What You Can Learn From FIFA and 34 Other Companies Who Just Got Caught
(This post originally appeared on Inc.)
Ah…spring. April showers. May flowers. Baseball. Sunshine. It’s a great time of year. Spring is a time of renewal, happiness, frolicking, and pleasure. And for many companies, including some names we all know, it also seems to be a time for getting caught doing bad things. Need some examples? We all know about the FIFA scandal. But that’s not the only organization being naughty. Let’s just say it’s been a very, very busy time for corporate scoundrels over the past few weeks.
For example, the U.S. Justice Department just identified criminal wrongdoing inGeneral Motors’ failure to disclose a defective ignition switch, and they are negotiating what is expected to be a record penalty. The final number is still being determined but it is expected to exceed the $1.2 billion paid last year by Toyota for concealing unintended acceleration problems.
This past month in California, the state’s Department of Public Health fined 12 hospitals a total of $775,000 after investigations determined that the hospitals caused–or were likely to have caused–death or serious injury to their patients.
Also in May, a German shipping company was sentenced in federal court to pay $800,000 for violating the Clean Water Act and the Act to Prevent Pollution from Ships, for dumping 4,500 gallons of oily bilge water into the ocean about 165 nautical miles south of the Aleutian Islands.
The Federal Reserve announced in May that it will impose fines totaling more than $1.8 billion against six major banking organizations (UBS AG, Barclays Bank PLC, Citigroup Inc., JPMorgan Chase & Co, Royal Bank of Scotland PLC, and Bank of America Corporation) for their unsafe and unsound practices in the foreign exchange markets.
During the same (very busy) month a government consumer finance watchdog ordered PayPal to pay $25 million in refunds and fines, stemming from the regulator’s claims the payment company illegally signed up users for PayPal Credit, its online credit service.
No doubt jealous that all those for-profit companies were getting the juicy headlines,four cancer charities (Cancer Fund of America, Cancer Support Services, Children’s Cancer Fund of America, and the Breast Cancer Society) were accused in May by the Federal Trade Commission of defrauding well-meaning donors for over $187 million. But hey, it’s for a good cause right?
Nope, not done yet.
In May, shipping giant UPS agreed to pay $25 million to settle a case involving alleged false claims to the government, and that same month found Hawaiian Airlines in violation of federal rules on liability for mishandled domestic baggage and deceptive advertising that will cost the carrier $160,000.
June’s getting off to a pretty good start too. Or bad, depending on how you look at it.
Nine days into the month, we hear that food giant ConAgra agreed to pay $11.2 million (a sum that includes the highest criminal fine ever in an American food safety case) to settle a federal charge that the company shipped Peter Pan peanut butter tainted with salmonella that sickened more than 600 people and led to a huge recall eight years ago. In Mississippi a small company was fined $85,000 for allegedly violating the Do Not Call law more than 17 times and for failing to both register as a telephone solicitor and to purchase the list with all the names of the people on the Do Not Call List.
Also in June, the Consumer Financial Protection Bureau filed a complaint in federal district court against RPM Mortgage, Inc. and its CEO for illegally paying bonuses and higher commissions to loan originators to incentivize them to steer consumers into costlier mortgages.
The Justice Department’s Antitrust Division just issued formal inquiries to Regal Entertainment Group and AMC Entertainment Holdings Inc., the nation’s two largest movie theater chains, signaling growing government scrutiny of a tactic large theater operators commonly use to keep movies out of competing locations.
And June found Bank of America (B of A now has the honor of being counted twice in this column) to be potentially on the hook for $30 million stemming from violations of the Servicemembers Civil Relief Act, according to the Office of the Comptroller of the Currency.
My favorite scoundrels of 2014? That would come down to three: A manufacturing company in Pennsylvania (and its CEO) who tried to smuggle an $800,000 machine to Iran; Warren Buffet’sBerkshire Hathaway, which paid $896,000 to settle accusations by the Justice Department that it did not follow antitrust guidelines in an acquisition; and the winner: hotel chain Marriott which was fined $600,000 for blocking guests’ access to their personal Wi-Fi accounts, essentially forcing them to use the hotel conference center’s overpriced service.
And these are just the companies that got caught! Who knows what other shenanigans are going out there in the big world that have yet to be uncovered…or ever will be. So what’s the lesson here? Just one.
The government can’t catch them all. And even the most reputable companies can be scoundrels. Sometimes this is deliberate. Most of the time it’s a rogue person or small team somewhere within the company. But that shouldn’t make you any less wary. Doing business is all about working with people you can trust. But it’s also about being realistic. Even some of the most trusted brands in the U.S. have been known to bend the rules and even knowingly break the law. In many cases, the fines are just petty cash and the media attention ultimately fades away. So keep that in mind the next time you do the next deal. I know it sounds cynical, but after being in business for more than 20 years I’ve learned that there are few people and fewer organizations in this world that can truly be 100 percent trusted.