Corporate wrongdoing: Enormous fines, penalties and settlements

Staggering fines are often assessed against some corporate wrongdoers. Huge fines have recently been levied on major corporations like JP Morgan, Walgreens, Volkswagen and others.

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Airbag manufacturer Takata recently incurred massive penalties for its defective airbags. (Logo via recall notice)

WASHINGTON, January 22, 2017 — Punishment for foibles, mistakes, wrongdoing, and intentional crime is meted out daily all over the world and billions of times per day by courts, parents, teachers, bosses, coaches and others. Here is a summary of some of the world’s most severe financial punishments that have been handed out just within the last month.

As an attorney whose fees are contingency-based—that is, paid only when results are obtained—and where typically one-third of the recovery is the fee, this writer would be satisfied if just a few of the following were results he had obtained.

Uber — $20 million

Uber Technologies, Inc., the popular ride-hailing company, has agreed to pay $20 million to settle claims by the U.S. government’s Federal Trade Commission (FTC) that the company exaggerated earnings to help recruit drivers and downplayed costs of buying or leasing a car. Uber’s website boasted that some of its drivers made more than $90,000 in New York and over $74,000 in San Francisco, when the actual earnings were $61,000 and $53,000, respectively. Further, the website said that Uber’s Vehicle Solutions Program listed inaccurate prices for leasing or owning a vehicle.


Uber employs over 600,000 drivers in the United States and operates in 74 countries. When the earnings they were promised did not occur, Uber drivers attempted to cancel their auto agreements, unfortunately incurring significant monetary harm in the process. The settlement will be divided among those drivers who were harmed.

JP Morgan — $55 million

JP Morgan Chase agreed to settle mortgage discrimination claims brought by the U.S. Department of Justice (DOJ) to the tune of $55 million. Chase was working with mortgage brokers that discriminated against minority borrowers by charging them, on average, $1,000 more than white borrowers. The settled lawsuit alleged that over 53,000 black and Hispanic borrowers were charged more than white borrowers.

Walgreens — $50 million

The U.S. government got involved in a whistleblower lawsuit against Walgreens, accusing them of violating federal law by allowing Medicare and Medicaid customers to participate in the Savings Club program, effectively stealing money from the government. Individuals who have Medicare or Medicaid cannot, by law, be in that type of program. Yet Walgreens offered its employees bonuses for enrolling people in the program without checking their eligibility. Hundreds of thousands of people were thus enrolled. About $46 million will go to resolve claims by the federal government. The remainder will go to the states that help administer Medicaid. The whistleblower who filed the lawsuit will receive about $9.7 million from the government’s share of the settlement.

Takata — $1 billion

This Japanese auto parts maker was hit with a $1 billion fine as part of a criminal settlement stemming from the company’s cover-up of defective air bags that contributed to the deaths of over a dozen motorists and resulted in injuries to hundreds more.

Takata is the world’s second largest maker of air bags. They deceived automobile companies that installed their airbags in new vehicles about the defects in these key safety products in order to sell inventory they knew had failed safety tests.

The settlement included a guilty plea to wire fraud, $25 million in fines, $125 million for injured motorists, and $850 million for recall and replacement costs.

McKesson Corporation — $150 million

Every day about 78 Americans die of opioid overdoses. The opioid drug oxycodone is abused by over 13 million Americans annually, U.S. prosecutors report.

McKesson is one of the largest U.S. distributors of pharmaceutical products. They are going to pay $150 million to settle claims that they failed to report to government authorities—as required by law—suspicious orders (i.e., requests by pharmacies, drug stores, etc.) for addictive painkillers including oxycodone.

McKesson failed to design and implement an effective system to detect and report suspiciously large or frequent orders for oxycodone and similar drugs while they supplied pharmacies with an increasing amount of these pills. One example: Over 1.6 million orders of controlled substances were processed in Colorado from June, 2008 to May, 2013, while only 16 of these orders were reported 16 as suspicious.

Cardinal Health, Inc. — $44 million

Ditto McKesson. Cardinal agreed to pay $44 million for failing to alert the U.S. Drug Enforcement Agency of suspiciously large orders of addictive painkillers.

Volkswagen — $4.3 billion

The federal government has fined German automaker Volkswagen $4.3 billion for cheating on the results of their U.S. diesel emission tests for nearly 10 years. Six top VW employees were indicted in the U.S., but it is not clear if Germany will allow them to be extradited to stand trial here.

As early as 2006, VW knew it could not meet tougher U.S. rules on emissions, so they destroyed testing documents and other evidence to avoid detection of their scheme to obtain false testing results.

Qualcomm — $854 million

The antitrust regulator in South Korea fined Qualcomm $854 million for unfair business practices in patent licensing and modem chip sales. The Korea Fair Trade Commission said Qualcomm abused its dominant market position to force handset makers to pay royalties for unnecessary patents as part of its sales of its modem chips. The company also illegally restricted competition by refusing or limiting licensing to rival chipmakers such as Intel and Samsung.

This fine is only the latest case involving Qualcomm’s patents and chipsets. In February, 2015, the company paid a $975 million fine in China for deploying its prowess and size to thwart its rivals.

Teva — $519 million 

Teva Pharmaceutical Industries has agreed to pay more than $519 million to resolve criminal and civil claims that it bribed overseas officials to gain business for its medications. Teva paid millions of dollars in bribes to officials in Mexico, Russia and Ukraine to promote its products.

The fine breaks down as a penalty ($283 million) to settle criminal claims under the Foreign Corrupt Practices Act and a forfeiture of profits ($236 million) to resolve the civil investigation by the Securities and Exchange Commission (SEC).

IKEA — $50 million

Three toddlers died in separate incidents after IKEA’s MALM dressers fell on them. As part of the $50 million settlement to the families, IKEA, a Swedish budget furniture manufacturer, also agreed to donate funds to numerous children’s hospitals.

Last June, IKEA recalled over 8 million MALM chests and dressers and 21 million other models of chest and dressers in the United States, and about 6.6 million were recalled in Canada.

$20 million seized

A Brazilian man was arrested in Massachusetts when authorities found $20 million under a mattress in his apartment. The money was seized and he was arrested for laundering money linked to a multi-billion-dollar global fraud operation.

If all of the bad-guys and crooks were caught and money was collected for their wrongdoings, the government would no longer be running at a deficit, victims would be made whole, and funding for programs that would help people would be abundant.

If you are aware of a crime in a corporate environment, investigate the concept of whistleblowing.

 

Paul A. Samakow is an attorney licensed in Maryland and Virginia, and has been practicing since 1980.  He represents injury victims and routinely battles insurance companies and big businesses that will not accept full responsibility for the harms and losses they cause. He can be reached at any time by calling 1-866-SAMAKOW (1-866-726-2569), via email, or through his website

His book “The 8 Critical Things Your Auto Accident Attorney Won’t Tell You” can be instantly downloaded, for free, on his website: http://www.samakowlaw.com/book.

Samakow has now also started a small business consulting firm. His new book “Step By Step, Achieve Small Business Success” is available at www.thebusinessanswer.com.

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Paul Samakow
Attorney Paul Samakow brings his legal expertise and analysis from the trenches of the courtroom to Communities Digital News. A native Washingtonian, Samakow has been a Plaintiff’s trial lawyer since 1980 practicing in the DC metro area. Paul can be reached at any time by calling 1-866-SAMAKOW (1-866-726-2569), via email @ [email protected], or through his website @ http://www.samakowlaw.com/. He is also available to speak to your group on numerous legal topics.