Will HSBC Be Too Big To Jail…Again?


Respectfully submitted by Lawrence E. Rafferty, (rafflaw) Weekend Contributor

British banking giant, HSBC reached an agreement in 2012 with the Department of Justice that kept it from being hauled in to court on criminal charges due to its systemic assistance in laundering money for drug cartels and allegedly terrorists.  HSBC, with its Hong Kong headquarters shown above, is now in trouble again for alleged problems prior to the settlement agreement in 2012.

“The US Department of Justice is considering bringing criminal charges against HSBC and its executives as part of its investigation into whether the bank’s Swiss subsidiary helped US clients evade taxes.

Democratic senator Elizabeth Warren called on prosecutors to “come down hard” on HSBC if the bank is found to have colluded with tax evaders on Tuesday.

Her intervention came as US government officials with knowledge of the DoJ’s investigation provided the Guardian with new details about the inquiry.

Renewed focus has been placed on the long-running investigation into HSBC Switzerland by the department, after a huge leak of secret bank data – passed to the DOJ’s tax division almost five years ago – was obtained by the Guardian and other media.

It shows that HSBC Switzerland helped some clients conceal millions of undeclared assets, and has immediately raised questions on Capitol Hill about the response from prosecutors and tax authorities.  US government officials said the investigation is not merely looking at HSBC’s US clients, and could also result in criminal indictments against the bank itself. “That has not been ruled out,” one official said, when asked if HSBC or its executives could be criminally indicted. “It is certainly something that is under consideration.” ‘ Reader Supported News 

This latest disclosure of an alleged enterprise to assist wealthy customers and corporations to evade taxes in the United States and internationally was disclosed by an international whistleblower named Hervé Falciani.  Mr. Falciani turned over the data to French authorities in 2010.  The French shared the information with the United States that same year and we have just recently learned of the pending investigation into the matter.  Not only is the alleged illegal activity disturbing, but the fact that the Department of Justice has had this information for at least 4 years is even more distressing.

Did the Department of Justice consider this information before it agreed to the 2012 settlement agreement with HSBC which allowed HSBC to escape criminal prosecution?  I am surprised that Loretta Lynch was not asked that question when she was grilled by the Senate committee discussing her confirmation as United States Attorney General.  In light of how easy the Department of Justice went on HSBC in 2012, maybe I should not be surprised.

“That nobody from the bank went to jail or paid a dollar in individual fines is nothing new in this era of financial crisis. What is different about this settlement is that the Justice Department, for the first time, admitted why it decided to go soft on this particular kind of criminal. It was worried that anything more than a wrist slap for HSBC might undermine the world economy. “Had the U.S. authorities decided to press criminal charges,” said Assistant Attorney General Lanny Breuer at a press conference to announce the settlement, “HSBC would almost certainly have lost its banking license in the U.S., the future of the institution would have been under threat and the entire banking system would have been destabilized.”

It was the dawn of a new era. In the years just after 9/11, even being breathed on by a suspected terrorist could land you in extralegal detention for the rest of your life. But now, when you’re Too Big to Jail, you can cop to laundering terrorist cash and violating the Trading With the Enemy Act, and not only will you not be prosecuted for it, but the government will go out of its way to make sure you won’t lose your license. Some on the Hill put it to me this way: OK, fine, no jail time, but they can’t even pull their charter? Are you kidding?

But the Justice Department wasn’t finished handing out Christmas goodies. A little over a week later, Breuer was back in front of the press, giving a cushy deal to another huge international firm, the Swiss bank UBS, which had just admitted to a key role in perhaps the biggest antitrust/price-fixing case in history, the so-called LIBOR scandal, a massive interest-rate­rigging conspiracy involving hundreds of trillions (“trillions,” with a “t”) of dollars in financial products. While two minor players did face charges, Breuer and the Justice Department worried aloud about global stability as they explained why no criminal charges were being filed against the parent company.

“Our goal here,” Breuer said, “is not to destroy a major financial institution.”‘ Rolling Stone

You will recall that infamous concept that the Big Banks are too big to jail.  HSBC has taken that knowledge and for years has been doing its best to avoid and elude regulators over its now infamous schemes to hide drug cartels and terrorist money from American and international authorities.

We have an international bank doing substantial business in the United States and they are found to have intentionally hidden assets on more than one occasion, and the Department of Justice is just getting around to consider criminal prosecutions!

I have an idea.  If a bank or any corporation has been found to have seriously violated the law on multiple occasions, maybe, just maybe it might make sense to close them down and put the individuals responsible for making the conscious decision to hide assets, in jail.  Would other banks and corporations so readily violate our laws if some people are going to jail and some corporate charters are being pulled?

Without sincere efforts by a Department of Justice that is truly blind to size and wealth, can we ever expect these banking criminals to change their behavior?  Just because they are corporations, they are just people like you and I, aren’t they?

The views expressed in this posting are the author’s alone and not those of the blog, the host, or other bloggers. As an open forum, weekend bloggers post independently without pre-approval or review. Content and any displays or art are solely their decision and responsibility.”

39 thoughts on “Will HSBC Be Too Big To Jail…Again?”

    1. “Offshore trusts. Holding companies. Foundations. Art. Jewelry. Foreign businesses. Foreign property. She’ll corporations.”

      So wealth may allow elites access to assets that may be regulated by the laws of other nation states – not by US law.

      I am still not seeing how that ties in with: “The Productive class cannot get away with as much as the elite because of government control of financial data.”

      It seems to me the plain language meaning of your two points has to do with access to assets and alternatives that result from wealth and nothing to do with ‘government control of financial data’.

      But maybe I am missing something.

  1. the weekend author has it right. Pulling charters is the way to go. The ppl of delaware or south dakota are aiding and abetting criminal activity by hsbc. Hsbc isn’t being tossed in jail but it could be given the death sentence. Its legit pieces bot up with little impact o the economy. And real wrong doers tossed in jail without coporate cover. It is time to pierce their viel…let legit shareholders stand….and take the offenders to court without ‘idemnity’ insuraancee which shld not cover criminal activity. No more exporting liability on innocent shareholders or customer. letting a mere half million ppl in south dak charter law breakers should not be hard to reverse. They are patriots. A little bit of ad money there could serve to over rule the doj cowards.

  2. “Well, duh. Exactly what does that have to do with “government control of financial data”.
    That Buffett has financial tools not under governmental control.

    1. “That Buffett has financial tools not under governmental control.”

      Could you tell us about some of those financial tools ‘not under governmental control’, what prevents the productive and dependent classes from making use of them, and how those tools influence financial markets and tax shelters.

  3. Pogo, I had an economics professor back in the 70’s who taught us it was our duty to pay as few taxes as legally permissible. He was a pretty liberal guy. The Woodstock folks here and elsewhere forget the mantra was to not have a big govt. and paying excessive taxes fed the beast.

    Olly, you lead off the thread w/ a home run. Lead off homers was Ricky Henderson’s specialty.

  4. My neighbor is a football nut. He absolutely demands that the referees punish all infractions of the rules. However, when it comes to “the market place” he demands that all referees be thrown in jail and all rules be immediately terminated because our market is “socialist” if not “communist” controlled. Unfortunately, the Loretta Lynch’s and Breuer’s of this world are not alone in allowing criminal banks such as HSBC to get away with legal murder. They are buoyed by a huge clan of fellow-travelers and these fellow-travelers are not all one-percenters nor are they all Republicans.

  5. “Doesn’t everybody have access to the same government financial data?
    You don’t think Warren Buffet has access to methods hiding his income that are unavailable to the average Joe?

    This is why people are increasingly leaving the US, moving to less financially damaging countries.

    1. “You don’t think Warren Buffet has access to methods hiding his income that are unavailable to the average Joe?”

      Well, duh. Exactly what does that have to do with “government control of financial data”.

  6. ” or does one work to change the law

    Good luck with that. Statists have been voting higher and higher taxes for 125 years.
    What chance do we have against Leviathan, save for sabotage?

  7. “…just let the masses know how the elite get away in the game and see the result

    The Dependent class already know this, and are often similarly getting away with smaller offenses.

    The Productive class cannot get away with as much as the elite because of government control of financial data.
    The Productive wish they could do what the Elite get away with, they are not as envious as you suppose, I.e., take no solace in the State destroying others.

    1. “The Productive class cannot get away with as much as the elite because of government control of financial data.”

      What does that mean? How does that work?

      Doesn’t everybody have access to the same government financial data?

      Can’t anyone hire a tax accountant or put their funds in a tax shelter?

      Are there really any secretes about tax law or how to construct a tax shelter?

  8. The gov=banks=gov…. the “too big fail” meme just fits the bill. Probably too late to do anything about it.

    So the answer to the article title: Yes.

  9. Imagine all of the shareholders who are calling friends in DC about this.
    Pogo, taxes make it possible and if you want anarchy, just let the masses know how the elite get away in the game and see the result. The age of communication is bringing the reality to the less informed, and their ability to digest it is limited.

  10. The US has become grasping and rapacious, capricious and excessive.
    Tax evasion should never be a criminal offense.
    In many cases, such evasions are a patriotic duty.

    1. Pogo – I have to agree. It is our patriotic duty to pay as little tax as possible. The less money the government has to play with the less damage they do to us.

      1. “. It is our patriotic duty to pay as little tax as possible. ”

        I think the question is does one do that by evading taxes as has been advocated here in this thread, or does one work to change the law?

        Which is it to be: social change through democratic process, or sabotage of the system.

        1. bfm – at this point I vote for sabotage. All the government agencies are doing, so why not me?

  11. I would support criminal prosecutions as long as they prosecute everyone who breaks the law.

  12. The TAX CODE is a farce – everyone except those who benefit knows it. No wonder, people know that few ever pay their fair share. If you can not make it equitable – then devise another system that the public can believe in. People do not just go off on their own to game the system – it is too complicated to do without JD help. If you don’t agree – Explain

  13. Why do we even have the concept ‘too big to fail’. Sure there will be some disruption if we take down these criminal enterprises.

    But is the business is there, if there is economic need then other players will step in to provide the products and services. To argue otherwise is to argue that capitalism does not work.

    We can be confident that when we remove criminal enterprises, other legitimate businesses will come forward to provide the legal products and services needed by a healthy economy.

    Some may argue that there is a cost to the economy in the form of economic inefficiency while resources are re organized to replace the criminal organization.

    But there is also economic inefficiency from allowing the criminal enterprise to operate in violation of the laws that others obey. We are going to pay an economic price in any case. Shouldn’t we pay a price for actions that lead to a more efficient, law abiding economy? Why would we choose to pay the price of economic inefficiency to further criminal activity? I have no answer for that question. It makes no sense to me. To answer that question you will have to ask the Department of Justice.

    The idea of ‘too big to fail’ is a fiction put forward by those who don’t want to or dare not disturb the status quo.

Comments are closed.