9 Modern Corporate Criminals

Beginning in the mid-1950s and continuing for approximately 40 years, Philip Morris, R.J. Reynolds, and other large American tobacco corporations (“Big Tobacco”) conducted a disinformation campaign designed to mislead the public regarding the dangers of cigarette smoking. As evidence linking smoking to cancer, heart disease, and other serious conditions (some of it produced by their own scientists) began to mount, these companies dishonestly proclaimed that the underlying science was uncertain or flawed and that there was no real proof that smoking was harmful or even addictive.

Their strategy, explicitly described in planning documents prepared by public relations firms, was to “manufacture doubt” in the public mind, even about conclusions that were well established in the scientific literature, thereby preventing a political consensus in favor of regulating tobacco products. The elements of this strategy included: dishonestly professing a concern for “sound science,” thereby shifting the focus of public debate away from the dangers of smoking and toward the implied deficiencies of the science itself; secretly creating and funding front organizations to parrot tobacco company claims, making them appear to be independently supported and accepted (“information laundering”); funding junk science and hacks to distort or contradict studies documenting the dangers of smoking; and intensively lobbying legislators and other government officials to block public health policies inimical to tobacco companies’ financial interests.

In these efforts Big Tobacco was remarkably successful, staving off meaningful regulation of its deadly products for decades, at the cost of unknown millions of lives. In the 1990s the largest American tobacco corporations were successfully sued by the attorneys general of 46 states to recover Medicaid and other costs incurred by the states in caring for persons with smoking-related illnesses.

On the night of December 2–3, 1984, some 45 tons of deadly methyl isocyanate gas escaped from an insecticide plant operated by a subsidiary of the American chemical corporation Union Carbide in Bhopal, India, and enveloped the surrounding city, immediately killing nearly 4,000 people in gruesome fashion and creating a panic as thousands of others attempted to flee. The final death toll was 15,000 to 20,000. About half a million others suffered serious permanent injuries and exposure-related illnesses, including respiratory problems, blindness, cancers, cognitive disabilities, gynecological disorders, and chromosomal abnormalities leading to severe birth defects in children born to parents who had been exposed to the gas.

Investigations later determined that the plant was understaffed and that, because of neglect, none of the six safety systems originally installed to prevent a leak was operational. Union Carbide attempted for years to evade responsibility for the disaster, initially blaming the accident on a fictitious Sikh extremist group. In 1989 it finally agreed to accept “moral responsibility” and to pay $470 million in compensation to the victims and their families, amounting to an average of a few hundred dollars each to those who had been injured. Courts in India later charged Union Carbide's chief executive officer, Warren Andersen, and the company itself with manslaughter; the U.S. refused to extradite Andersen to India, and he died in comfortable retirement at age 92.

After the disaster, Union Carbide abandoned the plant but failed to remove the tons of toxic wastes that had been dumped there indiscriminately since the early 1970s. The wastes had heavily contaminated the aquifers near the abandoned plant, which tens of thousands of people used for drinking water. Union Carbide knew of the contamination as early as 1989 but kept the results of its tests secret. In 2001 Union Carbide was acquired by Dow Chemical, which thereby legally assumed Union Carbide's liabilities. Dow nevertheless refused to accept any responsibility for cleaning up the Bhopal site or for compensating the people who had been poisoned by the contaminated water.

In December 2001 the American energy, commodities, and services company Enron Corporation, which at one time held more than $60 billion in assets, was forced to declare bankruptcy following the disclosure of years of massive accounting fraud designed to hide its worsening financial performance from investors and regulators. The deception was undertaken with the knowledge and cooperation of Arthur Andersen, then one of the five largest American accounting firms, which acted as Enron’s auditor.

Enron’s bankruptcy, one of the largest in U.S. history, resulted in billions of dollars in losses to its investors and employees and the eventual dissolution of Arthur Andersen, which was convicted of obstruction of justice for destroying documents implicating it in Enron’s crimes (its conviction was overturned on a technicality by the U.S. Supreme Court in 2015, by which time the firm had lost its license to audit public companies and had essentially ceased to exist). Several Enron executives, including its president and chief financial officer, were sentenced to prison. An arguably positive result of Enron’s collapse was the adoption of legislation designed to prevent accounting fraud by publicly traded companies, most notably the Sarbanes-Oxley Act (2002).

In the 1960s scientists employed by the petroleum corporation Exxon (now Exxon Mobil Corporation) began warning the company of the reality and dangers of global warming and climate change, phenomena that are primarily due to the release of carbon dioxide and other greenhouse gases through the burning of fossil fuels. Company executives were well aware of the problem by at least the 1980s. Nevertheless, in the late 1980s Exxon joined the American Petroleum Institute (an oil industry lobbying group) and other corporations to form the Global Climate Coalition, the purpose of which was to convince the public and government officials that global warming was not real or, if real, then not caused by humans.

Questionable to begin with, this position became increasingly implausible with the accumulation of scientific research in the 1990s and the adoption in 1997 of the Kyoto Protocol, an international agreement that originally committed 41 signatory states and the European Union to reduce their emissions of greenhouse gases. Recognizing the weight of scientific evidence and the global demand for meaningful action, some oil corporations left the Global Climate Coalition, which was eventually disbanded in 2002. Exxon, in contrast, decided to take a page from Big Tobacco’s playbook by mounting a campaign of climate change denial. Like Big Tobacco, Exxon portrayed itself as a dispassionate and even civic-minded advocate of “sound science,” created front groups to recycle criticisms of climate science that had been refuted many times, hired hacks to misrepresent the current state of scientific research and raise doubts about basic facts, and used its immense wealth to influence government policies and the content of government scientific assessments.

In 2015–16 New York state and California opened criminal investigations of Exxon for apparently having lied to the public and to shareholders regarding climate change. Exxon Mobil won its civil case against New York state in 2019 with regard to charges of defrauding its shareholders.

The largest marine oil spill in history began in April 2010 when the Deepwater Horizon oil rig in the Gulf of Mexico, owned and operated by the offshore-drilling company Transocean and leased by British Petroleum (BP), exploded and sank, killing 11 workers. During the next several months, oil spewed from the damaged well at a rate of several thousands of barrels a day, eventually amounting to at least three million barrels. The spill produced oil slicks extending over thousands of square miles and fouled beaches throughout the gulf, killing hundreds of thousands of birds, mammals, turtles, and other wildlife.

Although the chain of events leading to the explosion was complex, government reports issued in 2010 and 2011 assigned ultimate responsibility to BP, whose negligence and emphasis on cost cutting had led workers to overlook early indications of a serious problem with the well. Sued by the U.S. Department of Justice, BP eventually pleaded guilty to 14 criminal charges, including manslaughter and criminal violations of the Clean Water Act, for which it paid fines amounting to $4.5 billion. The company also faced a raft of civil charges by the federal government, the Gulf Coast states, and several other entities in a consolidated trial in 2013–15, for which it eventually paid $20.8 billion. Although criminal charges were brought against four individuals, none were sentenced to prison.

During the mid-2022 cryptocurrency crash, Sam Bankman-Fried’s FTX Trading Ltd., a cryptocurrency derivatives platform, appeared to be weathering the storm until investigators revealed that its sister company, Alameda Research, was dependent on FTX funds. The result was FTX’s sudden collapse along with the disappearance of at least $10 billion in customer funds and the indictment and arrest of Bankman-Fried on several criminal and civil charges in December 2022.

In 2017 Bankman-Fried had cofounded Alameda Research LLC as a quantitative trading firm, leveraging cryptocurrencies and selling them elsewhere globally. Alameda Research became less lucrative as investors’ interest rose in the cryptocurrency market, which in turn led Bankman-Fried to found FTX as the much-needed cryptocurrency exchange to fund the company. The relationship between the two companies was dependent on the FTX Token (FTT), of which Alameda would be the principal buyer. When cryptocurrency markets fell in mid-2022, lenders to Alameda Research recalled funds that the company had used in venture investments. FTX then used customer deposits in order to loan Alameda the money it needed. On November 2 a leaked Alameda Research balance sheet revealed the extent to which that company was propped up by its FTT holdings. About a week later—after a failed exchange with the former FTX investor Binance to bail out Bankman-Fried’s company underscored the extent of its failures, including the serious lack of transparency and the loss of at least $8 billion in customer funds—FTX, once a reliable staple of the cryptocurrency market valued at $32 billion, filed for bankruptcy.

Bankman-Fried was charged with securities fraud, money laundering, campaign finance violations, and foreign bribery. He was extradited from The Bahamas in December 2022, and he went on trial in Manhattan in October 2023. Bankman-Fried, who testified in his own defense, maintained his innocence, but a jury convicted him on seven counts of fraud and conspiracy. “Sam Bankman-Fried perpetrated one of the biggest financial frauds in American history, a multibillion-dollar scheme designed to make him the king of crypto,” a federal prosecutor said after the verdicts were read.

In an attempt to revolutionize medical practice with minimally invasive laboratory testing services, Elizabeth Holmes, founder and CEO of Theranos, revealed the underbelly of Silicon Valley’s seemingly impenetrable start-up culture through her high-profile fall from grace. Theranos failed to deliver on its primary testing device, the Edison, which it promoted as improving blood collection and testing by requiring only a couple of drops of blood for medical diagnostic tests.

In 2003 Holmes, at age 19, left Stanford University to found Theranos, modelling herself as the quintessential entrepreneur. By 2010 her company had reached a $1 billion valuation from investors and began attracting high-profile board members a year later, such as former U.S. secretaries of state George Shultz and Henry Kissinger. By 2014 Holmes had become the world’s youngest self-made female billionaire and had established a partnership with Walgreen Co. to offer her company’s nascent testing services across the United States.

However, investigations by The Wall Street Journal, The Washington Post, and other news organizations in 2015 revealed major inconsistencies between the Edison’s promise and its actual capabilities. In fact, the Edison was being used for just a few diagnostic tests. Not only was the company’s leading technology called into question, but Theranos was scrutinized for major health and safety concerns and laboratory malpractice within its facilities by the U.S. Centers for Medicare & Medicaid Services in 2016. That same year, Partner Fund Management sued Theranos for securities fraud regarding its technological advancement after Partner invested nearly $100 million in the company. In 2018 the U.S. Securities and Exchange Commission charged Holmes and the company’s former president, Ramesh (“Sunny”) Balwani, with securities fraud amounting to more than $700 million stolen from investors. In June 2018 Holmes lost both her stake in and control of Theranos before being indicted for wire fraud. The company was dissolved three months later.

Holmes was convicted in January 2022 for defrauding investors and wire fraud, and in November 2022 she began serving a prison sentence of more than 11 years, reflecting the limits of Silicon Valley’s entrepreneurial mentality.

In the two decades following the start of the opioid epidemic in the 1990s, more than 500,000 people in the United States died from drug overdoses. Of those deaths, some 280,000 involved prescription opioids such as oxycodone, a high-level painkiller that causes physical dependence and addiction. OxyContin, the most frequently prescribed brand of oxycodone, was manufactured by Purdue Pharma, a privately held company owned by the Sackler family, one of the wealthiest families in the United States.

The Sacklers and Purdue Pharma promoted the purported safe usage of OxyContin, claiming that the drug was nonaddictive because of its slow-release qualities. Consequently, they sought the endorsement of high-profile leaders in medicine and public health, gaining public approval from Russell Portenoy, chairman of the department of pain medicine and palliative care at Beth Israel Medical Center in New York City, and hosting major conferences with a speaking body of 3,000 physicians. Meanwhile, the opioid epidemic was beginning to take shape as the prescription of OxyContin became ubiquitous in medical practice. Later studies estimated that one in two opioid addiction cases that led to death by overdose began with a doctor’s prescription. The scale of the epidemic revealed the fatal potency of OxyContin and the far-reaching promotional campaign the drug had, with an eightfold increase in the death rate from drug overdoses between 1983 and 2017 and a significant increase in the 1990s. Opioids would account for 75 percent of the increase in drug overdoses, and in 2017 some 47,600 Americans died by opioid-related drug overdose.

Since its launch in 1996, OxyContin has generated an estimated $35 billion for Purdue Pharma. From 2008 to 2018 the Sacklers moved $10 billion into offshore accounts and trusts prior to Purdue Pharma’s filing for bankruptcy in 2019, ensuring that the money would remain inaccessible to the U.S. government and individuals affected by the epidemic. In 2020 the U.S. Department of Justice settled with Purdue Pharma and members of the Sackler family in what would be the largest-ever penalty against a pharmaceutical manufacturer, worth more than $8 billion. The Sacklers themselves were required to pay $225 million in damages. Although Purdue Pharma pleaded guilty to misleading the federal government and paying illegal kickbacks to doctors and a health records company, the Sackler family took no responsibility and expressed only regret.

In 2015 the U.S. Environmental Protection Agency (EPA) discovered that multiple diesel-engine models of Volkswagen vehicles were not meeting the standards for nitrogen oxide (NO_x) emissions. In an incident that became known as Dieselgate, more than 11 million Volkswagen vehicles around the globe were found to have been fitted with defeat devices—software technology that detects when diesel engines are being tested for exhaust standards and subsequently activates emissions-reducing equipment for the duration of the test. Presumably, the implementation of defeat devices would allow for diesel-engine vehicles to save on gas consumption or improve vehicular acceleration and torque during regular driving. Nonetheless, the damage was dealt, and Volkswagen’s reputation as an environmentally conscious automaker suffered.

The defeat devices were first devised in 2008 when Volkswagen developed its engine plan, and they were used in several Volkswagen models, both 2.0-liter engines and 3.0-liter engines, and in models by Volkswagen subsidiary companies Audi and Porsche. The EPA issued a Notice of Violation of the Clean Air Act to the Volkswagen Group on September 18, 2015, regarding its 2.0-liter engines, which were found to be releasing 40 times the allowable quantity of NO_x fumes. Less than a week later the CEO of Volkswagen Group, Martin Winterkorn, resigned. Later studies revealed that from 2009 to 2015, the fraudulent vehicles produced a total of 526 kilotons of NO_x more than was allowed and would account for approximately 45,000 disability-adjusted life years. Financially, it was estimated that the damage of Dieselgate—including vehicle refits, fines, and legal costs—would amount to more than $39 billion.

On June 28, 2016, Volkswagen entered a multibillion-dollar settlement, and on January 11, 2017, the company pleaded guilty to three criminal felony counts. Since then the manufacturing group has restituted a total of $9.5 billion to defrauded drivers and paid an additional $4.7 billion in pollution mitigation and environmentally conscious investments. Working to rehabilitate its brand name, Volkswagen fired some of its high-ranking managers, such as Audi CEO Rupert Stadler in 2018, established an employee-level whistleblower system, and operated under the supervision of former U.S. prosecutor Larry Thompson for a three-year period.