NEW YORK (TheStreet) -- Within the last few days of writing this commentary, and prior to celebrating our July Fourth independence, two significant scandals have been resolved, one in the banking industry and another in pharmaceuticals.
GlaxoSmithKline (GSK) agreed to plead guilty to misdemeanor criminal charges and pay $3 billion to settle what government officials described as the largest case of health care fraud in U.S. history.
GSK targeted the antidepressant Paxil to under-age patients, pushed Wellbutrin for uses it was not approved for, falsified articles, used illegal kickbacks, and also failed to give the U.S. Food and Drug Administration safety data about its diabetes drug Avandia.
Barclays PLC (BCS), the huge international banking concern of the U.K., has agreed to pay $453 million in fines to the U.S. Justice Department and the U.K.'s Financial Services Authority over charges it manipulated the LIBOR, a short-term interest rate used to calculate consumer bank loans, from mortgages to credit cards.
|Barclays Chief Executive Bob Diamond Stepping Down|
Their stock values will be diminished in the near term.
There will be announcements of major policy, process and practice improvements prior to the year's end.
However, neither company will go away. They are both icons with substantial assets to endure the latest penalties, downturn in business and reputation dips.
- Banking and big pharma take another self-induced hit of scandalous practices. In 2009, Pfizer (PFE) was hit with a $2.3 billion settlement for improperly marketing 13 drugs. Barclays' upset comes only months after the $2 billion+ debacle with JPMorgan Chase (JPM) investment-risk meltdown.
Regulatory and investigative attention will increase.
Advertising, public relations campaigns, legal fees, risk-management efforts and training budgets will go through the roof.
- There may be leadership shake-ups and board shuffling and those who stand accused will move on to other companies.
- They should be immediately fired or removed;
granted no resignation severance packages or benefits;
all compensation gained during the illicit practices should be clawed back and used to partially pay for the settlements;
they should be banned from holding any executive role in their particular industry for up to 10 years;
should not be allowed to leverage their misconduct into any means of profiteering such as lectures, books, media interviews, consulting, etc.;
company board members should also be immediately removed and undergo the aforementioned punishments including their inability to serve on any other corporate boards for up to 10 years.
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