Elizabeth Warren's new 1%: the percentage of fraudulent profits companies pay in fines

In Rigged Justice: 2016 How Weak Enforcement Lets Corporate Offenders Off Easy, a 12-page booklet, Senator Elizabeth Warren documents corporations that were caught undertaking grossly fraudulent, highly profitable actions, and were made to pay a trivial fraction of those profits in fines -- fines become a part of the cost of doing business, not a deterrent to criminal behavior.

Included in the tales of wrongdoing are:

* Education Management Corporation, a private university that defrauded its students about the rate at which its graduates found employment, taking in $11B, mostly in government money, and paying $95m to settle charges of fraud

* Standard & Poors, who fraudulently rated toxic mortgage-backed securities, helping to destroy the planet's economy, bankrupting, sickening, ruining and even killing people in every corner of the earth. The company received an 83% discount on its fines by agreeing to a settlement, never admitted wrongdoing, and faced no criminal charges.

* Novartis, the pharma company that bribed pharmacists to recommend its products while the company was under sanctions for a previous kickback scandal. The company received a 90% discount on its penalties for settling, admitted no wrongdoing, and has had no limits put on its ability to participate in Medicare and other programs

JPMorgan’s settlement for giving conflicted advice to its clients over wealth management products was less than 1 percent of annual operating profits.

GM paid under 1 percent of company revenue to settle claims on the faulty ignition switch that killed multiple vehicle passengers.

For-profit college EDMC ripped off students with false promises of well-paying jobs, and paid below 1 percent of its student loan revenue over the period of violations.

Warren further documents how in some settlements, the headline dollar figure looks tough until you read the fine print. A settlement with Graco Children’s Products for selling defective car seats yielded $10 million, but $7 million of it went toward developing safety programs, which any responsible manufacturer would do in their normal course of business. The BP civil settlement over the Deepwater Horizon for $20.8 billion sounds massive until you learn that $5 billion could be deducted as an ordinary business expense for tax purposes.

Elizabeth Warren Challenges Clinton, Sanders to Prosecute Corporate Crime Better Than Obama [David Dayen/The Intercept]

Notable Replies

  1. We have reached the point where what are supposed to be meaningful fines are becoming meaningless service fees. These companies get away with it, it sometimes being actual murder, by paying fees that they have worked into their bottom lines.

  2. And this is one of many reasons I wish Elizabeth Warren had presidential aspirations. She really "walks the walk" when it comes to using the government's power to benefit the general public. If I lived in her state/district, I would vote for her in a heartbeat for whatever she is running for.

    She would be such a better choice than Hillary or Bernie.

  3. lava says:

    they should be paying full fines, plus reparations for the harm to others and value destroyed by their action. In cases where this harms the company in way that their workers will suffer rather than the management and stockholders, that should be the only conditions for relief, and only in exchange for forfiet of executive and board compensations, benefits, bonuses, options along with criminal charges where appropriate.

    In other words pay-up your fines, don't even think about taking it out your your workers or you are going to jail. Once thats the choice stock market will take care of the rest of the flaying of their hides.

  4. petr says:

    Not only should they be paying full fines. The fines should be significantly bigger, ie. linked to the fraudulent profits. Having read Michael Lewis' Flash Boys and now the Big Short I'm more convinced than ever just how much damage Wall Street has done all the while skimming off everyone else's pensions and savings and tanking the world economy in the process. (There really ought to be jail time for the CEO's and board members, if corporations have the same rights as humans they should take the same punishment.)

  5. enso says:

    Why better than Bernie?

Continue the discussion bbs.boingboing.net

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