A record year for corporate criminal fines

Because the prospect of substantial criminal fines is part of what helps focus the minds of corporate executives and directors on the need for strong compliance and ethics programs, from time to time I publish a list of the largest federal corporate criminal fines ever.  (My interest in the topic goes back to the mid-1990’s when I was involved as a defense lawyer in a case that shattered the then record.  It is a sign of the times that that case doesn’t even make today’s top ten.  I also try to keep track of these to update a compliance treatise that, together with Joe Murphy, I edit.)

The close of 2012 seems a good time to refresh the list – given the number of new entries on it. The list now reads as follows:

– BP – $1.256 billion (environmental and related offenses) (2012)

– Pfizer – $1.2 billion (marketing offenses) (2009)

– GlaxoSmithKline – $956 million (marketing offenses) (2012)

– Eli Lilly – $515 million (marketing offenses) (2009)

– AU Optronics – $500 million (antitrust) (2012)

– Abbott Laboratories – $500 million (marketing offenses) (2012)

– Hoffman-LaRoche – $500 million (antitrust) (1999)

– Yakazi – $470 million (antitrust) (2012)

– Siemens – $450 million (FCPA) (2009)

– Halliburton/KBR – $402 million (FCPA) (2008).

What is striking here is that fully half of the ten largest federal corporate criminal fines in history were imposed or agreed to in 2012.  I cannot recall another year with so many new cases on the list.

I should also emphasize that this list is based only on federal corporate criminal fines.   Many of the cases here also involved federal or state criminal forfeitures, regulatory or civil penalties, and/or criminal (as well as other) fines or judgments imposed in other countries  – none of which were included in developing this list.  (In some instances the amount of these other costs substantially exceeded the criminal fine amounts.)  Similarly, there are many cases with massive overall  penalties, etc., that are not on this list at all because the criminal fine portion of such costs is relatively small.  Judgments and settlements arising from related private litigation are not included either, nor are the often very significant costs of defense, such as fees for lawyers and investigators.

Finally, as a long-time Sentencing Guidelines watcher, seeing so many very large fines in the span of a single year called to mind the  prescient words of the Court in the landmark Caremark case  which noted “the potential impact of the [Guidelines] on any business organization. Any rational person attempting in good faith to meet an organizational governance responsibility would be bound to take into account this development and the enhanced penalties and the opportunities for reduced sanctions that it offers. ” At the time Caremark was decided the Guidelines were less than five years old, and their impact could indeed be describe in terms of  what was “potential.”  This past year saw, in addition to all the massive fines,  the 21st anniversary of the Guidelines; it is now a “grown-up” set of legal standards, with very real consequences for those who fail to heed the compliance-based “opportunities for reduced sanctions that” they offer.

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