As long as there are companies, there will be company scandals.
The year 2015 has had no shortage of companies in trouble for pulling the wool over our eyes or for just being jerks. Take perennially hated company Comcast, for example. When customer Lisa Brown tried to get her cable service cancelled, Comcast customer service reps made offers in hopes of keeping her. She refused. So they did what any mature Fortune 50 company would do: they changed her name in their system to "A**hole Brown." In typically delayed fashion, the cable company eventually fixed the problem after the situation was brought to light by a journalist. Less than a month later, another unfavored customer was redubbed in their system "Super B****."
This presented Comcast with yet another black mark (I swear they have so many at this point, they make Darth Vader look bright). Unfortunately, this was a minor tiff compared to this year's worst company scandals.
In 2015, tried-and-true brands disappointed their customers. Brand personalities were exposed as monsters. Our perception of premium cat food was forever tainted. Companies, once again, showed themselves capable of anything when it came to covering up bad news or bad numbers. While rarely reaching Enron- or Lehman Brothers-like infamy, company scandals continued their nasty streak in 2015.
Join us as we remember the 10 worst company scandals of 2015 and hope 2016 will be different (yeah, right):
With some companies, you can see scandals coming from a mile away. But Volkswagen, which has been known for quality and integrity for decades with few incidents?
When it was discovered that VW had been purposely tweaking the software on their diesel engine models to give fake emissions numbers and trick the EPA, car enthusiasts everywhere couldn't believe their ears. Volkswagen suddenly became the automotive world's Lance Armstrong.
The repercussions for the auto giant were staggering. Eleven million cars worldwide had been outfitted with the so-called "defeat device." Unlike a typical recall where a faulty part would simply be replaced, the defeat device was covering up a fundamental failure in the cars' engine systems. They did not perform at standard-the engines emitted "nitrogen oxide pollutants up to 40 times above what is allowed in the US"-and it would take a major overhaul of their engines get them to standard.
VW America Michael Horn was quoted as saying, "We've totally screwed up."
The company's CEO resigned, an internal inquiry was launched, and the company set aside €4.8B to cover recalls. But they don't even know yet how much they could be fined by the EPA, but that could be as much as $37,500 for every affected vehicle. Ouch!
Yes, Volkswagen, you totally screwed up.
Everybody knows that Hollywood is a complete circus, so it was entertainment of the highest order to see their seedy, whiny underbelly fully exposed. When Sony Pictures defied cries of outrage from the North Korean government at the release of comedy "The Interview" (about a duo of reporters who plot to assassinate the country's leader) a group of possibly North Korean hackers stole and released to the world employees' personal information, employee emails, copies of unreleased movies, and more to the Web-allegedly over 100TB of data in all.
And then pandemonium broke out. Sony's Twitter accounts were taken over. An email exchange emerged with producer Scott Rudin calling Angelina Jolie a "minimally talented spoiled brat." Another email exchange between Sony Pictures co-chair Amy Pascal and Rudin contained racially charged references to President Obama. Most recently, another email revealed Charlie Sheen's HIV-positive status.
Pascal stepped down. Sony had to put side $15 million to cover any further damage. Look for the movie script within the next couple years, with Nicolas Cage set to star.
For years, people have commented on how Ronald McDonald gave them the creeps. Turns out we were scared of the wrong brand personality.
Earlier this year, suspicion began to swirl around inspirational weight-loss personality and Subway pitchman Jared Fogle when the head of his nonprofit was arrested on child pron charges. Fogle laid low and left the nation thinking, There's no way Jared did this. Weeks later, Jared handed himself over to police. He was charged with travelling across state boundaries to have sex with minors and possession of over 400 child porn videos.
In August, a Subway franchisee revealed that she had informed the company of Fogle's disturbing interest in children as far back as 2008 but that the company didn't do anything about it.
Subway, unfortunately, continued to stay quiet and minimize its relationship with Fogle with Subway attorneys claiming that the company can't be held culpable for Fogle's actions.
Despite their efforts to distance themselves, their brand has already been unfathomably tainted by the crimes of their pitch man. Fogle has been divorced by his wife and has been sentenced to 15 years in prison. Victims are to receive $1 million each in damages.
In just one measure of the impact this has had on Subway, The Reputation Institute's latest report shows that their score dropped six points, from 77 to 71, between the first and third quarters of this year-from nearly "excellent" to slightly "above average."
Airline crashes happen regularly enough, but few are purposely caused by the pilot of the craft. And it's even rarer for an airline to know of the pilot's dangerous state of mind prior to an incident like this. Unfortunately for Germanwings, the 150 people aboard the flight, and their loved ones, this is exactly what happened on Germanwings Flight 4U 9525 on March 24, 2015.
Sadly, Germanwings had a number of signals that something was terribly wrong with Lubitz. The pilot had suffered from depression for years, badly enough that he was denied his medical certificate twice by Lufthansa. Even when his certificate was revalidated, it came with instructions to have aeromedical doctors contact the pilot licensing authority before the certificate was renewed.
The last sign came the day of the crash, when, on an outbound flight, Lubitz practiced the maneuver he would eventually use to crash the plane on the return flight, rapidly dropping altitude while increasing the plane's speed.
For Germanwings, the realization that these dots all connected wouldn't come until after the crash. The crash victims' families began to demand answers. Germanwings offered these families €25,000 each for their suffering, but in August it was announced that many of the families were planning to file a lawsuit for higher compensation.
For the foreseeable future, Germanwings will be associated with a crash, a lawsuit, and the mentally unstable pilot who flew under their radar until it was too late.
It's not that anyone actually believed, before the dramatic arrests went down, that the officials and leadership of FIFA were upstanding and fair. What surprised people around the globe was that someone had actually had the moxy to go after them at all.
In a series of international raids, the FBI and IRS were accusing FIFA-associated officials of continental football bodies and sports marketing executives of wire fraud, bribery, racketeering, and money laundering. Suddenly, the 2010 and 2014 World Cups were allegedly the products of ridiculously large bribes to FIFA officials, instead of being the symbols of humanity and athletic competition they purport to be. Even mega-brands like Nike and Adidas were at risk of being sucked into the growing vortex.
Before the scandal erupted, no one thought that FIFA was squeaky clean; but after, no one would ever think they were invincible again.
Innovator. Game-changer. Bully. Sweatshop. When the New York Times released an expose of the surprisingly brutal work environment inside the Internet behemoth, their brand was suddenly blown wide open. And what was inside was not pretty.
The article gave this shocking glimpse into the supposedly enlightened, forward-thinking organization, revealing something more akin to a gladiatorial arena:
"At Amazon, workers are encouraged to tear apart one another's ideas in meetings, toil long and late (emails arrive past midnight, followed by text messages asking why they were not answered), and held to standards that the company boasts are 'unreasonably high.' The internal phone directory instructs colleagues on how to send secret feedback to one another's bosses. Employees say it is frequently used to sabotage others. (The tool offers sample texts, including this: 'I felt concerned about his inflexibility and openly complaining about minor tasks.')"
CEO Jeff Bezos, formerly considered a tech luminary, attempted to recover some goodwill by saying, "The article doesn't describe the Amazon I know." Instead, the statement became indicative of a manager out of touch with an organization gone horribly awry. A company once thought enlightened had been revealed as Industrial Revolution-era barbaric in its treatment of employees.
Perhaps it's scandalous enough that Nestle's Fancy Feast focused consumers on spoiling cats while millions of human beings live in poverty. But in August of this year, the massive food conglomerate was hit with a scandal that would leave a bad taste in everyone's mouth, when they were discovered to be acquiring fish for their Fancy Feast products from slave ships in Thailand.
A lawsuit by a handful of California consumers of the product alleges that Nestle knowingly kept from the public the source of the fish it uses for Fancy Feast products, namely Thai slave ships that are mostly filled with slaves taken from Myanmar and Cambodia. On these ships and in the process of catching fish for Nestle, the lawsuit further alleges, these slaves are starved, beaten, otherwise abused, and even murdered.
The last time Nestle had been embroiled in unlawful labor in the third world, the company's head of operations said staunchly that child labor "goes against every we stand for."
With two strikes against them now, consumers are going to find that claim harder to stomach.
In the realm of fantasy sports, gambling (or, shall we say, skill) is not scandalous enough to warrant a scandal. In fact, it's part of their business model. But if someone is gambling based on questionably obtained insider information? Then it's time to call in the Feds and declare a bona fide scandal.
Fantasy sports websites had been quietly growing by leaps and bounds into a billion-dollar industry when scandal struck. A DraftKings data breach in early October was soon followed by one of their own employees suddenly winning $350,000 in a single week. Cries of insider trading (or at least the fantasy sports version of the practice) rose from other fantasy sports players and acted like blood in the water for legislators and law enforcement around the country.
Within weeks, the Nevada Gaming Control Board had declared fantasy sports sites like FanDuel and DraftKings to be gambling and shut them down in the state until they went through the proper licensing procedures to operate there. New York's attorney general followed suit and banned FanDuel and DraftKings from the state. Over a dozen other states are rumored to be pursuing similar actions, dealing a serious blow to an industry that had barely started to see its day in the sun.
Accounting is practically synonymous with fudging the numbers. We all assume that every corporation does it to some degree or another. But when your company regularly overinflates their profits times three for six years straight? Well, then you're in for a bitter reckoning when everyone figures you out.
Such was the case with Toshiba, which had overstated its operating profits by $1.22 billion (151.8 billion yen) total since 2008. Unfortunately, these misreported numbers weren't the result of the actions of a few rogue employees. They came straight from management, who put pressure on employees to postpone loss reports or push costs into later years.
This scandal was just the latest in a slew of bad accounting decisions by notable Japanese companies that have hurt the global economies confidence in the country's businesses. But it was disgraceful enough to prompt Toshiba's CEO to resign, as well as an influential vice-chairperson and adviser.
What happens when a state-owned company is found to have lost over $33 billion as the result of rampant corruption and good old-fashioned inefficiency? Bribes built into every contract. Deliberately overpaying for acquisitions. Money launderers operating freely within the company. All of these and more make up the scandal that turned management at Brazil's Petrobras into enemies of the state.
Perhaps the hardest part about getting your arms around this scandal is figuring out where it ends. Contracts awarded by Petrobras included 3% for bribes for members of three different political parties. Ten companies were found to have charged extortion fees to obtain contracts with the company. Petrobras purposely paid $1 billion for a refinery that had been worth only $50 million a couple years earlier. Perhaps most shocking was that Brazil's current president, Dilma Rousseff was minister of energy at the time and approved the refinery purchase herself.
So where does the Petrobras corruption scandal end? More than 20 executives have been arrested. Petrobras CEO Maria das Graça Foster has resigned and is cooperating with law enforcement. But clearly it could go all the way up to the highest position in Brazil's government.