The world’s largest multinationals many seem so big that they can weather any storm, but they’re not always above the law. While the world’s largest and wealthiest corporations may have the fiscal tools to keep them afloat in times of crisis, they don’t always have the smarts to steer clear of the storm in the first place. When a blunder is too enormous to go unnoticed by the international media, huge companies stand to get hugely reprimanded. Certainly, when multinational corporations hit a crisis they don’t do it by halves. From dodgy drug deals, back door payments, prison sentences and all-around naughty fat cat behaviour, our top ten list looks at the biggest corporate penalties in recent years – and the impact these have had on the company.
While many cases featuring on our list stem from truly exceptional circumstances, there is a certain trend the discerning reader might notice: 4 of the 10 companies on our list are pharmaceutical manufacturers, with each fine relating to misleading consumers over the suitability of their products in the treatment of various illnesses. In the quest for ever greater revenues, it appears that these corporations will go to virtually any lengths to secure their fortune, regardless of the law. But in many instances, it’s not the enormous fine that cause the worst long-term impact to these corporations; rather, it’s the damage that such a high-profile pay out can do to their image. For all you aspiring CEOs out there, you might see these top ten corporate fines as not just a lesson in marketing and morality, but as a lesson in human resources management!
10. Intel: $1.45 Billion
With our lowest ranked spot landing a fine of well over one billion dollars, that should give you a sense of the size and scale of the fines we’re talking about here. In 2009 technology giant Intel was fined the $1.45 billion by the European Union for breaking competition laws, stifling consumer choice in the market. The fine- which that year represented 33% of Intel’s overall income- was unprecedented, as the largest of its kind in the EU at that time. Intel’s computer chips in particular were seen as the crux of the case with the multinational accused of making payments to computer manufacturers to favour their products over competitors. Intel’s closest rival, Advanced Micro Devices (AMD) had sued their competitor over these practices, bringing to light the dodgy dealings going on in the tech sector. In response to the ruling, Intel claimed that they were “mystified” as to what they were to do to rectify their practices. We’re not sure, but the EU would suggest that cutting the bribes to computer manufacturers would have been a good place to start.
9. Abbott Labs: $1.5 Billion
Abbott Labs are one of the many global pharmaceutical firms to fall foul of the FDA and international law. When Abbots Labs’ ill-advised profit-making scheme to light, the company was accused of illegally marketing their anti-seizure drug Depakote from 2006 to 2011. Older people, who are commonly prescribed the drug, were highlighted as a particular group the pharmaceutical company targeted. This case, which was settled in 2012 is the first of a number of similar cases on our list from that same year, which saw the FDA clamp down on drugs manufacturers’ promotional campaigns. With Abbot Labs turning a profit of $4.7 billion in that year, the figure they were fined represents around a third of their annual profit.
8. Enron Corp: $1.5 Billion
While Enron’s $1.5 billion fine in 2005 is by no means our biggest, they’re arguably the most infamous entry on our list. For those of you not in the know, Enron was a Texas-based energy supplier. In the mid 1990s, the company began fiddling their books left, right and centre. The company hid their dodgy dealings from shareholders and investors,as their stock market value rose. While the energy crisis raged in California in 2000, the company – counter-intuitively – thrived. Alas, the good times could not last forever for Enron’s chief executives and in 2005, the law caught up with this oil giant. An entire catalogue of foul play was uncovered -including undeclared income, lying to shareholders, misleading customers, and deliberately withholding power in order to raise consumer prices. Suspicions were raised after a quick scurry from the company’s CEO in 2001 called Enron’s credibility into question – and by the end of that year the company had declared bankruptcy. The $1.5 billion fine was one of a number the government levied on the firm in an attempt to recuperate the losses from this epic scam. When the case was settled in 2005, the company’s former CEO Jeffrey Skiling was imprisoned – and remains behind bars to this day.
7. A.I.G: $1.6 Billion
A.I.G. – or American International Group Inc. – is a multinational insurance and financial services corporation with revenues so high that even a fine of $1.6 billion couldn’t topple them. In fact, $1.6 billion was only 12% of the company’s total annual profit! In 2006, the US Justice Department along with the New York Insurance Department found that the firm had dishonest dealings stemming back over a decade. A.I.G. was found to have made payoffs to other brokers in order to bring business their way. They were also found guilty of falsifying insurance transactions so that the company accounts under-represented A.I.G.’s earnings – meaning they paid less taxes. What does all this mean? Basically, A.I.G. cooked their books, and for a long time they did a pretty good job of it. In spite of the serious damage to the company’s reputation in the United States in particular, the company has weathered the storm and today remains one of the world’s largest insurance brokers with the $1.6 billion fine merely a drop in the ocean.
6. Siemens, A.G: $1.6 Billion
Siemens, the German multinational specialising in telecommunications and electronics, does not immediately spring to mind in corruption cases – but in 2008, it emerged that these guys were as corrupt as it gets. The company was found guilty of bribery and corruption charges in both their native Germany and the United States. The charges stemmed from practices that had been ongoing since the mid-1990s. Siemens was found guilty of a series of off-books payments in the US, as well as bribing officials to win contracts in Venezuela, Israel, Bangladesh and Russia. On top of this the company was found to have continuously bribed the Iraqi government to win contracts on the lucrative oil-for-food programme. The corruption had set in so deeply that when it began to come to light in 2007, the company had to appoint a new chief executive; who in turn had to replace about half of the senior executives as a result of the scandal. The fine of $1.6 billion was made up of an $800 million fine levied by the US courts as well as an additional $814 million fine enforced in Germany. Ouch.
5. Johnson & Johnson: $2.2 Billion
We did warn you that pharmaceutical companies featured pretty heavily on this list, and John & Johnson form part of that worrying trend. in 2012, this multinational that specialises in medical devices, consumer goods and pharmaceuticals got into trouble over misleading branding of their anti-psychotic drug, Risperdal, since the 1990s. The drug, which was licenced for treatment of schizophrenics, was additionally being used to treat elderly sufferers of dementia. The Food and Drug Administration – better known as the FDA – both authorise drug use and impose the fines on companies. They penalised Johnson & Johnson with such a high figure due to the loss of public trust in the company as a result of the malpractice. Drugs companies marketing the drugs for uses others than those they were licensed for is strictly prohibited. With high-profile cases and huge fines like this one, the FDA was issuing an implicit warning that eventually unethical marketing will be noticed and punished: the $2.2 billion payout claimed about a quarter of Johnson & Johnson’s profit for that year.
4. Pfizer: $2.3 Billion
Staying with the trend of fraudulent pharmaceutical companies, the world-renowned Pfizer was yet another multinational drugs provider found guilty of misleading consumers. Fined an astounding $2.3 billion in 2009, the figure was the biggest ever imposed on healthcare in the United States. The scandal centres on Pifzer’s drug Bextra, which was inappropriately sold for post-surgery pain relief. Although the drug was in fact sold by Pfizer’s smaller subsidiary company Pharmacia & Upjohn, Pfizer – as parent company – had to take the hit. A Pfizer sales rep was eventually the one to whistle-blow on the case, lifting the lid on a four year fraud. A fascinating aspect of this case was that it revealed frankly bizarre corporate behaviours in the pharmaceutical corporation. The sales team behind the dodgy drug referred to themselves as “The Highlanders” – naming themselves after a TV show chronicling the lives of immortals living secretly among humans. The team’s leader signed off his emails by quoting the show’s tagline “There can be only one.” Odd.
3. Time Warner: $2.4 Billion
That a company so entrenched in the world of showbiz was attached to some underhand dealings may not surprise the cynical among us, but the nature of this fine will undoubtedly raise a few eyebrows. In 2005, the media corporation almost fell on its own sword as a result of the merger between Time Warner and internet giant AOL. Time Warner was accused of deceiving its own shareholders about the details of the merger, to the extent that these shareholders effectively took their own company to court. The failed merger created chaos both publicly and privately for the company, which at the time had over 90,000 employees. Share prices for the company came tumbling down as a result of the mismanagement of the merger and subsequent media frenzy around the case. The legal settlement of the case forced the company into the red: with revenue of only $1.3 billion for 2005, the fine was nearly double what Time Warner was taking in. Even after this initial settlement-which was three years in the making- the saga continued. Eight former executives at the company received prison sentences as a result of fraud stemming from the merger. The company’s televisions brands HBO , TNT and CNN appear to have saved Time Warner from ruin – but, ultimately, it has taken years for Time Warner to recover from the scandal. Things have been looking up of late: last year the company reported profits of $1.18 billion for their third quarter alone.
2. Glaxo-Smith-Kline: $3 Billion
Time Warner provided us with a brief reprieve from the world of drugs scandals, but here we are again with yet another multinational pharmaceuticals manufacturer involved in seriously dodgy deals. The British-based Glaxo-Smith-Kline were fined a shocking $3 billion in the great FDA clamp-down of 2012. The company was found guilty by the FDA of paying kickbacks to doctors, since the late 1990s, in return for their support of a number of their drugs products. And it gets worse: Doctors were also encouraged to promote the brand’s drugs in established medical journals. The FDA found that Paxil, an adult-only anti-depressant, was illegally being prescribed to children and teenagers as a result of these corrupt deals and the brand was additionally accused of manipulating medical research to benefit their drugs sales. As well as the $3 billion fine, the company also agreed to be monitored by the FDA for a further five years. $3 billion was around 37% of the company’s profits for the year; so despite such a hefty fine, the fat cats in pharmaceuticals still stood strong with huge financial power behind them.
1. BP: $34 Billion
Our number one spot is without question the largest fine ever imposed in recent years on any one corporation – and with good reason. The gargantuan fine of $34 billion stems from the 2010 oil spill in the Gulf of Mexico which began after a BP-owned deep sea oil rig exploded killing 11 people. What happened then was truly an environmental disaster: massive amounts of crude oil began leaking into the Gulf of Mexico, famed for its unique marine environment and its coastlines on the southern United States and Mexico. The oil was leaking at an insurmountable rate of up to 60,000 barrels a day (or 2.5 million gallons) making it the biggest offshore oil spill in history. It took three months of attempts before the hole from which the oil was spewing was eventually secured. The US President, Barack Obama, made clear from an early stage that it was BP who would foot the bill for the crisis; however, both the government and BP were criticised for the slow action in the face of the disaster. The case has yet to be finalised, but $34 billion is the figure sought by prosecutors, with a number of BP employees facing individual criminal cases as a result of their actions during the devastating spillage.
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