Eric Holder. (photo: Chip Somodevilla/Getty Images)
Eric
Holder's Longtime Excuse for Not Prosecuting Banks Just Crashed and Burned
12 July 16
Eric Holder has long insisted that he tried really hard when he was attorney general to make criminal cases against big banks in the wake of the 2007 financial crisis. His excuse, which he made again just last month, was that Justice Department prosecutors didn’t have enough evidence to bring charges.
Many critics have
long suspected that was bullshit, and that Holder, for a combination of
political, self-serving and craven reasons, held his department back.
A new, thoroughly-documented report from the House Financial Services
Committee supports that theory. It recounts how career prosecutors in 2012
wanted to criminally charge the global bank HSBC for facilitating money
laundering for Mexican drug lords and terrorist groups. But Holder said no.
When asked on June 8 why
his Justice Department did not equally apply the criminal laws to financial
institutions in the wake of the 2008 economic crisis, Holder told the platform
drafting panel of the Democratic National Committee that it was laboring under
a “misperception.”
He told the panel: “The
question you need to ask yourself is, if we could have made those cases, do you
think we would not have? Do you think that these very aggressive U.S. Attorneys
I was proud to serve with would have not brought these cases if they had the
ability?”
The report — the
result of a three-year investigation — shows that aggressive attorneys did want
to prosecute HSBC, but Holder overruled them.
In September 2012,
the Justice Department’s Asset Forfeiture and Money Laundering Section (AFMLS)
formally recommended that HSBC be prosecuted for its numerous financial crimes.
The history: From
2006 to 2010, HSBC failed to monitor billions of dollars of U.S. dollar
purchases with drug trafficking proceeds in Mexico. It also conducted business
going back to the mid-1990s on behalf of customers in Cuba, Iran, Libya, Sudan,
and Burma, while they were under sanctions. Such transactions were banned by
U.S. law.
Newly public
internal Treasury Department records show that AFMLS Chief Jennifer Shasky
wanted to seek a guilty plea for violations of the Bank Secrecy Act. “DoJ is
mulling over the ramifications that could flow from such an approach and plans
to finalize its decision this week,” reads an email from September 4, 2012 to
senior Treasury officials. On September 7, Treasury official Dennis Wood
describes the AFMLS decision as an “internal recommendation to ask the bank
[to] plead guilty.” It was a “bombshell,” Wood wrote, because of “the
implications of a criminal plea” and “the sheer amount of the proposed fines
and forfeitures.”
But after British
financial minister George Osborne complained to the Federal Reserve chairman
and the Treasury Secretary that DOJ was unfairly targeting a British bank,
senior Justice Department leadership reportedly sought to “better understand the
collateral consequences of a conviction/plea before taking such a dramatic
step.”
The report documents
how Holder and his top associates were concerned about the impact to the global
economy of prosecuting HSBC. And in particular, they worried that a guilty plea
would trigger a hearing over whether to revoke HSBC’s charter to do banking in
the United States.
According to
internal documents, DOJ then went dark for nearly two months, refusing to
participate in interagency calls about HSBC. Finally, Holder presented HSBC on
November 7 with a “take it or leave it” offer of a deferred prosecution
agreement, which would involve a cash settlement and future monitoring of HSBC.
No guilty plea was
required.
But even the “take
it or leave it” offer was apparently not the last word. HSBC was able to
negotiate for nearly a month after Holder presented that offer, getting more
favorable terms in the ultimate $1.9 billion deferred prosecution agreement,
announced on December 11, 2012.
The original
settlement documents would have forced any HSBC executive officers to void
their year-end bonuses if they showed future failures of anti-money laundering
compliance. The final documents say that, in the event of such failures, senior
executives merely “could” have their bonuses clawed back.
In addition, HSBC
successfully negotiated to have individual executives immunized from
prosecution over transactions with foreign terrorist organizations and other
sanctioned entities, even though the original agreement only covered the anti-money
laundering violations and explicitly left open the possibility of prosecuting
individuals.
As a Justice
Department functionary in 1999, Holder wrote the
infamous “collateral consequences” memo, advising prosecutors to take into
account economic damage that might result from criminally convicting a major
corporation.
In 2013, he
unwittingly earned his place in history for telling the Senate Judiciary
Committee, “I am concerned that the size of some of these [financial]
institutions becomes so large that it does become difficult for us to prosecute
them,” which became known as the “Too Big to Jail” theory.
Holder told the
Democratic platform drafting committee that “it was not lack of desire or lack
of resources” that led to the lack of prosecutions for any major bank executive
following the financial crisis. “We had in some cases statutory and sometimes
factual inabilities to bring the cases that we wanted to bring,” he said.
The HSBC case,
however, shows that lack of desire at the highest levels of the Justice
Department was indeed the primary reason that no prosecutions took place.
Former Congressman
Brad Miller, who also testified to the drafting committee, cited the HSBC case as
an example of the lack of equal application of justice in the Holder era.
Referring to the concern over destabilizing the financial system with an HSBC
prosecution, Miller said, “That’s not an argument that’s available to too many
people: ‘You can’t arrest me for selling cigarettes, it might destabilize the
financial system!’ ”
The internal communications
in the House report all come from the Treasury Department. The Justice
Department, they say, did not comply with subpoenas for information about the
settlement.
Holder
is returned to Covington & Burling, a corporate law firm
known for serving Wall Street clients in 2015. He had worked at
Covington from 2001 until he was sworn in as attorney general in Feburary 2009.
Covington literally kept an office empty for him, awaiting his return.
Jennifer Shasky, the
AFMLS Chief who requested the prosecution of HSBC but was overruled, recently resigned as
the head of the Financial Crimes Enforcement Network to become a senior
compliance officer with HSBC.
C 2015 Reader Supported News
Baltimore
Nonviolence Center, 325 East 25th Street, Baltimore, MD
21218. Ph: 410-323-1607; Email: mobuszewski [at] verizon.net. Go to http://baltimorenonviolencecenter.blogspot.com/
"The master class
has always declared the wars; the subject class has always fought the battles.
The master class has had all to gain and nothing to lose, while the subject
class has had nothing to gain and everything to lose--especially their
lives." Eugene Victor Debs
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