corporate wrongdoing

  • December 31, 2014
    Guest Post

    by Leslie Bailey, Staff Attorney, and Paul Bland, Executive Director, Public Justice. This post first appeared at the Public Justice Blog.

    USA Today has run a startling and powerful editorial that shines a bright light on a dark practice. All too often, corporations that have manufactured defective and sometimes deadly products, or are engaged in other severely illegal behavior, ask courts to cover up the wrongdoing. Through the excessive use of secrecy orders, far too many courts have sealed evidence and allowed corporations to conceal facts that – if they had become publicly known – would have stopped dangerous and illegal behavior.

    In particular, USA Today focuses on the case of Rich Barber, whom we had the privilege of successfully representing in a challenge to abusive court secrecy. Rich’s son was killed because a Remington rifle had fired without the trigger being pulled due to a design defect that Remington knew about and concealed for decades. USA Today argues that a pattern developed over a number of cases: a particular plaintiff would discover key internal documents of the gun manufacturer relating to the defect and its knowledge, and Remington would settle the cases and demand (and get) broad secrecy orders sealing up the evidence. As a result, the public didn’t learn of the defect for many years, and many more people died. 

    USA Today notes that Rich Barber’s work, and that of Public Justice, helped break down this wall of secrecy. Rich championed important legislation in Montana that now restricts courts from sealing records in cases involving public safety.

    I urge you to read USA Today’s editorial in its entirety, and to share it with others. Its editorial board put the entire problem in perspective:

    Clever use of court secrecy – confidential settlements and ‘protective orders’ to seal documents – helped keep evidence of the rifle’s potential dangers under wraps. Had court documents been public, injuries might have been prevented and lives saved. 

  • December 16, 2014
    BookTalk
    Why Not Jail?
    Industrial Catastrophes, Corporate Malfeasance, and Government Inaction
    By: 
    Rena Steinzor

    by Rena Steinzor, a Professor at the University of Maryland Carey School of Law and the president of the Center for Progressive Reform. For two decades, she has written dozens of articles and two previous books about the regulatory system that protects public health, worker and consumer safety, and the environment. She has testified repeatedly before Congress and has been quoted extensively in a wide range of mainstream media outlets. Cambridge University Press published her latest book Why Not Jail? Industrial Catastrophes, Corporate Malfeasance, and Government Inaction in December 2014.

    One subtle and too often ignored symptom of the fundamental bias in America’s criminal justice system is its feathery embrace of white collar crime. Failure to prosecute the banks in the wake of the 2008 crash gets consistent media attention and disgusts many people, but these reactions have yet to motivate a concerted response by the Obama Justice Department. The parallel failure to prosecute the corporations and executives that kill and injure people through reckless practices in industrial contexts is barely discussed.

    Just in the last few years, hundreds have died and thousands have been injured. Causes include contaminated food (think listeria in cantaloupes and salmonella in peanut paste), infected drugs (steroid injections tainted by meningitis), defective products (for example, Toyota sudden acceleration, General Motors ignition switches, Takata airbags), tainted drugs (consider meningitis-laden steroid injections administered at hospitals nationwide but manufactured by a nightmarishly inept pharmacy in Massachusetts), and absolutely preventable industrial catastrophes (oil rigs, refineries, coal mines, sugar plants, and construction sites). Less obvious is the egregious malfeasance at executive levels that enabled these outcomes. 

    The cantaloupes were washed in a machine designed for potatoes, with a disconnected rinse mechanism needed to kill the listeria. The peanut paste was shipped despite a positive test for salmonella. The managers of the “clean room” used to process injectable drugs shut off the air conditioning at night, allowing fungi and bacteria to fester. At the very least, senior car company executives failed to disclose defects to federal regulators promptly, as required by the law. They dragged their feet for months on recalls and, as the GM investigation deepens, evidence is even emerging that engineers fixed the defect in 2005 without informing dealers who had stockpiles of the defective parts, many of which ended up in cars still on the road. In the workplace, employers are quick to blame line workers for human errors regardless of thousands of pages of expert reports explaining that cost-cutting, delayed maintenance, lack of trained supervisory personnel, poor safety cultures, and manic haste to extract natural resources and build structures created intolerable risk. To their credit, U.S. attorneys are just beginning to bring such cases, and recently secured felony convictions against the owner and senior managers of the peanut plant.

  • December 10, 2013
    Guest Post

    by David M. Uhlmann, the Jeffrey F. Liss Professor from Practice and Director of the Environmental Law and Policy Program, University of Michigan Law School. For more on deferred prosecution agreements and corporate liability see Professor Uhlmann’s Maryland Law Review article, “Deferred Prosecution and Non-Prosecution Agreements and the Erosion of Corporate Criminal Liability.” Also see his recent post for The CLS Blue Sky Blog.

    The Justice Department announced last month that JP Morgan Chase would pay a record $13 billion for its role in the mortgage crisis that produced the Great Recession of 2008. The Justice Department deserves praise for reaching a civil settlement that will restore billions to investors and homeowners who were misled by JP Morgan Chase and Washington Mutual, the failing savings and loan that JP Morgan Chase bought in the midst of the financial crisis. In addition, if there is sufficient evidence, the Justice Department still can bring criminal charges against the individuals involved in the corporate wrongdoing.

    It is unlikely that JP Morgan Chase will face criminal charges, however, despite causing billions in losses and untold more in collateral damage to the global economy. Instead, if the bank pays anything more, it almost certainly will be the beneficiary of a disturbing shift in corporate prosecution policy that began in the Bush administration and has accelerated during the Obama administration: the increased use of deferred prosecution and non-prosecution agreements to address corporate wrongdoing. Under these agreements, corporations can avoid criminal charges if they pay large penalties, improve their compliance programs, and cooperate in investigations. Yet plea agreements -- the preferred approach to corporate crime before the last decade -- offer the same benefits without making it appear that justice can be bought.

    The Justice Department’s embrace of deferred prosecution and non-prosecution agreements has been dramatic. From 2004 through 2012, the Justice Department entered 242 deferred prosecution and non-prosecution agreements with corporations, after entering just 26 in the preceding 12 years combined (half of which occurred from 2001 to 2004). The use of the agreements has become so routine that the Justice Department’s Criminal Division now resolves most of its corporate criminal cases using “non-criminal alternatives” to prosecution. From 2010 to 2012, the Criminal Division entered more than twice as many deferred prosecution and non-prosecution agreements with corporations (46) as plea agreements (22). 

    Nor are these small cases involving technical violations of the law. The Justice Department agreed to a deferred prosecution with HSBC even though the bank was involved in nearly a trillion dollars of money laundering, much of it from drug trafficking. The Justice Department entered a non-prosecution agreement in the Upper Big Branch Mining disaster even though 29 miners died, and the Labor Department found that Massey, the company that owned the mine, committed over 300 violations of federal mine safety laws and kept a double-set of books to hide its misconduct from safety inspectors.

    The failure to prosecute corporations like HSBC and Massey sends the wrong message about how our society views corporate misconduct and sows doubts about the Justice Department’s commitment to address corporate crime. The Justice Department would never allow individuals who committed such serious crimes to escape prosecution. So why the double-standard for corporate defendants? Why has the Obama administration continued the questionable corporate crime policies of the Bush administration?