Corporate Crimes of 2016

1. Deceptive financial practices. The Consumer Financial

Protection Bureau fined Citibank $700 million for the
deceptive marketing of credit card add-on products.

2. Cheating depositors. Citizens Bank was fined $18.5

million by the CFPB for pocketing the difference when
customers mistakenly filled out deposit slips for amounts
lower than the sums actually transferred.

3. Overcharging customers. An investigation by officials in

New York City found that pre-packaged products at Whole
Foods had mislabelled weights, resulting in grossly inflated
unit prices.
4. Food contamination. In a rare financial penalty in a food
safety case, a subsidiary of ConAgra was fined $11.2
million for distributing salmonella-tainted peanut butter.

5. Adulterated medication. Johnson & Johnson subsidiary

McNeill-PPC entered a guilty plea and paid $25 million in
fines and forfeiture in connection with charges that it sold
adulterated children’s over-the-counter medications.

6. Illegal marketing. Sanofi subsidiary Genzyme Corporation

entered into a deferred prosecution agreement and paid a
penalty of $32.6 million in connection with charges that it
promoted its Seprafilm devices for uses not approved as
safe by the Food and Drug Administration.
7. Failure to report safety defects. Among the companies hit
this year with civil penalties by the Consumer Product Safety
Commission for failing to promptly report safety hazards
were: General Electric ($3.5 million fine), Office Depot ($3.4
million) and LG Electronics ($1.8 million).
8. Workplace hazards. Tuna producer Bumble Bee agreed to
pay $6 million to settle state charges that it wilfully violated
worker safety rules in connection with the death of an
employee who was trapped in an industrial oven at the
company’s plant in Southern California.
9. Sanctions violations. Deutsche Bank was fined $258
million for violations in connection with transactions on behalf
of countries (such as Iran and Syria) and entities subject to
U.S. economic sanctions.
10. Air pollution. Glass manufacturer Guardian Industries settled
Clean Air Act violations brought by the EPA by agreeing to
spend $70 million on new emission controls.
11. Ocean dumping. An Italian company called Carbofin was hit
with a $2.75 million criminal fine for falsifying its records to
hide the fact that it was using a device known as a “magic
hose” to dispose of sludge, waste oil and oil-contaminated
bilge water directly into the sea rather than using required
pollution prevention equipment.
12. False claims. Millennium Health agreed to pay $256
million to resolve allegations that it billed Medicare, Medicaid
and other federal health programs for unnecessary tests.
13. Illegal lobbying. Lockheed Martin paid $4.7 million to settle
charges that it illegally used government money to lobby
federal officials for an extension of its contract to run the
Sandia nuclear weapons lab.
15. Price-fixing. German auto parts maker Robert Bosch
was fined $57.8 million after pleading guilty to Justice
Department charges of conspiring to fix prices and rig
bids for spark plugs, oxygen sensors and starter motors
sold to automakers in the United States and elsewhere.
16. Foreign bribery. Goodyear Tire & Rubber paid $16
million to resolve Securities and Exchange Commission
allegations that company subsidiaries paid bribes to
obtain sales in Kenya and Angola.
17. Wage Theft. Oilfield services company Halliburton
paid $18 million to resolve Labour Department
allegations that it improperly categorized more than
1,000 workers to deny them overtime pay.
 State Corporate Crime
• State corporate crime is a concept which refers
to crime which are committed in relationship
with policies of the State and the policies and
practices of commercial corporations.
• It is also not 'State Organized Crime' which is
crime committed by Government
Organisations.
 TYPES OF CORPORATE CRIME
Crime Resulting in Physical Harm
Industrial Disasters
Ignoring occupational standard and safety
standards
Victims of unsafe products
Victims of industrial pollution
Human Right Violations
Economic Corporate Crimes
 Deceptive Accounting
Inside Trading
Manipulation of Security Market
Stealing Trade Secrets
Investment Trends
Corporate Bribery
Corporate Liability for failure to prevent negligent
act
Offences under the Companies Act
 CRACKING DOWN ON CORPORATE CRIME

• Strengthen Criminal Liability Standards For

Corporations, Executives and Directors.
• Strengthen The Sanctions for Corporate Crime
• Ban Corporate Crooks from Federal Contracts
• Strengthen the Foreign Corrupt Practices Act
• Ban Tax Deductions for Fines and Penalties for
Corporate Misbehaviour
• Make corporate crime a law enforcement priority
• Tighten Discretionary Standards for the Prosecution of
Corporate Criminals
• Empower Citizens to Enforce the Law
• Empower Investors, Consumers and Ratepayers
Crisis Management Planning
 Crisis happens more than
we imagine.

They are not always easy to see

unless they affect our own lives.
 Crises in the past, crises in the future
Past
• Earthquake and Tsunami in Japan,
March, 2011
• Earthquake in Christchurch, NZ,
February, 2011
• Middle East protests and
demonstrations, January-March, Future?
2011
• H1N1 Pandemic, May 2009
• Mumbai Attacks, November 2008
• London Bombings, July 2005
• Madrid Bombings, March 2004
• Avian Flu–December 2003
 Crisis
 Crisis is any event that is expected to lead
to, an unstable and dangerous situation
affecting an individual, group, community
or whole society.

 It is a situation that is unpredictable, but it

is not unexpected.
 Definition

• A crisis is defined as an event that by its

nature or its consequences:
– constitutes a threat to vital national interests
or to the essential needs of the population;
– prompts rapid decision making;
– demands coordination between different
departments and organisms
 Common features of Crisis
 The situation materialises unexpectedly.
 Decisions are required urgently.
 Time is short.
 Urgent demands for information are received.
 There is sense of loss of control.
 Pressures build over time.
 Routine business become increasingly difficult.
 Reputation suffers.
 Types of Crisis

 Financial Crisis
 Technological Crisis
 Crisis of Malevolence
 Natural Crisis
 Crisis of Deception
 Workplace Violence
 Human breakdowns
 Organizational misdeeds
 Financial Crisis
 These are the crisis that occur in an organization
due to its prevailing financial conditions.

 Losses, increase in costs, non-availability of

funds, bankruptcy, unable to pay back loans, etc.
 Examples of Financial Crisis

 Kingfisher Airlines,  Deutsche Bank faced a

recently faced a financial crisis in USA, in
financial crisis. 2009.
 Technological Crisis
 Technological crisis are caused by human
application of science and technology. This
occurs when technology becomes complex
and the system breaks down.
Software failures, Industrial accidents etc.
 Examples of Technological Crisis

 Exxon Valdez, oil spill in  Union Carbide India Ltd,

Alaska, on March gas leak in Bhopal, on
24,1989.
December 2, 1984.
 Crisis of Malevolence
 When opponents or miscreant individuals use extreme
tactics for the purpose of expressing anger or seeking
gain from, a company or economic system, perhaps
with the aim of destroying it.

 Product tampering, kidnapping, malicious rumors,

terrorism etc.
 Example of Malevolence Crisis

 The Tylenol (Extra-Strength capsules) murder

case in Chicago, on 29 September, 1982.
 Natural Crisis
 Natural crisis, are natural disasters considered as
'acts of God,' are such environmental phenomena.

 Earthquakes, volcanic eruptions, tornadoes and

hurricanes, floods, landslides, tsunamis, storms,
and droughts etc.
 Examples of Natural Crisis

 The Power Project of  The Indian Ocean

Jaiprakash Associates, at earthquake (Tsunami) , in
Nathpa, in Himachal Pradesh 2004.
was devastated by floods.
 Crisis of Deception
 Crisis of deception occur when management
conceals or misrepresents information about itself
and its products in its dealing with consumers and
others.
 Example of Crisis of Deception

 Dow Corning’s silicone-  The Satyam scam,

gel controversy in which came into
Michigan, USA. light, in 2009
 Workplace Violence and Rumors
 Crisis occur when an employee(s) or former
employee(s) commits an act of violence against other
employees on organizational grounds.

 Rumors are, when false information about an

organization or its products creates crises hurting it’s
reputation.
 Example of Workplace Violence and Rumors

 A workplace violence  Violence at Maruti

had occurred between Manesar plant: One
the laborers and higher dead, 40 injured in 2012
authority, in Vardhman
Group of Companies.
 Crisis Management

 Crisis management is the process by which an

organization deals with a major event that
threatens to harm the organization, its
stakeholders, or the general public.
 Crisis Management

 Crisis management can be defined as a system or

methodology of solving crisis situations. We can be
sure that the actual crisis situation will differ from
our expectation.

A crisis is like a virus, the effects can be sudden

, insidious, infectious and extremely dangerous…
 Crisis management objectives
Crisis management has four objectives:

• Reducing tension during the incident;

• Demonstrating corporate commitment and
expertise
• Controlling the flow and accuracy of
information
• Managing resources effectively
 Purpose of crisis management:

• Prevention
• Survival
• Successful outcomes
 Crisis Management Plan

 Gather facts.
 Be prepared.
 Communicate quickly and accurately
conduct brainstorming.
 Develop policies to minimize crisis.
 Assemble and organize resources.
 Create a Crisis Management Team.
 Step One
Create a Crisis Management Team
and Assess Potential Crises
The CMT team can include legal counsel,
investigators, public relations personnel,
investor relation’s personnel, risk manager,
financial personnel, marketing personnel,
employee relation’s personnel, and technical
personnel.
 Step Two
Develop Crisis Management Team Plans
• The primary objective of any plan is to set up a
flexible structure that is capable of responding to
any type of crisis quickly, decisively and in a
coordinated manner. The CMT plan should
establish relationships, responsibilities and
continuity.
• It should include a notification system with a
specific and up to date listing of current contact
information on the team members, chain of
command, outside relevant agencies.
 Step 3
Establish Guidelines for Gathering
Information and Internal Investigations

• Identify who has the authority to initiate an investigation

• Identify who will determine the scope of the investigation
• Identify an attorney or investigator that is qualified to head
the investigation
• Formulate a preliminary list of employees and management
with knowledge about particular crisis risks
• Formulate guidelines that establish an initial schedule for
the investigation and identify the information needed
• Determine which team member will evaluate the results
and what will be done with them.
 Step Four
Provide Periodic Crisis Training Evaluation
• The best way to ensure that everyone
understands his or her roles in the plan is to
have training on managing a crisis.
• The training will help address legal issues
before they occur, develop investigation
procedures; identify systems and equipment
needed during a crisis and develop good
media relation’s skills.
 Step Five
Develop Guidelines for Crisis
Communications
• Good communication is the heart of any crisis
management plan. Communication should
reduce tension, demonstrate a corporate
commitment to correct the problem and take
control of the information flow.
• Crisis communications involves
communicating with a variety of constitutes:
the media, employees, neighbours, investors,
regulators and lawmakers.
Example of Unsuccessful Crisis Management

 Union Carbide India Ltd, gas leak

tragedy in Bhopal, on December 2,
1984.
 It occurred on the night of December 2–3, 1984 at
the Union Carbide India Ltd, pesticide plant in
Bhopal, Madhya Pradesh.

 A leak of methyl isocyanate gas and other

chemicals from the plant resulted in the exposure
of hundreds of thousands of people.

 Estimates vary on the death toll. The official

immediate death toll was 2,259 and the
government of Madhya Pradesh.
Example of Successful Crisis Management

 The Pepsi Corporation faced a crisis in

1993, which was successfully managed
by the company.
 In 1993, claims of syringes being found in cans of diet
Pepsi were made.

 Company urged stores not to remove the product from

shelves while it had the cans and the situation
investigated.

 Pepsi released videos and made public, showing the

production process to demonstrate that such tampering
was impossible within their factories.

 Crisis was managed through effective communication.

 Johnson and Johnson's cyanide scare
THE CRISIS
Seven people died in the Chicago area in 1982 after taking Tylenol, a
pain reliever that ranked among Johnson & Johnson's best-selling
products. Someone had laced the pills with cyanide.
THE RESPONSE
In what is still regarded as the 'gold standard' in corporate crisis
management, Johnson & Johnson quickly accepted responsibility
and set up a 24-hour hotline to keep consumers updated.
Then-CEO James Burke became a media fixture as he stressed that
consumer safety was the company's top priority.
That point was reinforced by Johnson & Johnson's decision to recall all
Tylenol products and develop a tamperproof seal to protect its
bottles.