In this article we are going to list the 15 biggest corporate fines in history. Click to skip ahead and jump to the 5 biggest corporate fines in history.
Take a look at major companies and their history, and you'll see that they have more often than not flouted rules, and again, more often than not, gotten away with it as well. When a company is growing, it has to be really mindful of all the applicable laws and regulations which apply, which can sometimes be quite confusing, which is why most companies have separate legal departments to take care of such stuff when it happens.
However, unfortunately, when a company becomes quite dominant, it is able to flout rules with abandon and evade the eye of the regulators as well as their ire. Take the 2008 financial crisis for example. The entire global economy came to a standstill, with many countries undergoing recessions mainly due banks being able to act with impunity. Before the financial crisis, regulations in the US were such that banks allowed more and more consumers to take loans for buying houses and mortgages, offering low interest rates initially which would sky-rocket upon default. The banks didn't carry out the detailed checks necessary before offering such major loans, as this was padding their numbers and making them look good, and no one expected the housing market in the United States to fall. Many banks also started buying mortgage assets, where they were able to charge high amounts of fees while also receiving high margins from what were essentially sub-prime mortgages. These subprime mortgages were then bundled into a financial instrument known as collateralized debt obligations which were then sold across the world. This meant that banks other than the United States were involved as well, and when customers (who could never have been able to repay the loan) started to inevitably default on their mortgages, these banks started losing money and since foreign banks were involved, this led to a global recession, leading to the closure of some of the biggest financial institutions in the United States at the time, including Lehmann Brothers and Bears Stearns, which was purchased by JP Morgan Chase (NYSE:JPM). Also, since US consumption was one of the main factors behind the growth in consumption globally, other countries depended on the economy of the US, which declined during the financial crisis, and in turn saw the entire world being affected.
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However, even after all was said and done, federal institutions across the world spent trillions of dollars in an unprecedented move to rescue these financial institutions, leading to the coining of the term 'too big to fail', which is mostly applied to major banks. This is said to be the largest liquidity injection into the credit market in history, which shows that even after the banks failed due to their own policies, greed and not following proper standards and procedures, instead of being fined and brought to justice immediately, they received trillions of dollars to try and boost the economy, a lot of which was then spent on bonuses for executives. This was brought to special attention by American International Group (NYSE:AIG) which had received bailouts but then proceeded to pay more than $218 million in bonuses to executives, which resulted in widespread condemnation. It is true that later on these banks were investigated and had to pay major fines but the fact that these are still some of the biggest corporations engaging in the same activities shows that the fines aren't having the intended effect.
However, it should be said that ever since the recession, and of course it took the world's economy sinking to wake up regulators, the laws have been modified and regulators have been quite strict on banking and financial institutions, which is why you'll see many financial services companies in our list. In fact, the United States is now leading the charge and fines worth billions of dollars have been imposed. Europe isn't far behind however, and often implements laws which are more restrictive than the United States, which is why some of the major companies in the US have drawn the ire of European regulators and have received massive fines in this respect as well.
The above example goes to show that major companies can often escape unscathed and unpunished even when their defiance of rules and regulations result in unmitigated disasters. Moving away from the banking sector, we can see the same in oil companies who are often engaged in controversial practices and try to save a few bucks by not following proper procedure, which is why we see many environmental disasters on their hands, which in turn might or might not be fined. But the thing is, for a company whose annual revenues are worth hundreds of billions of dollars, a fine of even a few hundred million, which seems like a massive amount, doesn't really do much to discourage them. And a fine going into hundreds of millions of dollars itself is a rarity; most fines for such companies are worth a few million and barely cause a dent in their financials or their profitability.
While the biggest corporate fines in history are worth several billion dollars in total, the impact of the fine and the benefits of the fine are debatable. These companies seem to know that they are too big to go down, until something absolutely unprecedented takes place and hence, while battling any legal issues that may come with their armies of lawyers, won't really mind paying these fines since they'll still make more money than most countries in the world and fly on their private jets and take our their million dollar yachts. In fact, this is precisely why the GameStop saga which has seen hedge funds suffer losses worth billions of dollars for shorting 140% of the stock has such broad mainstream appeal. It is David vs Goliath, with David emerging victorious and causing more damage to the hedge funds in less than a month than most major fines have been able to manage. But for now, let's take a look at the biggest corporate fines in history, starting with number 15:
Most of you who use flagship phones of Apple (NASDAQ:AAPL) and Samsung will be familiar with Qualcomm chips. It was fined by the European Union to the tune of $1.2 billion for entering an arrangement to be the exclusive supplier of in Apple's products. The decision is still being appealed.
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14. HSBC
HSBC, in 2012, forfeited $1.256 billion to the US Department of Justice for its role in the violation of US sancations and anti-money laundering regulations.
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Multiple EU fines make our list, with Intel being accused of abusing its dominance in the semiconductor market and engaging in anti-competitive practices, resulting in a fine of $1.44 billion.
The only company to make our list of the biggest corporate fines in history twice, Google was fined by the European Union in 2017 for $2.7 billion for abusing its dominance in the search engine industry and promoting its own services.
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10. Credit Suisse
Swiss banks are well-known for the secrecy, which actually came back to bite Credit Suisse, which was found guilty of conspiring to help Americans evade taxes, resulting a fine of $2.5 billion
It is one of the biggest pharma companies in the world. GSK in 2012, pleaded guilty for promoting drugs for unapproved uses, kickbacks to physicians and failure in reporting breaches in safety data, resulting in the biggest healthcare fraud in the history of the US, and a $3 billion file, which is still the largest settlement by a pharmaceutical company.
GlaxoSmithKline plc (ADR) (NYSE:GSK)
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8. Google
Google is one of the most well-known companies in the world, though it is also often accused of anti-competitive behavior. The company was found guilty of favoring its own apps over that of competitors, resulting in the largest fine outside the US of $5 billion.
Goldman Sachs is one of the biggest investment banks in the world, and in the buildup to the 2008 crisis, misled investors regarding the value of mortgage backed securities, while betting against them itself, and earned the ire of the Department of Justice, and ended up paying more than $5 billion in 2016.
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7. Anadarko Petroleum
Anadarko Petroleum may no longer exist now, but the company made headlines in 2014 when it paid $5.15 billion in a settlement against environmental contamination, in a case brought by the US Department of Justice.
The American company is one of several in our list who were investigated and fined for their actions resulting in the Great Recession, where the company misled investors into thinking that worthless mortgage backed securities were actually valuable, preceding the financial crisis and ended up paying $7 billion.
