4 of the Worst Corporate Criminals of the 2000s
When it comes to holding big business responsible for its misdeeds, the U.S. has a pretty poor track record. Just look at the number of top executives who went to prison for their role in the 2008 financial crisis: virtually zero.
Companies may have to pay fines and penalties when they screw up, but it’s rare for a CEO or other corporate leader to face prison time for wrongdoing, no matter how many lives are devastated by their mistakes or malfeasance. When Brandon Garrett, a law professor at the University of Virginia, reviewed 303 cases against corporations from 2001 to 2014, he found that only 34% involved charges against specific individuals, and that of those, just 42% resulted in jail time.
Prosecuting executives is difficult for a number of reasons. A company’s top brass may not technically have knowledge of wrongdoing, and labyrinthine corporate structures can make it hard to untangle who is truly responsible for a crime. Plus, a company’s deep pockets can make prosecution an expensive and drawn out affair, according to the New York Times. “The entire structure of a corporation is intended to protect and insulate high-ranking executives,” the Times noted.
Sometimes, however, a crime is so egregious – and public outrage so significant – that CEOs have to be held accountable for the consequences of their business decisions. Often, these CEOs have committed fraud on a huge scale, or they encouraged or allowed behavior that killed or seriously injured employees or customers.
We’ve put together a list of four big corporate crimes and the CEOs who were responsible for them.
1. Selling a deadly product
Case study: Stewart Parnell, Peanut Corporation of America
In 2008 and 2009, a salmonella outbreak killed nine people across the U.S. and sickened hundreds more. The source of the contamination was traced back to the Peanut Corporation of America (PCA), a Virginia company run out of its CEO’s garage. The salmonella outbreak turned out not to be a tragic accident, but rather the direct result of PCA’s and CEO Stewart Parnell’s decision to intentionally ship contaminated products. In 2014, Parnell was convicted for his role in the crime.
While problems with contaminated food aren’t exactly rare (Blue Bell Creameries recently recalled all of its products because of possible listeria contamination), it is unusual for a CEO to be held responsible for lapses in food safety. Parnell was the first CEO to ever receive a felony conviction related to food safety crimes, CNN reported.
Conditions at PCA’s factories were deplorable, with leaking roofs, rodent infestations, and mold. Evidence against Parnell included a 2007 email where he ordered a plant manager to “just ship it,” rather than wait for results of a salmonella testing, Food Safety News reported. The company’s lax approach to cleanliness and focus on the bottom line above all else was an open secret in the peanut industry, according to a 2009 report in the Washington Post.
“The emails and documents told a story of a company that was more interested in shipping out products than products that were safe,” Bill Marler, a food safety lawyer who represented several victims, told CNN.
2. Committing massive financial fraud
Case study: Kenneth Lay and Jeffrey Skilling, Enron
Twenty thousand people lost their jobs, and in many cases, their life savings, when Enron collapsed in December 2001. After the company declared bankruptcy, investigations revealed extensive accounting fraud and corruption throughout the organization. Enron, which on paper had appeared to be massively successful, had overstated its earning by hundreds of millions of dollars, according to Time magazine. Plus, top executives had unloaded millions of dollars of Enron stock just before the business went belly up, while rank-and-file employees were stuck holding shares of a company that were virtually worthless.
Several of the company’s top executives were later convicted of fraud, including CEO Kenneth Lay and COO Jeffrey Skilling, who had also served as CEO for a brief period. Lay died of a heart attack before entering prison, but Skilling received a 24-year sentence, though that term was eventually reduced after he agreed to stop filing appeals and pay $41 million in restitution to people who lost money as a result of Enron’s crimes, according to CBS News.
3. Running an elaborate Ponzi scheme
Case study: Allen Stanford, Stanford Financial Group
Former billionaire Allen Stanford was once one of the richest men in the world. But he acquired his wealth by scamming people. The ruse involved offering high-interest CDs through his Antigua-based Stanford International Bank. Investors were told their money was safe, while in reality Stanford was using their deposits to fund a lavish lifestyle that included a fleet of private jets and his own cricket team, the New York Times reported. In all, he appears to have made off with more than $7 billion.
Stanford perpetrated his scam for two decades, but like all Ponzi schemes, his empire eventually collapsed. In 2012, he was sentenced to 110 years in prison. Stanford, who is appealing his conviction, argues that the U.S. Securities and Exchange Commission doesn’t have any authority over the actions of a foreign financial institution like his bank, according to a CNBC report. Meanwhile, Stanford’s victims, many of them elderly, are waiting to find out if they’ll ever get any of their money back.
4. Jeopardizing worker safety
Case study: Brent Weidman, Far West Water & Sewer, Inc.
On-the-job deaths and injuries are distressingly common in the U.S. In 2013, 4,405 people were killed at work, according to the Occupational Safety & Health Administration, which accounts for 12 per day. While companies may face fines and civil penalties for endangering workers, CEOs are not usually held personally responsible for employee deaths and injuries that happen on their watch. Brent Weidman, the former president of Far West Water & Sewer in Yuma, Ariz., is an exception.
In 2001, two Far West employees were killed and one was seriously injured after inhaling sewage gas while working in a tank. Weidman was later convicted of two counts of negligent homicide and two counts of reckless endangerment. According to the Arizona Attorney General’s office, the company had not tested the air in the tank on the day of the accident and had not provided proper worker safety training. Weidman, who could have served nearly four years in prison, instead received seven years of probation and was ordered to complete 840 hours of community service, including teaching safety classes, EHS Today reported.
Another CEO who’s facing serious prison time for endangering workers is Donald Blankenship, the former head of Massey Energy. Prosecutors are alleging that Blankenship deliberately hid safety violations, which led to a 2010 explosion that killed 29 miners. Massey pled not guilty. His trial is set to begin in July 2015, according to Bloomberg.