Federal prosecutors reportedly sought a guilty plea from HSBC in 2012, after the bank was caught laundering money and helping governments bust US sanctions, but the initiative was ignored by top Justice Department officials.
The allegation was made earlier this week in a report compiled by Republicans on the House Financial Services Committee. The probe alleges that DOJ officials backed off any move to prosecute the London-based bank after pressure from the British government.
In December 2012, the Justice Department and HSBC reached a $1.9 billion settlement based on a deferred prosecution agreement, which had been announced the previous month. The deal put the bank in a probationary state without forcing it to admit guilt.
The New York Times called the signing of the agreement a “dark day for the rule of law,” noting in an editorial that HSBC had been aiding “Mexican drug cartels and Saudi banks with ties to terrorist groups.” It had also been helping Sudan, Iran, and Cuba break US sanctions.
According to the House Republicans’ inquiry, the guilty plea push was revealed in a Sept. 4, 2012 inter-agency phone call, originating from the Justice Department’s Asset Forfeiture and Money Laundering Section (AFMLS).
Jen Shasky, then AFMLS chief, “stated for the first time that it is considering seeking a guilty plea from HSBC (apparently for violations of the Bank Secrecy Act only, not for sanctions violations),” according to an internal Treasury Department memo about the phone call, emailed the same day.
During the next inter-agency phone call, Justice Department officials said they were still “very strongly considering a prosecution,” but invited more commentary from British regulators and other US agencies. The day before, George Osborne, the highest ranking British financial minister, had asked his US counterparts to refrain from prosecuting HSBC.
“Chancellor Osborne insinuated in his letter of September 10th that the US was unfairly targeting UK banks by seeking settlements that were significantly higher than ‘comparable’ settlements with US banks,” the report stated.
Osborne also said prosecuting HSBC “could lead to [financial] contagion” and that the case would have “very serious implications for financial and economic stability, particularly in Europe and Asia.”
House Republicans additionally said that former Attorney General Eric Holder may have misled Congress, in light of their findings. In May 2013 testimony before the House Judiciary Committee, Holder said: “if we find a bank or a financial institution that has done something wrong, if we can prove it beyond a reasonable doubt, those cases will be brought.”
Questions about the integrity of that testimony, however, are not new, as Holder’s declaration varied from remarks he had made just two months before, in front of the Senate Judiciary Committee.
“I am concerned that the size of some of these institutions becomes so large that it does become difficult for us to prosecute them when we are hit with indications that if we do prosecute–if we do bring a criminal charge–it will have a negative impact on the national economy, perhaps even the world economy,” Holder had said.
The former Attorney General has been widely-panned for not seeking criminal prosecutions of Wall Street executives at the heart of last decade’s financial meltdown—a calamity fueled by a multi-trillion dollar mortgage securities fraud, carried out with the help of just about every major actor in the industry.
Holder now works for Covington & Burling, a corporate law firm that represents financial firms. The outfit notes on its website that it specializes in “anti-money laundering compliance programs,” among other areas of banking law.
Covington & Burling did not respond to a request for comment on behalf of Holder, made on Monday by USA Today.
