A few pieces from the last few days—first, how corporations are on track to pay record fines this year for fraud:
Pharmaceutical companies, military contractors, banks and other corporations are on track to pay as much as $8 billion this year to resolve charges of defrauding the government, analysts say — a record sum and more than twice the amount assessed last year by the Justice Department.
But while the collections are a boon to the government and taxpayers, they are resurrecting questions about the relative lack of charges against executives at the companies that are getting the stiffest penalties.
“A lot of people on the street, they’re wondering how a company can commit serious violations of securities laws and yet no individuals seem to be involved and no individual responsibility was assessed,” Senator Jack Reed, Democrat of Rhode Island and chairman of a subcommittee that oversees securities regulation, said at a recent hearing.
Second, a nice contrast between the average accused loiterer and the bank HSBC:
It’s a splendidly large bank, with $2.5 trillion in global assets, 300,000 employees and a 2011 profit of about $22 billion. It is one of our city’s prominent corporate citizens, contributing to museums and charitable groups.
It also let Mexican drug cartels launder money on a grand scale, according to a Senate report, and it evaded laws intended to stop banks from doing business with Iran and North Korea. Perhaps most astonishing, the report said it had conducted business for many years with Al Rajhi, a bank in Saudi Arabia whose founder was an Al Qaeda benefactor.
All of this is detailed in the report, 335 pages long, issued a few weeks ago by Senator Carl Levin. It reads like a racketeering indictment of the Genovese crime family, replete with evidence that senior officials knew the contours of the game.
Finally, a nice piece at Reuters titled “Regulators irate at NY action against Standard Chartered:”
The Treasury Department and Federal Reserve were blindsided and angered by New York’s banking regulator’s decision to launch an explosive attack on Standard Chartered Plc over $250 billion in alleged money laundering transactions tied to Iran, sources familiar with the situation said…
[New York financial regulator Benjamin] Lawsky’s stunning move, which included releasing embarrassing communications and details of the bank’s alleged defiance of U.S. sanctions against Iran, is rewriting the playbook on how foreign banks settle cases involving the processing of shadowy funds tied to sanctioned countries. In the past, such cases have usually been settled through negotiation - with public shaming kept to a minimum.
In his order, Lawsky said Standard Chartered’s dealings exposed the U.S. banking system to terrorists, drug traffickers and corrupt states.
According to the article, Standard Chartered hired a top Washington fixer to determine just how much money they had been moving for Iran:
As part of a review the bank sought to give to regulators, Standard Chartered hired Promontory Financial Group, a Washington D.C. consulting firm run by Eugene Ludwig, who served as U.S. Comptroller of the Currency from 1993-98. Promontory was hired to review Standard Chartered’s transactions tied to Iran. The bank’s review ultimately settled on the figure of less than $14 million for improper transactions.
But Lawsky is alleging a somewhat larger figure:
One area of sharp disagreement between Lawsky and Standard Chartered is just how much in illicit funds is involved. The bank put the value of Iran-related transactions that did not comply with regulations at less than $14 million. Lawsky estimated them at $250 billion.
Note that the bank would be fined based on the size of their transactions with Iran, so they have a definite incentive to juke the stats. And the bank is lawyering up:
The bank has hired two prominent law firms - Sullivan & Cromwell in New York and Slaughter and May in London - to represent it in its dealings with various U.S. authorities over transactions linked to Iran. Among the Sullivan & Cromwell partners working for Standard Chartered is Rodgin Cohen, one of the best-known U.S. corporate lawyers, a person familiar with the matter said. Sullivan & Cromwell has represented other non-U.S. banks probed for allegedly ignoring U.S. sanctions against countries.
Now, here’s where that last story gets interesting. I happened to have that article open in my browser from yesterday. But if you click over there using the original link, the article has been largely rewritten. The title is now “Standard Chartered begins fightback on Iran allegations,” and all the details about the DC consulting firm Promontory and the law firm Sullivan & Cromwell are gone. Yves Smith has proof (as well as the original article in full) that Reuters has scrubbed it from their site entirely (my searches also turn up nothing), and there is no correction notice on the article or anywhere else I can find.
Why did Reuters change the story? I’ll post an update if I hear anything from them. Until that time, Marcy Wheeler has some all-too-convincing speculation.
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