before finally recalling the
seats a month later. Although the headlines
indicated that the company would be penalized
$10 million, the settlement includes only a $3
million fine and a requirement that Graco spend
$7 million to develop safety programs, including
“identifying potential safety trends affecting
car seats industrywide and launching a child
safety awareness campaign”34 – investments
that would presumably be a normal course of
business for a car seat manufacturer.

D.	Occupational Safety Laws
•	 The Upper Big Branch Mine Disaster.
Donald L. Blankenship, former CEO of Massey

Energy Company, was convicted in December
2015 of only one misdemeanor (conspiring to
willfully violate mandatory mine safety and
health standards) in the Upper Big Branch mine
explosion that resulted in 29 deaths - despite
the fact that his company had a years-long
history of safety failures, including 2,400 safety
violations in 2009 alone.35 The penalty in this
case was so small because federal mine safety
laws allow only a misdemeanor charge - not
a felony - even for deadly violations of safety
regulations.36
•	 DuPont and Methyl Mercaptan. In November
2014, toxic methyl mercaptan was accidentally
released at DuPont’s facility in LaPorte, Texas,
killing one employee nearby and three others
who came to her aid. In May 2015, OSHA
cited DuPont for 11 violations at that factory,
and in July 2015 OSHA cited DuPont for eight
more violations. Despite the four deaths and
multiple violations, DuPont was fined only
$372,000 by OSHA.37 OSHA also placed
DuPont into its Severe Violator Enforcement
Program, which places them under higher
scrutiny for inspections. No individual DuPont
executives were held accountable. In response
to this meager penalty, workplace safety expert
Thomas Fuller said that “These fines are just
a drop in the bucket … OSHA is really little
more than a paper tiger.”38

E.	 Environmental Laws
•	 ExxonMobil Pegasus Pipeline Oil Spill. In
early 2013, ExxonMobil’s Pegasus Pipeline
ruptured, spilling approximately 134,000
gallons of heavy crude oil on Mayflower,
Arkansas. The oil contaminated homes and
displaced families, eventually seeping into
a nearby creek, wetlands, and parts of Lake
Conway. Maximum Clean Water Act fines
based on the amount of spilled oil could have
been as high as $21.5 million. But in April
2015, ExxonMobil agreed in a civil settlement
to pay just over $5 million in total fines and
penalties.39 This was not the only problem with
the settlement; the Central Arkansas Water
utility said, “The proposed consent decree does
nothing to protect the vital water resources
within the State of Arkansas from harm when
the next segment of the Pegasus pipeline

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ruptures … [and] does not require [Exxon]
to perform any corrective measures or take
additional precautionary measures to prevent
future spills from the Pegasus pipeline.”40 Not
one of the corporation’s executives was held
responsible.
•	 Bayer CropScience LP. In August 2008, an
explosion at a Bayer pesticide plant in Institute,
West Virginia, killed two workers. Bayer was
alleged to have failed to comply with its risk
management plan and failed to properly train
employees prior to the explosion. More than
seven years later, in September 2015, Bayer
agreed to a $5.6 million settlement with EPA.
No individuals were held accountable. The
settlement included only $975,000 in civil
fines and $4.6 million in safety and emergency
response expenditures by Bayer, much of which
the company was likely to spend on similar
projects even in the absence of the agreement.41
•	 BP Deepwater Horizon Final Civil Claims
Settlement. In October 2015, DOJ and five
states announced a final settlement with BP
for civil claims for natural resource damage
arising from the company’s massive 2010
Gulf of Mexico Deepwater Horizon oil spill.
The settlement required the company to pay
$20.8 billion, and Attorney General Loretta
Lynch, who described the oil spill as “the worst
environmental disaster in American history,”42
said that “BP is receiving the punishment it
deserves.” The settlement was structured in a
way that allowed BP to deduct $15 billion of
the payments from the company’s income for
tax purposes, reducing the impact of the civil
penalty – which BP will pay over 18 years – by
over $5 billion.43

F.	 Failure to Enforce Trade Laws
There are numerous examples of U.S. officials failing
to enforce or delaying enforcement of key provisions of
trade agreement, going back decades.44 Examples from
2015 include:
•	 After years of complaints about Guatemala’s
failure to meet CAFTA labor standards, the
USTR finally brought a labor enforcement
case under the trade agreement; this case went
to a hearing on June 2, 2015, with a panel

decision required by agreement within 120
days.45 But the USTR approved an extension
of this decision, and in November 2015, with
the report not yet complete, a panelist withdrew
and work was suspended until November
27. The report still has not been released, and it
is now more than 210 days since the hearing.
•	 In 2015 the USTR failed to take action
against countries violating key free trade law
environmental obligations, neglecting new
and detailed reports of illegal logging in Peru
that violated the U.S.-Peru Trade Promotion
Agreement.46 An analysis of the problem found
that USTR took “[n]o action to investigate
industry, in the United States or Peru, with
documented evidence of repeated and persistent
engagement in illegal harvest and trade or [no
action to] prosecute known violations.”47
•	 In April, 2015, Colombia’s National Union
School issued a damning report on Colombia’s
failure to comply with its labor obligations,
finding that “Colombian workers have suffered
more than 1,933 threats and acts of violence,
including 105 assassinations of union activists
and 1,337 death threats.”  But the USTR has not
initiated any enforcement efforts in response.48

G.	Drug Manufacturer Fraud and
Misrepresentation
•	 Novartis. In November 2015, DOJ announced
a $390 million settlement of a civil fraud
lawsuit with Novartis Pharmaceuticals over
allegations that the company engaged in a
kickback scheme with pharmacists to increase
sales of their drugs to Medicare and Medicaid
patients. These kickbacks allegedly were paid
even as Novaris was already under a corporate
integrity agreement for previous violations
of the law. This $390 million represented
just over 10% of the damages sought by the
government. It placed no further restrictions on
Novartis’ participation in federal government
healthcare programs, included no admission of
wrongdoing, and did not include an indictment
of any individual responsible for the kickbacks.
The settlement was so paltry that after it was
announced, Novartis’s CEO candidly noted that
“whether we change our behavior …[in response
to the settlement] remains to be seen.”49

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IV. ENDNOTES
1	

Department of Justice, For-Profit College Company to Pay $95 Million to Settle Claims of Illegal Recruiting, Consumer Fraud, and Other
Violations (Nov. 16, 2015) (http://www.justice.gov/opa/pr/profit-college-company-pay-955-million-settle-claims-illegal-recruiting-consumerfraud-and); Letter from Sens. Warren, Durbin, and Blumenthal to The Honorable Loretta Lynch, Attorney General of the United States, and
the Honorable Arne Duncan, U.S. Secretary of Education (Nov. 30, 2015) (http://www.warren.senate.gov/files/documents/2015-11-30_Letter_
to_Depts_of_Edu_and_Justice_re_EDMC_Settlement.pdf). A separate settlement by state Attorneys General required that EDMC forgive
student loan debts it was owed by former students, but neither this settlement nor the DOJ settlement required forgiveness of federal student
loans. Had an admission of guilt been obtained by DOJ, students would “have had potential grounds to discharge their [federal] loans taken
out to attend the college.” New York Times, (For-Profit College Operator EDMC Will Forgive Student Loan) (Nov. 16, 2015) (http://www.
nytimes.com/2015/11/17/us/for-profit-college-operator-edmc-will-forgive-student-loans.html?_r=0).

2	

Wall Street Journal, State Lawsuits Could Add to S&P Exposure (Feb. 6, 2015); (http://www.wsj.com/articles/
SB10001424127887324906004578288441441869834?cb=logged0.32419539988040924).

3	

Department of Justice, Justice Department and State Partners Secure $1.375 Billion Settlement with S&P for Defrauding Investors in the Lead
Up to the Financial Crisis (Feb. 3, 2015) (http://www.justice.gov/opa/pr/justice-department-and-state-partners-secure-1375-billion-settlementsp-defrauding-investors); USA Today, Critics Blast Justice Department’s S&P Settlement (Feb. 3, 2015) (http://www.usatoday.com/story/
money/business/2015/02/03/sp-settlement-14b-wrongdoing-change/22808017/).

4	

New York Times, Rigging of Foreign Exchange Market Makes Felons of Top Banks (May 20, 2015) (http://www.nytimes.com/2015/05/21/
business/dealbook/5-big-banks-to-pay-billions-and-plead-guilty-in-currency-and-interest-rate-cases.html).

5	

New York Times, Mixed Verdict for Donald Blankenship, Ex-Chief of Massey Energy, After Coal Mine Blast (Dec. 3, 2015) (http://www.
nytimes.com/2015/12/04/us/donald-blankenship-massey-energy-upper-big-branch-mine.html).

6	

Charleston Gazette-Mail, After Blankenship Trial, Seeking Stiffer Penalties for Mine Safety Crimes (Dec. 4, 2015) (http://www.wvgazettemail.
com/article/20151204/GZ15/151209762/).

7	

New York Times, Many Messages in the GM Settlement (Sep. 21, 2015) (http://www.nytimes.com/2015/09/22/business/dealbook/manymessages-in-the-gm-settlement.html?_r=0).

8	

Department of Justice, Manhattan U.S. Attorney Announces $370 Million Civil Fraud Settlement Against Novartis Pharmaceuticals For
Kickback Scheme Involving High-Priced Prescription Drugs, Along With $20 Million Forfeiture Of Proceeds From The Scheme (Nov. 20,
2015) (http://www.justice.gov/usao-sdny/pr/manhattan-us-attorney-announces-370-million-civil-fraud-settlement-against-novartis); Law360,
Five Takeaways From the Novartis FCA Settlement (Nov. 1, 2015) (http://www.law360.com/articles/720152/5-takeaways-from-the-novartisfca-settlement).

9	

Department of Justice, Attorney General Holder Remarks on Financial Fraud Prosecutions at NYU School of Law (Sep. 17, 2014) (http://
www.justice.gov/opa/speech/attorney-general-holder-remarks-financial-fraud-prosecutions-nyu-school-law).

10	 Department of Justice, Deputy Attorney General Sally Quillian Yates Delivers Remarks at New York University School of Law Announcing
New Policy on Individual Liability in Matters of Corporate Wrongdoing (Sep. 10, 2015) (http://www.justice.gov/opa/speech/deputy-attorneygeneral-sally-quillian-yates-delivers-remarks-new-york-university-school).
11	 National Journal, Divided GOP Ponders Way Forward on Criminal Justice Reform (Jan. 20, 2016) (http://www.nationaljournal.com/s/508111/
divided-gop-ponders-way-forward-criminal-justice-reform).
12	 Department of Justice, Justice Department and State Partners Secure $1.375 Billion Settlement with S&P for Defrauding Investors in the Lead
Up to the Financial Crisis (Feb. 3, 2015) (http://www.justice.gov/opa/pr/justice-department-and-state-partners-secure-1375-billion-settlementsp-defrauding-investors); USA Today, Critics Blast Justice Department’s S&P Settlement (Feb. 3, 2015) (http://www.usatoday.com/story/
money/business/2015/02/03/sp-settlement-14b-wrongdoing-change/22808017/).
13	 New York Times, Rigging of Foreign Exchange Market Makes Felons of Top Banks (May 20, 2015) (http://www.nytimes.com/2015/05/21/
business/dealbook/5-big-banks-to-pay-billions-and-plead-guilty-in-currency-and-interest-rate-cases.html).
14	 Bloomberg, Deutsche Bank to Pay Record $2.5 Billion to Resolve LIBOR Probes (Apr. 23, 2015) (http://www.bloomberg.com/news/
articles/2015-04-23/deutsche-bank-to-pay-record-2-5-billion-to-resolve-libor-probes); Department of Justice, Deutsche Bank’s London
Subsidiary Agrees to Plead Guilty in Connection with Long-Running Manipulation of LIBOR (Apr. 23, 2015) (http://www.justice.gov/opa/pr/
deutsche-banks-london-subsidiary-agrees-plead-guilty-connection-long-running-manipulation).
15	 Wall Street Journal, Deutsche Bank to Pay $2.5 Billion to Settle Libor Investigation (Apr. 23, 2015); (http://www.wsj.com/articles/deutschebank-settles-libor-investigation-with-u-s-u-k-authorities-1429791118).
16	 Bloomberg, Deutsche Bank Staff Probed Over LIBOR by Frankfurt Prosecutors (June 29, 2015) (http://www.bloomberg.com/news/
articles/2015-06-29/deutsche-bank-staff-probed-over-libor-by-frankfurt-prosecutors).
17	 Wall Street Journal, Deutsche Bank to Pay $2.5 Billion to Settle Libor Investigation (Apr. 23, 2015); (http://www.wsj.com/articles/deutschebank-settles-libor-investigation-with-u-s-u-k-authorities-1429791118).
18	 Law360, SEC Grants Deutsche Bank WKSI Waiver After Guilty Plea (May 6, 2015) (http://www.law360.com/articles/651174/sec-grantsdeutsche-bank-wksi-waiver-after-guilty-plea).
19	 New York Times, An S.E.C. Settlement With Citigroup That Fails to Name Names (Aug. 28, 2015) (http://www.nytimes.com/2015/08/30/
business/sec-settlement-with-citigroup-holds-no-one-responsible.html).
20	 New York Times, An S.E.C. Settlement With Citigroup That Fails to Name Names (Aug. 28, 2015) (http://www.nytimes.com/2015/08/30/
business/sec-settlement-with-citigroup-holds-no-one-responsible.html).

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21	 Wall Street Journal, Deutsche Bank Agrees to Pay $55 Million to SEC (May 26 ,2015) (http://www.wsj.com/articles/deutsche-bank-agreesto-pay-55-million-to-sec-1432651289); Bloomberg, Deutsche Bank to Pay $55 Million to Settle Derivatives Probe (May 26, 2015) (http://
www.bloomberg.com/news/articles/2015-05-26/deutsche-bank-to-pay-55-million-to-settle-sec-derivatives-probe); Securities and Exchange
Commission, SEC Charges Deutsche Bank With Misstating Financial Reports During Financial Crisis (May 26, 2015) (http://www.sec.gov/
news/pressrelease/2015-99.html).
22	 Bloomberg, JP Morgan Admits It Didn’t Tell Clients About Conflicts (Dec. 18, 2015) (http://www.bloomberg.com/news/articles/2015-12-18/
jpmorgan-pays-267-million-to-settle-conflict-of-interest-claims).
23	 Bloomberg, JP Morgan Admits It Didn’t Tell Clients About Conflicts (Dec. 18, 2015) (http://www.bloomberg.com/news/articles/2015-12-18/
jpmorgan-pays-267-million-to-settle-conflict-of-interest-claims).
24	 Bloomberg, JP Morgan Said to Win Relief in SEC Case on Sale of Its Own Funds (Dec. 10, 2015) (http://www.bloomberg.com/news/
articles/2015-12-10/jpmorgan-said-to-win-relief-in-sec-case-on-sale-of-its-own-funds).
25	 New York Times, Why Investors Are Right to be Distrustful (Dec. 23, 2015) (http://www.nytimes.com/2015/12/23/opinion/why-investors-areright-to-be-distrustful.html?ref=opinion&_r=0).
26	 Department of Justice, For-Profit College Company to Pay $95 Million to Settle Claims of Illegal Recruiting, Consumer Fraud, and Other
Violations (Nov. 16, 2015) (http://www.justice.gov/opa/pr/profit-college-company-pay-955-million-settle-claims-illegal-recruiting-consumerfraud-and); Letter from Sens. Warren, Durbin, and Blumenthal to The Honorable Loretta Lynch, Attorney General of the United States, and
the Honorable Arne Duncan, U.S. Secretary of Education (Nov. 30, 2015) (http://www.warren.senate.gov/files/documents/2015-11-30_Letter_
to_Depts_of_Edu_and_Justice_re_EDMC_Settlement.pdf). A separate settlement by state Attorneys General required that EDMC forgive
student loan debts it was owed by former students, but neither this settlement nor the DOJ settlement required forgiveness of federal student
loans. Had an admission of guilt been obtained by DOJ, students would “have had potential grounds to discharge their [federal] loans taken
out to attend the college.” New York Times, (For-Profit College Operator EDMC Will Forgive Student Loan) (Nov. 16, 2015) (http://www.
nytimes.com/2015/11/17/us/for-profit-college-operator-edmc-will-forgive-student-loans.html?_r=0).
27	 Department of Justice, (Justice Department Reaches $60 Million Settlement with Sallie Mae to Resolve Allegations of Charging Military
Servicemembers Excessive Rates on Student Loans) (May 13, 2014) (www.justice.gov/opa/pr/justice-department-reaches-60-millionsettlement-sallie-mae-resolve-allegations-charging); FDIC, (FDIC Announces Settlement with Sallie Mae for Unfair and Deceptive Practices
and Violations of the Servicemembers Civil Relief Act) (May 13, 2014) (www.fdic.gov/news/news/press/2014/pr14033.html).
28	 Senator Elizabeth Warren, (An Analysis of the Department of Education’s Review of Student Loan Servicers Compliance with the
Servicemembers Civil Relief Act) (August 2015).
29	 New York Times, Many Messages in the GM Settlement (Sep. 21, 2015) (http://www.nytimes.com/2015/09/22/business/dealbook/manymessages-in-the-gm-settlement.html).
30	 Corporate Crime Reporter, Critics Rip GM Deferred Prosecution Agreement in Engine Switch Case (Sep. 17, 2015) (http://www.
corporatecrimereporter.com/news/200/critics-rip-gm-deferred-prosecution-in-switch-case/#sthash.JSSOCK0E.dpuf).
31	 Detroit News, (U.S. Fines Honda Record $70 Million for Safety Lapses) (Jan. 8, 2015) (http://www.detroitnews.com/story/business/autos/
foreign/2015/01/08/honda-fine/21444089/).
32	 New York Times, Honda Fined for Violations of Safety Law, (Jan. 8, 2015) (http://www.nytimes.com/2015/01/09/business/honda-fined-70million-in-underreporting-safety-issues-to-government.html)
33	 National Highway Traffic Safety Administration, U.S Transportation Secretary Foxx Announces $10 Million Civil Penalty Against Child Car
Seat Manufacturer (Mar. 20, 2015) (http://www.nhtsa.gov/About+NHTSA/Press+Releases/2015/Car-seat-maker-Graco-fined-$10-million).
34	 New York Times, Graco to Pay $10 Million for Delay in Recall of Defective Child Seats (Mar. 20, 2015) (http://www.nytimes.com/2015/03/21/
business/graco-to-pay-10-million-for-delay-in-recall-of-defective-child-seats.html).
35	 New York Times, Mixed Verdict for Donald Blankenship, Ex-Chief of Massey Energy, After Coal Mine Blast (Dec. 3, 2015) (http://www.
nytimes.com/2015/12/04/us/donald-blankenship-massey-energy-upper-big-branch-mine.html).
36	 Charleston Gazette-Mail, After Blankenship Trial, Seeking Stiffer Penalties for Mine Safety Crimes (Dec. 4, 2015) (http://www.wvgazettemail.
com/article/20151204/GZ15/151209762/).
37	 Occupational and Safety Health Administration, Deaths Of Four Workers Prompts Deeper Look At Dupont Safety Practices (July 9, 2015)
(https://www.osha.gov/newsrelease/reg6-20150709.html).
38	 USA Today, OSHA Adds DuPont to Severe Violator List After Leak (July 13, 2015) (http://www.usatoday.com/story/money/
business/2015/07/13/feds-add-dupont-to-severe-violator-program/30111419/).
39	 Department of Justice, ExxonMobil to Pay $5 Million to Settle U.S. and Arkansas Claims for 2013 Mayflower Oil Spill (Apr. 22, 2015) (http://
www.justice.gov/opa/pr/exxonmobil-pay-5-million-settle-us-and-arkansas-claims-2013-mayflower-oil-spill); Inside Climate News, Exxon’s
Deal for Arkansas Pipeline Spill Leaves Water Vulnerable, Groups Warn (July 28, 2015) (http://insideclimatenews.org/news/28072015/exxonmobil-deal-mayflower-arkansas-pipeline-oil-spill-leaves-water-vulnerable-groups-warn-tar-sands-diblit); Inside Climate News, Exxon’s
Maligned $5M Settlement for Pegasus Spill Ruled ‘Fair and Reasonable’, (Aug. 13, 2015) (http://insideclimatenews.org/news/13082015/exxonmaligned-5m-settlement-pegasus-spill-ruled-fair-judge-Arkansas).
40	 Inside Climate News, Exxon’s Deal for Arkansas Pipeline Spill Leaves Water Vulnerable, Groups Warn. (July 28, 2015) (http://
insideclimatenews.org/news/28072015/exxon-mobil-deal-mayflower-arkansas-pipeline-oil-spill-leaves-water-vulnerable-groups-warn-tarsands-diblit).

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41	 Washington Examiner, Bayer to Pay $5.6 Million in Settlement with EPA (Sep. 21, 2015) (http://www.washingtonexaminer.com/bayer-to-pay5.6-million-in-settlement-with-epa/article/2572548); EPA, Bayer Cropscience to Enhance Safeguards at Chemical Facilities in Four States
to Settle Violations at W.V. Plant (Sep. 21, 2015) (http://yosemite.epa.gov/opa/admpress.nsf/0/FB43A837CDBE194085257EC7006D9F46);
Associated Press, Bayer Cropscience Settles For $5.6M Over Deadly Blast (Sep. 21, 2015) (http://bigstory.ap.org/
article/367f13b3230a4fb89f55346804c4125d/bayer-cropscience-settles-56m-over-deadly-blast).
42	 Department of Justice, U.S. and Five Gulf States Reach Historic Settlement with BP to Resolve Civil Lawsuit Over Deepwater Horizon Oil
Spill (Oct. 5, 2015) (http://www.justice.gov/opa/pr/us-and-five-gulf-states-reach-historic-settlement-bp-resolve-civil-lawsuit-over-deepwater).
43	 Paul Caron, Pepperdine University School of Law, TaxProfBlog, BP Settlement Generates $15 Billion Tax Deduction (Oct. 6, 2015) (http://
taxprof.typepad.com/taxprof_blog/2015/10/bp-settlement-generates-15-billion-tax-deduction.html).
44	 Sen. Elizabeth Warren, Broken Promises: Decades of Failure to Enforce Labor Standards in Free Trade Agreements (May 2015) (http://www.
warren.senate.gov/files/documents/BrokenPromises.pdf).
45	 Cornell International Law Journal, Reality Check: The U.S. Labor Action Against Guatemala (2014) (http://cornellilj.org/reality-check-the-u-slabor-action-against-guatemala/).
46	 Environmental Investigation Agency, USTR Fails to Implement and Enforce Key U.S.-Peru FTA Provisions (June 4, 2015) (http://eia-global.
org/news-media/failure-to-implement-and-enforce-key-us-peru-fta-provisions).
47	 Environmental Investigation Agency, USTR Fails to Implement and Enforce Key U.S.-Peru FTA Provisions (June 4, 2015) (http://eia-global.
org/news-media/failure-to-implement-and-enforce-key-us-peru-fta-provisions).
48	 AFL-CIO, Despite Labor Action Plan, Colombian Unionists Still Targeted for Death (Apr. 7, 2015) (http://www.aflcio.org/Blog/GlobalAction/Despite-Labor-Action-Plan-Colombian-Unionists-Still-Targeted-for-Death).
49	 Department of Justice, Manhattan U.S. Attorney Announces $370 Million Civil Fraud Settlement Against Novartis Pharmaceuticals For
Kickback Scheme Involving High-Priced Prescription Drugs, Along With $20 Million Forfeiture Of Proceeds From The Scheme (Nov. 20,
2015) (http://www.justice.gov/usao-sdny/pr/manhattan-us-attorney-announces-370-million-civil-fraud-settlement-against-novartis); Law360,
Five Takeaways From the Novartis FCA Settlement (Nov. 1, 2015) (http://www.law360.com/articles/720152/5-takeaways-from-the-novartisfca-settlement).

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