These 5 companies have paid the biggest fines for ethics violations

August 21, 2024

•

6 min read

This is one in a series of articles that will incorporate data from YourStake, a technology platform designed to help financial advisors and investors align their portfolios with personal values, focusing on ESG criteria.

The market for corporate attorneys is booming — and bad behavior in business certainly isn’t hurting.

Fighting legal challenges, law advocacy and lawsuit defense have become increasingly common for global corporations. According to a report from the Association of Corporate Counsel, companies with market capitalizations of more than $20 billion are estimated to employ 145 legal workers at a cost of $80 million each year.

Why so much spending on legal defense? Because that amount pales in comparison to the actual fines levied for ethics violations by these companies, which are estimated to have paid more than $1 trillion in penalties since 2000.

Let’s take a look at the top five companies that paid the most in fines since 2017, which together have accounted for $20.4 billion in penalties. That’s more than double the yearly budget for the U.S. Attorney’s Office.

5. Bank of America ($2.31 billion)

Since 2017, Bank of America BAC has spent cash 32 times to settle legal issues, whether through judgments against the multinational investment bank or by reaching settlements with disgruntled parties.

More than half of its $2.31 billion in penalties came from one alleged incident — a 2018 lawsuit claiming it imposed excessive overdraft fees on checking account customers. The total settlement of the consumer protection violation was $1.27 billion, though most of that penalty was calculated by factoring in the lost revenue resulting from its change in practices.

Bank of America did, however, shell out $66 million to 5.9 million customers who had been adversely affected by its practice of charging an “extended overdrawn balance charge” in addition to $35 overdraft fees.

While that lawsuit had one of the most significant financial impacts on the corporation in recent years, Bank of America has continued to receive sanctions for similar practices, including the following instances:

2017 — $22 million settlement paid on allegations the bank improperly applied overdraft fees on customers using debit cards for Uber rides
2020 — $5 million settlement paid to settle litigation claiming Bank of America charged customers improper overdraft fees on transactions with gig economy service providers
2022 — $75 million settlement paid, and the bank agreed to make changes in its business practices, after being accused of improperly charging overdraft fees to customers whose accounts were empty
2023 — $60 million fine paid to the Office of the Comptroller of the Currency for assessing multiple overdraft and insufficient fund fees against customers for a single transaction.

4. Boeing ($2.6 billion)

The financial impact the 737 Max has had on Boeing BA pales in comparison to the human impact the failed airliner has caused since first taking to the skies in 2016. A total of 346 people died in two fatal incidents that occurred in October 2018 and March 2019. The incidents led to the 18-month grounding of all 387 aircraft delivered to commercial customers.

In 2021, Boeing entered into an agreement with the Department of Justice to resolve a criminal charge related to a conspiracy to defraud the Federal Aviation Administration’s Aircraft Evaluation Group concerning evaluations of the plane. The agreement included a $243 million criminal monetary penalty, compensation payments to 737 Max airline customers of $1.77 billion and the establishment of a $500 million crash-victim beneficiaries fund for the families of the victims of Lion Air Flight 610 and Ethiopian Airlines Flight 302.

The fines, however, were a drop in the bucket of the total financial impact the 737 Max had on Boeing. In addition to the $2.5 billion in penalties, Boeing is estimated to have spent an additional $17.5 billion in compensation and legal fees. Additionally, the 1,200 canceled orders resulting from the two fatal incidents account for more than $60 billion in indirect losses.

3. Goldman Sachs ($3.21 billion)

The second-largest investment bank in the world comes in third place on this list after it is reported to have suffered $3.21 billion in penalties since 2017.

In 2020, Goldman agreed to pay more than $2.9 billion to criminal and civil authorities in the United States as part of a settlement agreement.

The allegations were levied after it was discovered that Goldman GS was participating in a scheme to pay more than $1 billion in bribes to Malaysian and Abu Dhabi officials to obtain lucrative business. The bribes allegedly resulted in Goldman underwriting about $6.5 billion in three Malaysian bond deals, earning the bank hundreds of millions in fees.

Goldman Sachs denies wrongdoing in the case, instead claiming that members of the previous Malaysian government were not honest about how the proceeds of the bond sale would be used.

Officials said the bond deal earned Goldman over $500 million in fees, leading to large bonuses for its executives.

2. Visa ($4.1 billion)

Visa has had a nearly clean slate regarding legal battles over the past seven years, but unfortunately for the global payment processing network, its one instance of alleged bad behavior proved extremely costly.

In 2019, Visa and its main competitor, Mastercard MA , agreed to pay a combined $6.2 billion to settle litigation alleging collusion to raise swipe fees paid by merchants. The settlement received final court approval in 2019, but it wasn’t until a federal appeals court in Manhattan upheld the accord in 2023 that the agreement became official.

This year, Visa announced a proposed settlement in March that sought to end a separate legal battle on swipe fees that began in 2005. In June, a U.S. judge rejected Visa and Mastercard’s proposed $30 billion settlement, which would have resulted in lower swipe fees and decreased revenue for both companies.

1. Wells Fargo ($8.21 billion)

With at least twice the amount of fines and settlement payments doled out than any other company on this list, Wells Fargo WFC is the king of ethical miscues, leading to costly payouts to customers and financial regulators. Of the $8.21 billion in fines Wells Fargo has paid since 2017, two incidents account for $6.7 billion.

In 2020, Wells Fargo signed a deferred prosecution agreement and agreed to pay $3 billion to resolve potential criminal and civil liability stemming from a practice between 2002 and 2016 of pressuring employees to meet unrealistic sales goals. That move led thousands of employees to provide millions of accounts or products to customers under false pretenses or without consent, prosecutors alleged.

Two years later, the financial-services company agreed to pay $2 billion in redress to consumers and a $1.7 billion civil penalty for legal violations across several of its largest product lines. The Consumer Financial Protection Bureau claimed Wells Fargo illegally assessed fees and interest charges on auto and mortgage loans that directly led to the repossession and foreclosure of customers’ property.

The bank was also accused of charging consumers unlawful surprise overdraft fees to checking and saving accounts. About 16 million people were believed to be affected.

YourStake embraces data transparency on its company screeners to combat “greenwashing” and uses more than 150 databases to provide accurate information to impact investors. For the corporate ethics violation study YouStake relied on Violation Tracker, produced by the Corporate Research Project of Good Jobs First, a wide-ranging database on misconduct by large and small corporations throughout the United States.