Corporate felons
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Does your nonprofit solicit and accept grants from corporate felons? It may be hard to avoid some major corporations that despite their philanthropic track records have had serious problems with the law. Because corporations charged with criminal behavior by the U.S. Department of Justice or the Securities and Exchange Commission sometimes settle and negotiate payments rather than going to court, many nonprofits might be unwittingly looking to felonious philanthropy from U.S. corporations to support their nonprofit programs.

Knowing Who the Corporate Felons Might Be

University of Virginia law professor Brandon Garrett has a book coming out in October 2014—Too Big to Jailexamining what happens when criminal charges are brought against major corporations in the U.S. His book shows that sometimes corporations are compelled to pay penalties and fines through negotiated settlements, though the settlements often amount to much less than the public thinks. Rarely are the culpable corporate executives themselves ever prosecuted, much less sentenced to prison, as the following infographic from Garrett’s blog demonstrates: 

Graph

Nonprofit advocates know this all too well with the puny number of prosecutions of bankers and investors who were responsible for the national mortgage foreclosure crisis that led to the collapse of the entire economy. Typically, the seriously troubled behavior of some big corporations isn’t getting much in the way of federal government prosecution.

Penalties for Corporations that Are “Sort Of” Guilty

The federal government’s financial penalties imposed on corporations generally let the executives off with minor slaps on the wrist or with no prosecution at all. In 2013, federal prosecutors negotiated a number of non-prosecution agreements (NPAs) and deferred prosecution agreements (DPAs) that hit corporations with penalties and occasional requirements for reforms in corporate policy and practice, but allowed corporations and prosecutors to sidestep criminal prosecutions, whose chances of success neither side might be able to predict with confidence. In 2013, a number of high profile companies were subject to NPAs and DPAs with ostensibly significant financial consequences:

Company (and total sales/revenues)

Alleged violation

Financial penalty

Archer Daniels Midland ($89.8 billion)

Foreign Corrupt Practices Act

$54,267,366

Diebold ($2.9 billion)

Foreign Corrupt Practices Act

$48,170,000

Ernst & Young ($25.8 billion)

Tax fraud

$123,000,000

Las Vegas Sands Corporation ($13.8 billion)

Bank Secrecy Act

$47,400,300

Total, S.A. (French firm)

Foreign Corrupt Practices Act

$398,200,000

United Parcel Service ($55.4 billion)

Controlled Substances Act

$40,000,000

These are only some of the NPAs and DPAs known to have been concluded by the Department of Justice or various U.S. attorneys with better-known companies in 2013. NPAs and DPAs are routinely kept secret for a period of time, so others might have been concluded in 2013 that were not immediately made available on some lists.

The Securities and Exchange Commission in 2013 also counted a number of enforcement actions against companies. Some were related to the financial crisis, but holding those aside, there were others in which corporations were hit with fines and penalties for legally and ethically inappropriate behavior. Again, here, too, a very brief selection of some of the better-known corporations to have hit the skids with the SEC in 2013:

Company (and total sales/revenues)

 

Alleged violation

Financial penalty

Allianz SE (German firm, $115.5 billion)

Foreign Corrupt Practices Act

$12.3 million

Eli Lilly and Company ($23.1 billion)

Foreign Corrupt Practices Act

$29 million

BP (£21.1 billion worldwide)

Financial fraud, misleading investors

$525 million

JPMorgan Chase ($96.6 billion)

Misstating financial results, lack of effective financial controls

$200 million

TD Bank (subsidiary of Canadian bank)

Securities violations

$15 million

These lists would be much longer if we added the corporations that have reached settlements with the Justice Department and other federal agencies concerning their shoddy behavior in the mortgage markets—misleading borrowers, foreclosing on homeowners, selling faulty mortgage-backed securities and such—not to mention others that have had to settle with the U.S. Department of Housing and Urban Development concerning racially discriminatory practices. But those are probably better known to nonprofits, particularly since there are segments of the nonprofit sector, like community development corporations, fair housing advocates, community reinvestment advocates, and so on, that have targeted those corporations for special scrutiny. We suspect that nonprofits probably aren’t as on top of monitoring corporations for securities violations and foreign corrupt practices.

Corporate Grantmakers with Federal Legal Problems

Just about all of these corporations are known to be significant grantmakers:

Company

Philanthropic grantmaking vehicle (beyond their corporate employees’ giving, etc.)

Grantmaking priorities

Sample relatively recent grants and grantees

Archer Daniels Midland

ADM Cares

Education, environment, sustainable agriculture

Jobs for America’s Graduates ($250,000); Living Lands & Waters ($440,000); Doing It Right—Brazil ($540,000); Opportunities Industrialization Centers International—Cote d’Ivoire ($575,000)

Diebold

Diebold Foundation (total giving 2012: $534,700)

Human services, food banks

Several six-figure grants to United Way of Greater Stark County (Canton OH)

Ernst & Young

Ernst & Young Foundation (total giving FY 2012: $12.1 million)

Emphasis on higher education

Mostly matching grants to universities plus grants to universities’ donor-advised funds

Total S.A. (in the U.S.)

Charitable giving

Community outreach, education, arts

Website identifies Total through U.S. subsidiaries as sponsors of multiple charities such as Houston Symphony, Texas Energy Museum, and Texas French Alliance for the Arts

Las Vegas Sands

Sands Foundation (Venetian Foundation) (total giving 2011: $22,687)

Youth, health, wounded veterans

Largest grant $10,000 to Best Buddies International

United Parcel Service

UPS Foundation (total giving 2012: $41 million)

Community Safety;

economic empowerment, educational opportunity, mentorship, and inclusion for underserved and underrepresented populations.

Mix of grants to U.S. grantees including 100 Black Men of Atlanta, Leadership Conference on Civil Rights, National Council of La Raza, Urban League, American Legislative Exchange Council, Americans for Tax Reform

Eli Lilly and Company

Eli Lilly and Company Foundation (total giving 2012: $26.4 million)– distinct from Lilly Cares Foundation, which is donations of pharmaceuticals

Improving the lives of people who lack the resources to obtain quality health care, with a primary focus on low and middle-income countries; strengthening public education in the United States, with an emphasis