Corporate Crime Case Studies
Here is some interesting long-form journalism, covering notorious acts of corporate crime and misconduct. Please send me any great pieces I’m missing.
DuPont – Teflon, C8
This story starts in 1951, when DuPont started using PFOA, also known as “C8”, to manufacture Teflon. Environmental law in the USA permits the use of chemicals in production unless there is data to suggest it is harmful; so DuPont was free to use the product without conducting substantial safety tests. From 1961, DuPont had data from animal studies suggesting worrying health effects of exposure to that chemical. That data increased over the decades, but was kept from the EPA, despite laws requiring DuPont to report the data to the EPA. Dupont dumped C8 in huge quantities around its manufacturing plant in Ohio, and released it into the air as dust. The health consequences for animals, people, and ecosystems exposed are staggering.
One of the points of interest in this story, (apart from the problem it highlights with laws that eschew the precautionary principle) is the grip that DuPont had/has on the townships worst affected by C8 poisoning, and the difficulty this created for plaintiffs: as Murdock reports, “No one in the Mid-Ohio Valley ever wanted to sue DuPont. The company employs thousands in the region and supports charities and community organizations. In some families, multiple generations owe their livelihood to the Delaware-based chemical giant…. “A guy called my wife and asked, ‘If I lose my job are you going to pay for my wife and kids?'” said Joe Kiger, a Parkersburg, West Virginia, school teacher and the lead plaintiff in the 2001 class-action lawsuit against DuPont over high levels of the toxic chemical C8 in the region’s water supplies.”
Sharon Lerner’s series for The Intercept, The Teflon Toxin. At the time of writing, 10 parts have been written, with more to follow; this matter is still before the courts.
Jeff Mordock’s five-chapter profile for Delaware Online, Taking On Dupont: Illnesses, Dealths Blamed On Pollution.
Nathaniel Rich’s piece for the New York Times, The Lawyer Who Became DuPont’s Worst Nightmare. A nice place to start if you’re pressed for time.
For those interested, here’s the 2005 press release from the EPA celebrating its settlement with DuPont.
Johnson & Johnson – Risperdal
The story of J&J and its anti-psychotic, prescription drug ‘Risperdal’, is summarised by Nicholas Kristof for The New York Times as follows:
[Risperdal] can cause strokes among the elderly. And it can cause boys to grow large, pendulous breasts; one boy developed a 46DD bust.
Yet Johnson & Johnson marketed Risperdal aggressively to the elderly and to boys while allegedly manipulating and hiding the data about breast development. J&J got caught, pleaded guilty to a crime and has paid more than $2 billion in penalties and settlements. But that pales next to some $30 billion in sales of Risperdal around the world.
In short, crime pays, if you’re a major corporation.
Oh, and the person who was in charge of marketing the drug in these ways? He is Alex Gorsky, who was rewarded by being elevated to C.E.O. of J&J. He earned $25 million last year.
The story is painstakingly pieced together by Steven Brill in his 10-part report for Highline, America’s Most Admired Lawbreaker.
GM – Faulty Ignition Switch
In 2002, GM approved an ignition switch for installation in its cars. Unfortunately for road users and their families, those ignition switches were defective – and GM knew it. Defective is my word – but you can read the material and decide for yourself. The ignition switches were so sensitive that a slight bump against a key chain could switch the car over to the ‘accessory’ or ‘off’ position, disabling the breaks and airbags, even if the car was moving at high speed. Deaths, injuries, and many near-misses followed: complaints poured in to GM and the regulator. But GM didn’t recall the switch until 2014, and stubbornly withheld relevant information from the regulator. For 12 years, these cars were on the road (and perhaps many still are), and their drivers and passengers had no idea their safety, and the safety of road users around them, was at risk if they used a keychain, or brushed against the key in the ignition.
Once plaintiff litigation started piling up, GM argued that its bankruptcy sale following the GFC barred some post-sale claims. The Appeal Court of the Second Circuit determined that those claims are not barred, despite the terms of the Old GM to New GM sale terms: the judgment is available here.
Max Blau’s piece for Atlanta Magazine tells the story: No Accident: Inside GM’s Deadly Ignition Switch Scandal.
And here are some of the official documents:
The Velukas Report – an internal GM investigation into the handling of the defective switch issue.
GM’s website to assist you with your affected vehicle.
US House of Representatives Committee on Energy & Commerce, 113th Congress, Report on the GM Ignition Switch Recall: Review of NHTSA 1 (16 September 2014).
There were many Senate and House Committee hearings associated with the GM Ignition Switch Recall; transcripts or video recordings are readily available. Of particular interest are the following hearings:
- The GM Ignition Switch Recall: Why Did It Take So Long? Hearing Before the Subcommittee on Oversight & Investigations of the House Committee on Energy & Commerce, 113th Congress (1 April 2014)
- Examining the GM Recall and NHTSAʹs Defect Investigation Process: Hearing Before the Subcommittee on Consumer Protection, Product Safety & Insurance of the Senate Committee on Commerce, Science & Transportation, 113th Congress (2 April 2014);
- The GM Ignition Switch Recall: Investigation Update Hearing Before the Subcommittee on Oversight & Investigations of the House Committee on Energy & Commerce, 113th Congress (18 June 2014);
- Examining Accountability and Corporate Culture in Wake of the GM Recalls: Hearing Before the Subcommittee on Consumer Protection, Product Safety & Insurance of the Senate Committee on Commerce, Science & Transportation, 113th Congress (17 July 2014);
Sub-prime Student Loans By Sallie Mae
The New York Times provides the background to US Government lawsuits against Navient, filed in January 2017:
“New details unsealed last month in the state lawsuits against Navient shed light on how Sallie Mae used private subprime loans — some of which it expected to default at rates as high as 92 percent — as a tool to build its business relationships with colleges and universities across the country. From the outset, the lender knew that many borrowers would be unable to repay, government lawyers say, but it still made the loans, ensnaring students in debt traps that have dogged them for more than a decade.
While these risky loans were a bad deal for students, they were a boon for Sallie Mae. The private loans were — as Sallie Mae itself put it — a “baited hook” that the lender used to reel in more federally guaranteed loans, according to an internal strategy memo cited in the Illinois lawsuit.”