Announcing the 2015 Sales Ethics Hall of Shame


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“Money doesn’t talk, it swears.” – Bob Dylan

When I need a burst of energy, I don’t reach for an espresso or Red Bull. I pick up a revenue plan. Any plan will do. Wanna dance? I know the Cash Flow Hustle!

Targets! Sales process! Profit margins! Lead generation! Capture rate! Conversion rate! Market share! When saying these words, watch for errant spittle flying off the tongue. It can’t be helped.

Ethical Governance deserves a special place in every revenue plan, but this dowdy topic doesn’t fit with the excitement. Many companies simply shove ethics into a metaphorical closet and then down the stairs. “Let Legal handle that.” Muffled banging, a distinct thud, and then the thrill of watching the revenue curve soar heavenward, according to plan.

The party ends after an inopportune disclosure from an employee, or a journalist’s investigative report. Business poop hitting a whirling fan. What gets propelled through the other side sullies everything in its path. The myopic pursuit of the almighty dollar seldom ends up pretty.

That describes the 16 companies inducted into the 2015 Sales Ethics Hall of Shame. When I first made these awards in 2013, the inductees had to meet three standards:

1. The primary purpose of the enterprise couldn’t be selling an illegal product or service, like crystal meth or human trafficking.

2. More than one employee had to be involved in unethical activity. Scams involving a single, rogue employee did not qualify.

3. Any chicanery had to be repeatable and scalable—in other words, embedded in the company’s business process.

These standards apply to 2015’s award recipients as well, and all 16 inductees cleared each threshold, with room to spare.

Turing Pharmaceuticals: Hiking prices on Aunt Betty’s lifesaving medication by 5,500%.

This year, Turing’s CEO, Martin Shkreli made news by increasing the price of Turing’s Daraprim to $750 per tablet from the original price of $13.50. A change that instantly drove annual treatment costs for some patients into the six figures. “What is it that they are doing differently that has led to this dramatic increase?” Dr. Judith Aberg, the chief of the division of infectious diseases at the Icahn School of Medicine at Mount Sinai, asked rhetorically. She said the price increase meant hospitals might have to use “alternative therapies that may not have the same efficacy.” Translation: the price increase will kill some patients – literally.

Valeant Pharmaceuticals International / Philidor Rx Services LLC: Bad ethics infect a supply chain.

Valeant, and its retail partner Philidor had a cozy working relationship – too cozy for some. Valeant manufactures drugs, and Philidor distributes them, with Valeant as a sole-source provider. “Valeant’s critics say the flap shows some pharmaceutical companies have established or controlled pharmacies expressly to dispense their drugs and ensure reimbursement by insurers – sometimes through aggressive tactics that evade insurers’ efforts to control costs,” The Wall Street Journal reported on November 1, 2015.

Recently, “a short [stock] seller has accused [Valeant] of using Philidor in an accounting scheme, and former Philidor employees say Valeant staffers worked directly in the pharmacy’s offices, sometimes using fake names,” according to another Wall Street Journal article (Tough Sales Tactics Used at Philidor, October 29, 2015). None of this would be possible without good old infrastructure and documented business procedures for staff to follow. A Philidor training manual advised dropping a drug’s cost in $500 increments “until paid and then increase by $100 to get as close as possible to the max amount allowed by the insurance company,” the Journal reported.

Valeant’s revenue scheme with Philidor came to ignominious end on Friday, October 30th, when the three largest US pharmacy-benefit managers – CVS Health Corp, Express Scripts Holding Company, and United Health Group Inc.’s OptumRx – announced they were terminating all purchases from Philidor effective immediately. Valeant followed suit the next day, saying it was “ending all ties with Philidor.”

American Honda Finance Corporation: When Marketing loves minorities, but for all the wrong reasons.

In July, the US Department of Justice filed a complaint against American Honda Finance Corporation, alleging that the company’s dealers had overcharged minority customers, causing them to pay higher interest rates than white borrowers. Honda’s auto finance division agreed to pay a $24 million settlement to minority buyers, and to restructure the division.

Honda does not make direct loans to consumers. Instead, it authorizes dealers to mark up its loan rates up to 2.25%. But “regulators found rate discrimination within those mark-ups,” Assistant Attorney General Vanita Gupta said in an interview. The Justice Department and the Consumer Financial Protection Bureau began their investigation in 2013, and found that minority borrowers were paying $150 to $250 more than white borrowers. “The hope really is that Honda’s leadership is going to trigger the rest of industry to constrain dealer mark-ups and discriminatory pricing,” said Gupta.

Volkswagen: “Clean Diesel” – marketing lipstick on an ethical pig.

When VW’s management decided to embed software for circumventing environmental regulations into the brains of its engines, it mass produced lying on an unprecedented scale. Eleven million vehicles are driving around with deceitful code, and now, we’ve just learned, not all of them are Volkswagens. The flagship brand Porsche just entered the scandal.

The case will be studied for years in business classes around the world as an example of a catastrophic junction of ethics and finance. $18 billion in potential fines. Billions of dollars pending in class-action lawsuits. 20% decline in VW’s stock price when news of the cheating scandal broke. Hospital and social costs estimated at $450 million. 30 Volkswagen managers directly implicated in the scandal. Massive worker cutbacks.

“I personally am deeply sorry that we have broken the trust of our customers and the public,” Volkswagen’s former CEO, Martin Winterkorn, said after the news of the scandal broke. His contrition appears to be lipstick on a pay-plan pig. Winterkorn’s pension from his former employer will be around $32 million.

General Motors: When fixing a fatal product flaw cuts into profit margins.

“They let the public down. They didn’t tell the truth in the best way that they should have — to the regulators, to the public — about this serious safety issue that risked life and limb,” said US Attorney Preet Bharara. The product flaw – ignition switches that unintentionally slip from the “run” position, cutting power to the engine – has been implicated in at least 169 deaths. GM has spent more than $5.3 billion “on a problem authorities say could have been handled for less than a dollar per car. Those expenses include fines, compensation for victims and the recall of millions of vehicles,” according to the Oneida Daily Dispatch.

There was evidence that GM knew about the faulty engineering for over ten years, but chose to conceal the defect from the government and the public. “We understand that lives were impacted. That is something that we understand and we take forward and will have with us every day,” GM’s CEO, Mary Barra said. But her circumspection won’t take place in prison. As part of the deal with government prosecutors, no GM employees will go to jail.

“If a person kills someone because he decided to drive drunk, he will go to jail,” said Laura Christian, the mother of a woman who died in her 2005 Cobalt. Yet GM employees “are able to hide behind a corporation because our laws are insufficient. It must change.”

Takata: Stuffing ten pounds of product defects into a five pound airbag.

Defective Takata airbags have been attributed to at least 139 injuries across all automakers. Two people have died from faulty Takata airbags in Honda vehicles, Takata’s largest customer. Approximately 34 million vehicles of all makes have installed Takata airbags that are potentially defective.Takata’s airbag inflators can explode, causing shrapnel to shoot into auto cabins.

On November 3rd, US regulators assessed Takata a $70 million fine, and ordered the company to stop using ammonium nitrite-based propellants in their products. In 2014, The New York Times published a report “suggesting that Takata knew about the airbag issues in 2004, conducting secret tests off work hours to verify the problem. The results confirmed major issues with the inflators, and engineers quickly began researching a solution. But instead of notifying federal safety regulators and moving forward with fixes, Takata executives ordered its engineers to destroy the data and dispose of the physical evidence. This occurred a full four years before Takata publicly acknowledged the problem,” Car and Driver reported on October 26, 2015 (Massive Takata Airbag Recall: Everything You Need to Know, Including Full List of Affected Vehicles).

“’We deeply regret the circumstances that led to this,’ said Takata Chief Executive Shigehisa Takada, adding that the company is ‘committed to being part of the solution,’” The Wall Street Journal Reported on November 4th (Honda Adds to Mounting Woes at Takata). On November 3rd, the same day that US regulators announced the $70 million fine, Honda said it “will no longer use Takata Corporation front driver or passenger air-bag inflaters in new vehicles under development,” alleging Takata misrepresented or manipulated test data.

Coca Cola: Using “scientific research” to “inform” the debate about obesity.

In the last 20 years, consumption of full-calorie sodas in the US has declined 25%. Coca Cola wanted to stem the tide with “science.” “Most of the focus in the popular media and in the scientific press is, ‘Oh they’re eating too much, eating too much, eating too much’ — blaming fast food, blaming sugary drinks and so on,” said the vice president of the Global Energy Balance Network, Steven N. Blair, adding, “and there’s really virtually no compelling evidence that that, in fact, is the cause.” Coca Cola provides Blair’s organization financial and logistical support.

Health experts objected to Blair’s assertions, saying they are “misleading and part of an effort by Coke to deflect criticism about the role sugary drinks have played in the spread of obesity and Type 2 diabetes. They contend that the company is using the new group to convince the public that physical activity can offset a bad diet despite evidence that exercise has only minimal impact on weight compared with what people consume,” according to an article in The New York Times (Coca Cola Funds Scientists Who Shift Blame for Obesity away from Bad Diets).

Coca Cola heard the health community’s response loud and clear. In a Wall Street Journal editorial published August 19 titled, We’ll Do Better, Coca Cola CEO Muhtar Kent wrote,

“I am disappointed that some actions we have taken to fund scientific research and health and well-being programs have served only to create more confusion and mistrust. I know our company can do a better job engaging both the public-health and scientific communities—and we will. By supporting research and nonprofit organizations, we seek to foster more science-based knowledge to better inform the debate about how best to deal with the obesity epidemic. We have never attempted to hide that. However, in the future we will act with even more transparency as we refocus our investments and our efforts on well-being.”

Axact Corporation : College degrees provide wealth . . . to the faux institutions that issue them.

Online access to education has provided opportunities to millions of people to earn college degrees. It also provides opportunities for unscrupulous scam artists who operate from behind of smokescreen of proxy Internet services and weak international regulations, particularly in Pakistan, the home country of Axact Corporation.

“At Axact’s headquarters, former employees say, telephone sales agents work in shifts around the clock. Sometimes they cater to customers who clearly understand that they are buying a shady instant degree for money. But often the agents manipulate those seeking a real education, pushing them to enroll for coursework that never materializes, or assuring them that their life experiences are enough to earn them a diploma. To boost profits, the sales agents often follow up with elaborate ruses, including impersonating American government officials, to persuade customers to buy expensive certifications or authentication documents. Revenues, estimated by former employees and fraud experts at several million dollars per month, are cycled through a network of offshore companies,” according to an article in The New York Times (Fake Diplomas, Real Cash: Pakistani Company Axact Reaps Millions).

In late May, Axact’s CEO, Shoaib Ahmed Shaikh, and four others were arrested in Pakistan, and charged with fraud, forgery and illegal electronic money transfers, money laundering, and violating Pakistan’s electronic crimes act.

Peanut Corporation of America (PCA): Neither mold, nor cockroaches, nor salmonella will delay this company’s deliveries.

Peanut Corporation’s products were involved in a two-year salmonella outbreak from 2007 to 2009. In 2015, Stewart Parnell, former CEO of PCA, was sentenced to 28 years, the most severe punishment ever meted to an executive of a food company for a safety issue. The Center for Disease Control estimates around 700 PCA-related cases were reported, including nine deaths in 46 states. Possibly thousands of people were harmed.

Parnell wasn’t guilty of lax oversight and poor quality control. This scandal resulted from the fact that his company knowingly shipping tainted food. After discovering that a shipment might get delayed because of lab results that indicated the presence of salmonella, Parnell wrote, “s***, just ship it,” according to The Wall Street Journal. Parnell was also accused of falsifying lab reports.

“I cannot afford to loose [sic] another customer,” he wrote in a statement that should not be confused with customer-centricity.

M.C. Dean and Hilton Hotels. When you mysteriously can’t get wireless access, they’ve got a solution if you have a credit card.

“Consumers are tired of being taken advantage of by hotels and convention centers that block their personal WiFi connections,” said Travis LeBlanc, chief of the FCC’s Enforcement Bureau. “This disturbing practice must come to an end. It is patently unlawful for any company to maliciously block FCC-approved WiFi connections.” The FCC began investigating M. C. Dean in 2014 after it received complaints that the company was blocking wireless Internet access for guests at the Baltimore Convention Center, where the company is the sole Internet provider. M. C. Dean admitted to obstructing hotspots using auto-block mode on its WiFi system, reported on November 4th. “The company was charged with violating the FCC’s Communications Act by maliciously interfering with or causing interference to lawful WiFi Hotspots.” The FCC has fined company $718,000.

Hilton has been fined $25,000 for failing to cooperate with an FCC investigation into similar efforts to block WiFi access at its properties.

Wells Fargo: What happens when a company insists on its sales force making quota, but doesn’t care how.

This summer, The Los Angeles City Attorney, Mike Feuer, sued Wells Fargo on behalf of the city. The suit states, “. . . Wells Fargo’s business model imposed unrealistic sales quotas that, among other things, have driven employees to engage in unlawful activity including opening fee-generating customer accounts and adding unwanted secondary accounts to primary accounts without permission. These practices allegedly have led to significant hardship and financial loss to consumers, including having money withdrawn from customer’s authorized accounts to pay for fees assessed by Wells Fargo on unauthorized accounts and derogatory notes on credit reports when unauthorized fees went unpaid, causing some customers to purchase identity theft protection.” The complaint further alleges that Wells Fargo failed to properly inform customers of misuse of their personal information and failed to refund unauthorized fees,” according to a press release from Feuer’s office.

A judge dismissed the lawsuit, but the City has appealed. In September, the City of Oakland, California, filed a related suit against Wells Fargo, accusing the company of “steering minorities into high-cost mortgage loans that allegedly led to foreclosures, abandoned properties and neighborhood blight,” according to Reuters.

“African-American borrowers in Oakland were 2.4 times more likely to receive a predatory loan than comparable white borrowers. Hispanic borrowers were 2.5 times more likely to receive a predatory loan. Loans in minority neighborhoods were 4.75 times more likely to end in foreclosure. The disproportionate number of foreclosures among minorities would not have happened if [Wells Fargo] applied uniform lending practices,” the lawsuit said.

Access Funding: Why let a buyer’s mental impairment undermine a profitable deal?

To critics, “Access Funding is part of an industry that profits off the poor and disabled. And Baltimore has become a prime target. It’s here that one teen — diagnosed with ‘mild mental retardation,’ court records show — sold her [structured settlement] payments [to Access] through 2030 in four deals and is now homeless. It’s here that companies blanket certain neighborhoods in advertisements, searching for a potentially lucrative type of inhabitant, according to the Washington Post (How Companies Make Millions of Lead-poisoned, Poor Blacks, August 25, 2015).

Access Funding and other companies have found gaps in the legal protections offered to victims of lead poisoning, allowing them to buy structured settlements for pennies on the dollar. “Over the past two decades, state legislatures and the U.S. Congress have passed measures to protect vulnerable people selling structured settlements. In 2000, Maryland inked the Structured Settlement Protection Act, which enumerated a series of requirements. First, a seller must seek the counsel of an independent professional adviser. Then the proposed deal must go before a county judge, who decides whether that agreement reflects the seller’s best interests,” according to the Post article.

“There are weaknesses and ways people can circumvent it,” said Eric Vaughn, Executive Director of the National Structured Settlements Trade Association. “And these companies are getting around the intents of the law. . . . And when that happens, people get hammered.”

Medtronic: M-E-D-I-C-A-R-E: another way to spell revenue.

A former Medtronic sales rep, Jason Nickell of Austin, Texas, alleged in a whistleblower lawsuit that the company promoted off-label use of a neurostimulation device. He made as much as $600,000 per year selling it. The suit states, “Medtronic sales staff was directed to promote the off-label procedure by selling the neuromodulation device at steep discounts to pain management doctors and by promising those physicians that they could ‘make upward of $10,000 profit on each patient, while adding only minutes to the procedure,’” according to an article in the Star Tribune (Medtronic to pay $2.8 million to Settle Off-label Promotion Charges, February 7, 2015). Nickell quit his job “over concerns about the way that Medtronic devices were being promoted for an investigational procedure known as subcutaneous stimulation, Sub-Q or subcutaneous peripheral nerve field stimulation,” according to the suit.

Under the terms of Medtronic’s agreement with the US government, the company will pay $2.8 million in fines, in exchange for dismissal of criminal charges, and no obligation to admit liability. “Medtronic is committed to following appropriate marketing and reimbursement practices at all times, and for many years has had in place a comprehensive and robust employee compliance program,” the company said in the statement.

The US government interpreted the company’s actions differently. “Medtronic’s scheme,” as the government described it, turned many doctors “from dispassionate medical professionals … into retail salesmen pushing ‘snake oil’ because of large profits.”

Office Depot: A price commitment that’s worth less than the paper it’s printed on.

In January, the law firm Philips and Cohen reported that “more than 1,000 cities, counties, school districts and other government entities in California – including Los Angeles and Santa Clara County – will share in a $68.5 million settlement paid by Office Depot for allegedly overcharging them for office supplies. The case was initiated by a former Office Depot employee, David Sherwin, in a whistleblower lawsuit.

“Participants in the contract are guaranteed to receive Office Depot’s best available prices for government purchasers, according to Sherwin’s complaint. But Office Depot allegedly gave Los Angeles, Santa Clara and the other California entities that are part of the settlement a lower discount rate than other government entities were given,” according to Philips and Cohen. The case alleged that “Office Depot failed to give most of its California government customers the lowest price it was offering any government customer as required under its contracts.” Other pricing misconduct also was alleged.

“David Sherwin’s insider knowledge and his determination to do the right thing were the most important factors in bringing Office Depot’s alleged misconduct to light,” said Stephen Hasegawa, a San Francisco attorney who represented Sherwin. “He worked tirelessly on his own and with his lawyers for several years to try to prove Office Depot had overcharged its government customers.”

Formosa Plastics: When quality control measurements don’t conform to industry standards, make them up.

On April 4th, Formosa Plastics agreed to pay $22.5 million “to settle its liability in a whistleblower lawsuit involving PVC pipe manufactured by a former subsidiary, JM Eagle, under the terms of a settlement agreement approved by a federal judge. The settlement by Formosa Plastics doesn’t cover JM Eagle’s liability. The lawsuit alleges that JM Eagle ‘falsely represented to its customers . . . that the PVC pipe products sold to them conformed to applicable industry standards when in fact the products were made using inferior materials, processing, and tooling that resulted in their having substandard tensile strength, as measured by various tests,’” according to PRNewsire (Formosa Plastics Agrees to Pay $22.5 million to Settle Its Liability in Whistleblower Case That Former Subsidiary JM Eagle Lost at Trial)

It’s impossible to read about these appalling ethical choices without recognizing disturbing patterns. All were heartless and deliberate. Most created human calamity, including death, personal injury, job and financial losses. All exploited information power. All depended on legal loopholes, regulatory gaps, or lax enforcement. All caused incalculable financial losses. All resulted from persistent chains of unethical choices – not from a single bad decision. Most infected more than one company.

These patterns can be broken when Ethical Sales Governance gets wedged into every company’s revenue plan. I propose putting it in between Sales Process and Lead Generation, so it won’t be missed. Jazz up the title by calling it Optimized Ethical Sales Governance – that way, people will read it. Then, pack the section full of content, including Corporate Responsibility, a Code of Business Conduct, Ethics Monitoring and Assessment, How to report violations, Compliance standards, and Ongoing Ethics Training and Development.

My reasons for making these recommendations are entirely self-serving: I want fewer candidates to cull when I make my choices for 2016.


  1. Hi Michael – thanks for your comment. While Monsanto has a history of unethical practice, my awards are for companies that had significant unethical activity in the current calendar year.


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