What happens to corporate crime cases with the FBI in flux?

AP News
Posted: May 12, 2017 3:17 PM
What happens to corporate crime cases with the FBI in flux?

WASHINGTON (AP) — There's the federal criminal investigation into Wells Fargo's opening of unauthorized client accounts.

And the probe of Fox News's business practices.

And the investigation of Baxter International, Pfizer and ICU Medical over their medical pricing and dealings with competitors.

For investors and others with an interest in such companies, President Donald Trump's firing of FBI Director James Comey has added a new layer of uncertainty to the government's corporate criminal investigations. What might an FBI without a permanent leader, even for a short time, mean for ongoing cases of corporate misconduct?

Comey's dismissal comes just as questions have already been raised about whether corporate crime will be a priority for the Justice Department in the Trump administration.

The FBI partners with the network of federal prosecutors around the country who report to the Justice Department leadership in Washington. Agents collect evidence and interview witnesses, laying the groundwork that the U.S. attorneys use to prosecute cases. With complicated corporate cases, that process can take many months.

Doubts have already been swirling around whether local U.S. attorneys' offices will involve themselves aggressively in such cases. Trump's attorney general, Jeff Sessions, in March asked 46 U.S. attorneys around the country who served under President Barack Obama to step down. That total represents half of all the U.S. attorneys. None of their proposed replacements has yet been confirmed by the Senate.

While it's customary for a new president to replace nearly all the U.S. attorneys, it often occurs more incrementally.

In the aftermath of Comey's firing, some experts foresee delays in the FBI's pursuit of corporate cases.

"What we're seeing right now is chaos," says Jimmy Gurule, a law professor at Notre Dame who was an assistant U.S. attorney general in the George H.W. Bush administration. "I wouldn't be surprised to see some of these investigations disrupted. Who benefits? It's only the defendants."

The FBI director sets the agenda and orders priorities for the agency, thereby determining how its roughly $9 billion annual budget is spent.

"It's critically important that there be a full-time director named to lead the FBI," says Robert Mintz, a former assistant U.S. attorney now in private law practice at McCarter & English in New Jersey.

Here are some of the business cases recently under FBI and Justice Department investigation that could be affected. Several were begun under the Obama administration. Federal criminal probes don't necessarily result in charges. None of the companies or their executives has been charged.


Wells Fargo & Co.

Investigators have been looking into the actions taken by bank employees to open up to 2 million unauthorized accounts in a drive to meet punishing sales quotas. The scandal erupted in September at the third-largest U.S. bank, triggering the resignation of its CEO, emotional hearings in Congress and over $300 million in civil fines from regulators and in class-action settlements.

The bank's board of directors conducted its own investigation. It found that the problems dated back at least 15 years but that executives avoided dealing with them until they burst into public view. The board pinned blame on former executives, notably ousted CEO John Stumpf and Carrie Tolstedt, who ran the retail division where the misconduct occurred. Tolstedt has denied responsibility and said the board is trying to shift blame. Federal bank regulators have found the board was aware of some problems with sales practices as early as 2005.


Medical Companies

An investigation has focused on whether big producers of injectable medicines like saline solution conspired to create supply shortages and drive up prices. Intravenous saline, which hospitals use for hydrating patients, has marked price increases of 200 to 300 percent in the past three years. Health care company Baxter International, drug maker Pfizer and ICU Medical have disclosed that they are under investigation and have been ordered to provide documents on their pricing practices for intravenous solutions and their dealings with competitors.


Theranos Inc.

The blood-testing company's claims about its technology are under scrutiny by federal investigators. Last month, the company settled a lawsuit by Arizona's attorney general over alleged faulty technology and clinical lab practices. It agreed to pay $4.6 million to reimburse affected Arizona residents but has denied wrongdoing.

Theranos, a privately held company based in Silicon Valley, closed its labs in several states and its wellness centers inside Arizona Walgreens stores in October and laid off much of its workforce. The move came after federal regulators barred company founder and CEO Elizabeth Holmes from owning or running a medical lab for two years.

The 33-year-old Holmes, once considered the country's youngest female billionaire, started Theranos in 2003, pitching its technology as a cheaper way to run dozens of blood tests and raising millions in startup funding.


21st Century Fox:

A federal grand jury investigation has looked into how the company led by Rupert Murdoch and his sons handled the scandal involving accusations of sexual harassment by female employees at its Fox News TV network. An issue is whether Fox sought to hide from shareholders the payments it made in settlements with alleged victims.

Fox News has confirmed that it's been in communications with the U.S. criminal authorities and said it will continue to cooperate with all inquiries.

When Fox News chairman Roger Ailes was forced out last July, the company said it was determined to change the culture to make it a more respectful workplace.