In 2012, federal agencies scored some resounding wins — and suffered some dramatic losses as well. The 2010 oil spill in the Gulf of Mexico led to the largest criminal penalty in the U.S. Justice Department’s history: $4.5 billion in fines and penalties (an amount that doesn’t count the ongoing civil case against BP PLC, which could generate billions more for the feds).
On the flip side, the Equal Employment Opportunity Commission lost its case on behalf of 200 women truck drivers who had alleged a long-standing pattern of sexual harassment. And a panel with the U.S. Court of Appeals for the D.C. Circuit handed the Food and Drug Administration a big loss when it sided with the tobacco industry in its suit to stop the FDA from mandating that graphic warning labels be included on cigarette packs.
BILLIONS AND BILLIONS
The largest environmental disaster in the country’s history — the 2010 oil spill in the Gulf of Mexico — generated the biggest criminal case punishment DOJ has ever handed down: $4.5 billion in fines and penalties. Prosecutors in November filed a 14-count information in New Orleans federal district court charging BP with, among other crimes, obstruction of Congress and felony manslaughter.
“There can be no question that this historic announcement represents a critical step forward — and underscores the Justice Department’s determination to stand with Gulf Coast communities,” Attorney General Eric Holder Jr. said in a statement. Holder and other DOJ officials stressed that the deal doesn’t mark the end of the road for BP. The government has a pending civil suit against the oil giant that could generate billions of dollars more in damages. The task for the government in the civil case: to prove that BP was grossly negligent in causing the spill.
The U.S. Commodity Futures Trading Commission vaulted into the big leagues in June when it imposed a $200 million penalty on Barclays Bank PLC for attempting to manipulate the London Interbank Offered Rate, or Libor. At the time, it was the largest settlement in agency history, and the scandal led to the resignation of Barclays CEO Robert Diamond.
Barclays was charged with making numerous false reports from 2005 to 2009 in a bid to manipulate key global benchmark interest rates. Six months later, the CFTC in December set a new record when it hit UBS with a $700 million fine for similar violations. The cases were the cherry on top of the busiest year ever for CFTC enforcers, who brought a record 102 cases in fiscal year 2012. For the agency, which is newly empowered by the Dodd-Frank Act, it’s all part of a strategy to bring what Enforcement Division chief David Meister in an October interview described as “high-impact cases…that influence market behavior.”
Few government announcements have been greeted more warmly than news from the Federal Trade Commission in November that it busted “Rachel from Cardholder Services.” Millions of consumers received illegal pre-recorded calls from the perky-voiced woman with an “important message about your credit card account.” The FTC won court orders shutting down five telemarketing companies responsible for the calls, which allegedly involved deceptive promises to lower consumers’ credit card interest rates for an up-front fee.
For the FTC, the crackdown on robo-calling and other consumer-protection violations took center stage in a year when work on the antitrust front was relatively quiet. Or as FTC chairman Jon Leibowitz put it, “At the FTC, Rachel from Cardholder Services is public enemy number one.” The agency in mid-December brought its 101st case alleging violations of the Do Not Call Registry (“The most popular government program since the Elvis stamp,” notes humorist Dave Barry).
VIVE LA FRANCE
It took a while, but the Justice Department and U.S. Securities and Exchange Commission delivered, by publishing a lengthy resource guide to explain just how the government enforces the Foreign Corrupt Practices Act. Don’t worry about that cup of coffee or tax ride purchased for a foreign government official. But that trip to Paris for a government official and his wife, in which they’re taken around in a chauffeur-driven vehicle? Enforcement authorities call that improper travel and entertainment.
“Transparency is, of course, a worthwhile goal all by itself,” Assistant Attorney General Lanny Breuer, the DOJ Criminal Division leader, said in November. “We want U.S. businesses, foreign officials, nongovernmental organizations and others to understand why we prosecute FCPA cases as vigorously as we do, and also how and why we make our charging decisions.” White-collar defense lawyers immediately reacted to the new FCPA memo, calling it a welcome resource that doesn’t necessarily provide a clear path for compliance with anti-foreign bribery laws.
Business groups called the U.S. Environmental Protection Agency’s bid to regulate greenhouse gas emissions nothing short of “the most significant and far-reaching regulatory program ever devised by a federal agency.”
The groups filed 94 suits challenging the rules, all consolidated in four inter-connected cases before the D.C. Circuit, Coalition for Responsible Regulation v. EPA. In June, the court handed EPA a resounding win, upholding the regulations and concluding that EPA’s interpretation of the Clean Air Act was “unambiguously correct.” The court noted that EPA “compiled a substantial scientific record” to support its judgment that greenhouse gases endanger public health and welfare by contributing to global warming. In December, the court declined to hear the case en banc.
Bank executives in Europe were on a roll this year — apologizing for unlawful conduct. Federal prosecutors in December announced a blockbuster criminal case against HSBC Holdings PLC. The company was charged — in a deferred prosecution agreement — with failing to maintain adequate internal controls to combat money laundering. DOJ’s Breuer said HSBC is “being held accountable for stunning failures of oversight” that allowed drug traffickers to launder hundreds of millions of dollars through the bank’s subsidiaries. Standard Chartered agreed to a $327 million with prosecutors the day before the government announced the HSBC deal.
In June, ING Bank N.V. agreed to a $619 million deal with the government over illegal transactions with Cuba and Iranian entities. A team from Steptoe & Johnson LLP said in an article in July that “the magnitude of these settlements,” coupled with increased cooperation between state and federal agencies, means that foreign financial institutions “face ever-increasing risks of enforcement in the United States.”
The U.S. Equal Employment Opportunity Commission has made systemic cases involving widespread allegations of discrimination one of its top priorities, but in February the agency suffered a devastating loss in a case involving graphic allegations of sexual harassment by more than 200 women truck drivers. The result is a new hurdle for the EEOC when bringing cases with multiple victims.
From the beginning, the EEOC’s case against trucking company CRST Van Expedited Inc. faltered — the trial court judge said she had “never had a case brought by a government agency that was such a mess.” The agency fared only marginally better before the U.S. Court of Appeals for the Eighth Circuit, which gutted the case because the EEOC didn’t attempt to investigate and conciliate every individual claim before filing a class suit.
For a time this year, it seemed all Attorney General Holder talked about was civil rights — and, particularly, the department’s fight to protect voter rights. “I think in many ways the Civil Rights Division is the conscience of the Justice Department,” Holder said in November. “You can really assess how good a Justice Department is by how effective its Civil Rights Division is.”
DOJ lawyers saw some success this year in disputes over Section 5 of the Voting Rights Act. In August, a three-judge panel in Washington ruled for the government in blocking a Texas voter identification law. DOJ’s legal team said the law would have had a disproportionate harm on blacks and Hispanics. The U.S. Supreme Court will hear a voting rights case in February.
The images are unsettling, to say the least: a man blowing smoke out of a trachea hole; a close-up of a mouth with a festering, cancerous sore; a corpse after an autopsy.
Little wonder the tobacco industry objected ferociously when the U.S. Food and Drug Administration mandated that the graphics, plus warnings such as “Smoking can kill you,” would take up half the space on the front and rear panels of cigarette packages. The tobacco industry argued that the FDA’s label rule violated the First Amendment, and in August, the U.S. Court of Appeals for the D.C. Circuit in a 2-to-1 decision agreed, striking down the regulation as unconstitutional.
Writing for the majority in R.J. Reynolds Tobacco Co. v. U.S. Food and Drug Administration, Judge Janice Rogers Brown called the graphics “unabashed attempts to evoke emotion (and perhaps embarrassment) and browbeat consumers into quitting.” Many predict the government will appeal the decision to the Supreme Court.
In 2012, the Justice Department saw another banner year when it comes to the money recovered in False Claims Act cases. Tony West, the acting associate attorney general, said DOJ recovered nearly $5 billion in settlements and judgments this year in civil cases involving fraud against the government. The 2011 recovery was about $3.3 billion, according to the department.
What’s driving the trend? Increasing health care and mortgage fraud, in part. And thank whistleblowers. West and Stuart Delery, the acting leader of the Civil Division, noted that the department saw a record 647 whistleblower suits. “The False Claims Act is, quite simply, the most powerful tool that we have to deter and redress fraud,” West said in December.