As the calendar year wraps up, we thought it would be interesting to take a look back at the companies paying more than $1 billion in 2014 to resolve investigations into corporate misconduct. Twelve companies agreed to these large fines (if we include Suntrust which fell just shy of $1 billion) for a total of more than $45 billion in penalties to the US (and a handful to the UK from the forex settlement). A few things worthy of note:
- Only 2 companies were not financial institutions.
- Only 5 cases involved mortgage fraud.
- Not one pharmaceutical company is on the list.
- We only used the calendar year. J&J and JPMorgan Chase both had large settlements that would have qualified if we used Fiscal Year 2014.
Bank of America – $16.65 Billion in August
The largest civil settlement with a single entity in American history was agreed to by the financial institution to resolve misconduct by Countrywide, Merrill Lynch and BofA stemming from . The $5 billion penalty imposed under the Financial Institutions Reform, Recovery and Enforcement Act (FIRREA) is the largest under the law, eclipsing the $4 billion paid by Citigroup only a month before. Four whistleblowers in this case were paid approximately $170 million in total under the False Claims Act and FIRREA.
BNP Paribas – $8.9 Billion in June
The French bank agreed to a guilty plea to charges it violated US economic sanctions by providing dollar clearing services to individuals and entities dealing with Sudan, Cuba and Iran between 2004 and 2012. Three individuals helped the government make their case agains BNP.
Citigroup – $7 Billion in July
The settlement covered misrepresentations made to investors regarding the quality of mortgage securities. It paid a short-lived record $4 billion as a civil penalty to settle the Justice Department claims under FIRREA. It also paid $208.25 million to the Federal Deposit Insurance Corporation (FDIC) and nearly $300 million to five states participating in the agreement. The remaining $2.5 billion was earmarked for consumer relief.
Anadarko – $5.15 Billion in April
Anadarko agreed to pay the largest recovery for the cleanup of environmental contamination. It resolves the liability of Kerr-McGee, an Anadarko subsidiary acquired in 2006, for legacy liabilities spun off in an inadequately funded company which filed for bankruptcy in 2009.
Goldman Sachs – $3.15 Billion in August
Goldman agreed to pay the Federal Housing Finance Agency (FHFA) for securities law violations in the sale of private-label mortgage-backed securities to Freddie Mac and Fannie Mae between 2005 and 2007.
Credit Suisse – $2.6 Billion in May
The Swiss bank pleaded guilty to conspiracy to aid U.S. taxpayers in filing false income tax returns with the Internal Revenue Service. It paid $1.8 billion to the Department of Justice for the U.S. Treasury, $100 million to the Federal Reserve, and $715 million to the New York State Department of Financial Services. It also paid $196 million to the SEC earlier in the year for providing cross-border brokerage services without registering.
MF Global Holdings Ltd. – $1.3 Billion in December
A consent order in December 2014 requires the parent company of brokerage unit MF Global Inc. to pay $1.2 billion in restitution and $100 million in fines to the CFTC. MF Global had liquidity problems in 2011 due to trading losses that caused its bankruptcy.
Morgan Stanley – $1.25 Billion in February
The FHFA settled its claims over private-label mortgage-backed securities sold to Freddie Mac and Fannie Mae between 2005 and 2007 for $625 million to each.
Toyota Motors – $1.2 Billion in March
Toyota agreed to the largest penalty for an automobile manufacturer to resolve allegations of misconduct related to its recall of vehicles for unintended acceleration. The charges involved misleading statements made to consumers and regulators in 2009 and 2010 concerning the safety of its vehicles.
FOREX Manipulation – $4.3 Billion by six banks in November to three agencies in the US and UK.
Citigroup and JPMorgan each paid a total of about $1 billion in fines between the US Commodity Futures Trading Commission, Office of the Comptroller of the Currency and UK Financial Conduct Authority to resolve allegations its traders manipulated the FOREX market. Four other banks paid amounts under $1 billion to resolve the investigations by these government agencies. UBS, RBS, HSBC and Bank of America each paid between $250 million and $800 million.
Suntrust Mortgage – $968 Million in June
The mortgage company settled claims involving problems with improper mortgage origination, servicing and foreclosure arising between 2006 and 2012. The settlement involved the Justice Dept., Housing and Urban Development (HUD), Consumer Financial Protection Bureau (CFPB) and 49 states plus the District of Columbia. The deal was agreed to in principal in late 2013 but announced in 2014.
Other Settlements of Interest
While we were doing our research, we found a few other record settlements that we thought you would find interesting.
Alstom – The French engineering company agreed to the largest criminal tax penalty for an FCPA violation imposed by the Department of Justice, $772 million, in December 2014. Alstom used consultants to pay $75 million in bribes to secure $4 billion in projects with state-owned companies in five countries.
Hyundai Motor and Kia Motors – The two related auto manufacturers agreed to a $100 million penalty, the largest ever for violation of the Clean Air Act, in November 2014. They overstated the fuel economy and understated the greenhouse gas emissions of their cars and SUVs in 2012 and 2013.
AT&T Mobility – The $105 million settlement with the Federal Communications Commission over cramming unauthorized third party subscriptions and premium text messaging onto customer bills was the largest enforcement action in the FCC’s history.
We are aware of ten whistleblowers involved in four of these cases. At this point, only payments to the individuals in the Bank of America case have become public knowledge.
There may have been additional cases involving insiders where the details have not yet been made publicly available. For example, the CFTC has not yet issued a notice of covered action for the fines issued to the banks in the forex case.