Respectfully submitted by Lawrence E. Rafferty (rafflaw)-Weekend Contributor
We have written on multiple occasions about the illegal activities of Big Banks and Wall Street financial firms as well as their penchant to repeat their offenses. It now seems that a State regulator and two Federal prosecutors may have finally come to the conclusion that many Big Banks are not only continuing their illegal practices, but that they may have hid information during prior investigations into their allegedly shady dealings.
While I am glad that at least two Federal prosecutors may be putting the heat on some of the repeat offenders by extending their deferred prosecution agreements and opening new investigations and taking a second look at past investigations, my first response is what took them so long?
According to the New York Times, New York State Regulator Benjamin Lawsky and Federal Prosecutors Leslie R. Caldwell and Cyrus R. Vance, Jr. believe that some of the Big Banks have not been telling the truth.
“It would be the Wall Street equivalent of a parole violation: Just two years after avoiding prosecution for a variety of crimes, some of the world’s biggest banks are suspected of having broken their promises to behave.
A mixture of new issues and lingering problems could violate earlier settlements that imposed new practices and fines on the banks but stopped short of criminal charges, according to lawyers briefed on the cases. Prosecutors are exploring whether to strengthen the earlier deals, the lawyers said, or scrap them altogether and force the banks to plead guilty to a crime.
That effort, unfolding separately from a number of well-known investigations into Wall Street, has ensnared several giant banks and consulting firms that until now were thought to be in the clear.
Prosecutors in Washington and Manhattan have reopened an investigation into Standard Chartered, the big British bank that reached a settlement in 2012 over accusations that it transferred billions of dollars for Iran and other nations blacklisted by the United States, according to the lawyers briefed on the cases. The prosecutors are questioning whether Standard Chartered, which has a large operation in New York, failed to disclose the extent of its wrongdoing to the government, imperiling the bank’s earlier settlement.” New York Times
As the New York Times states, Standard Chartered was caught illegally transferring Billions of dollars to blacklisted nations. Of course, their penalty the last time was a large fine, but allegedly not large enough to prevent them from possibly not being totally forthright in the earlier investigation.
Unfortunately, Standard Charter is not the only Big Bank and Wall Street firm that may soon join the Repeat Offenders Club.
The Bank of Toyko and PriceWaterhouseCoopers are both being looked at by the State of New York and the Manhattan Federal prosecutor to see if their past settlements need to be amended in light of new information that appears to prove that both entities fudged the reports given to the regulators during the first investigation.
“New York State’s banking regulator is also taking a fresh look at old cases, reopening a 2013 settlement with the Bank of Tokyo-Mitsubishi UFJ over accusations that the bank’s New York branch did business with Iran, according to the lawyers who were not authorized to speak publicly.
The regulator, Benjamin M. Lawsky, the lawyers said, is negotiating a new settlement deal with the bank that, if it goes through, would involve a penalty larger than the $250 million it paid last year. Mr. Lawsky suspects that the bank initially played down the scope of its wrongdoing.
PricewaterhouseCoopers, the influential consulting firm that advised the Japanese bank on that case, is also under investigation, according to the lawyers briefed on the matter. The Manhattan district attorney’s office is examining whether the firm watered down a report about the bank’s dealings with Iran before it was sent to government investigators.
Those developments, not previously reported, are part of a broader revisiting of settlements with some of the world’s biggest banks, an effort that has focused on foreign banks but could eventually spread to American institutions.” New York Times
While I commend these regulators for their efforts, how many times do these foreign banks and domestic banks like Bank of America and JP Morgan get to break the law and only have to pay a fine or penalty that in many cases is a tax-deductible “cost of doing business”? Instead of merely revisiting the prior deferred prosecution agreements, it might make more sense to put a few top officers of these institutions in jail with serious sentences instead of just making the fines and penalties larger.
The New York Times article that we have linked to above, seems to suggest that the government may finally be considering more serious penalties. But will anyone go to jail?
“Even now that prosecutors are examining repeat offenses on Wall Street, they are likely to seek punishments more symbolic than sweeping. Top executives are not expected to land in prison, nor are any problem banks in jeopardy of shutting down.
Still, fearing a certain fallout from the new round of scrutiny, banks have bolstered their legal teams. Standard Chartered, for instance, has retained one of the most lauded litigators in the country, Theodore V. Wells Jr., to work on the reopened sanctions case, according to the lawyers briefed on the matter.
The decision to revisit the cases also draws attention to consulting firms that helped shape the original settlements. When determining the extent of wrongdoing at a bank, the government often relies on assessments from consultants that are handpicked and paid by the same bank.” New York Times
That last sentence quoted above is just one example of how these Big Banks have been successful in keeping their profitable illegal activities safe from prying investigators eyes. The banks hire and pay for the consultants that the government uses in their investigation of those very same banks. Does anyone else see a problem here? In effect, it is akin to buying a jury or at least, hiring your opponents expert witness.
I highly recommend that you read the entire New York Times article that we have linked to above. The only way the various State and Federal regulators can bring the Big Banks and Wall Street firms under control is to use the full weight of the law against the Banks when they break the law. If an individual intentionally funnels millions of dollars to blacklisted nations, would that individual just get fined?
While the reopening of these past cases and the renewed scrutiny by State and Federal regulators in future cases is a good thing, the only way to get the attention of these lawbreakers is to indict corporate officers and board members who knew or authorized the illegal behavior. If they are convicted, put them in jail. If not, their corporate money will continue to bankroll illegal schemes to get around their past settlements and flaunt the law.
Oh, by the way, not allowing the Banksters to deduct their penalties and fines might help!
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