As Part of Confirmation Process, Loretta Lynch Suggested DOJ Didn’t Have Enough Evidence to Prosecute HSBC

The WSJ has a story reporting what we long pretty much knew: DOJ decided not to prosecute HSBC for helping drug kingpins (this report, like most others and like DOJ’s settlement itself, forgets to mention HSBC also materially supported terrorism) because doing so might create global financial havoc.

U.S. Justice Department officials overruled their prosecutors’ recommendation to pursue criminal charges against  HSBC Holdings PLC over money-laundering failings, according to a House committee report prepared by Republicans that sheds new light on the bank’s 2012 settlement.

The report, which was reviewed by The Wall Street Journal and prepared by the Republican staff of the Financial Services Committee, concluded that former Attorney General Eric Holder overruled the internal recommendation and subsequently misled Congress about the Justice Department’s decision not to prosecute the U.K. bank.

“Rather than lacking adequate evidence to prove HSBC’s criminal conduct, internal Treasury documents show that DOJ leadership declined to pursue [the] recommendation to prosecute HSBC because senior DOJ leaders were concerned that prosecuting the bank ‘could result in a global financial disaster,’ ” the 282-page report stated.

[snip]

Holder later said those comments were misconstrued and that the Justice Department doesn’t believe any institution is too large to face legal punishment. “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,” Mr. Holder said at a 2013 House hearing.

The report, which was expected to be released Monday, concluded those comments were misleading because lower-level prosecutors had recommended the department prosecute HSBC, according to Treasury Department emails subpoenaed by the committee.

The report blames Eric Holder for the decision, not Loretta Lynch, who oversaw the case as US Attorney. Indeed, her name doesn’t appear in the WSJ story at all.

But given the claim that line prosecutors believed they had plenty of evidence to charge HSBC, consider how Lynch answered a question about the topic during her confirmation process.

38. As United States Attorney for the Eastern District of New York, you helped secure nearly $2 billion from HSBC over its failure to establish proper procedures to prevent money laundering by drug cartels and terrorists. You were quoted in a DOJ press release saying, “HSBC’s blatant failure to implement proper anti-money laundering controls facilitated the laundering of at least $881 million in drug proceeds through the U.S. financial system.”

You stated that the bank’s “willful flouting of U.S. sanctions laws and regulations resulted in the processing of hundreds of millions of dollars in [Office of Foreign Assets Control]-prohibited transactions.” Still, no criminal penalties have been assessed for any executive who may have been involved.

a. Did you make any decision or recommendation on charging any individual with a crime?

i. If so, please describe any and all decisions or recommendations you made.

ii. Please explain why such decisions or recommendations were made.

b. If you did not make any decision or recommendation on charging any individual with a crime, who made the decision not to prosecute?

RESPONSE: On December 11, 2012, the Department filed an information charging HSBC Bank USA with violations of the Bank Secrecy Act and HSBC Holdings with violating U.S. economic sanctions (the two entities are collectively referred to as “HSBC”). Pursuant to a deferred prosecution agreement (“DPA”), HSBC admitted its wrongdoing, agreed to forfeit $1.256 billion, and agreed to implement significant remedial measures, including, among other things, to follow the highest global anti-money laundering standards in all jurisdictions in which it operates. As the United States District Judge who approved the deferred prosecution found, “the DPA imposes upon HSBC significant, and in some respect extraordinary, measures” and the “decision to approve the DPA is easy, for it accomplishes a great deal.” Although grand jury secrecy rules prevent me from discussing the facts involving any individual or entity against whom we decided not to bring criminal charges, as I do in all cases in which I am involved, I and the dedicated career prosecutors handling the investigation carefully considered whether there was sufficient admissible evidence to prosecute an individual and whether such a prosecution otherwise would have been consistent with the principles of federal prosecution contained in the United States Attorney’s Manual.

I want to reiterate, particularly in the context of recent media reports regarding the release of HSBC files pertaining to its tax clients, that the Deferred Prosecution Agreement reached with HSBC addresses only the charges filed in the criminal violations of the Bank Secrecy Act for failures to maintain an adequate anti-money laundering program and for sanctions violations. The DPA explicitly does not provide any protection against prosecution for conduct beyond what was described in the Statement of Facts. Furthermore, I should note the DPA explicitly mentions that the agreement does not bind the Department’s Tax Division, nor the Fraud Section of the Criminal Division. information, which are limited to violations of the Bank Secrecy Act for failures to maintain an adequate anti-money laundering program and for sanctions violations. The DPA explicitly does not provide any protection against prosecution for conduct beyond what was described in the Statement of Facts. Furthermore, I should note the DPA explicitly mentions that the agreement does not bind the Department’s Tax Division, nor the Fraud Section of the Criminal Division. [my emphasis]

To be fair to Lynch, hers was basically a non-answer. She said she and career prosecutors review the evidence. She implied that there was insufficient admissible evidence to prosecute, but did not say it.

But if the WSJ report is correct (and we should find out soon enough) in fact at least her prosecutors recommended prosecuting.

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14 replies
  1. scribe says:

    In 2010-11, which would have been the relevant time matters would have been submitted to a grand jury, I doubt there existed any E.D. N.Y. jury that would have balked at convicting HSBC.
    .
    In other words, anything in evidence in a case captioned U.S. v. HSBC (or any other bank) would have been more than enough to convict.
    .
    Recall, there was the story roaming the world after when Bear Sterns went down about how some underling, losing his job b/c the MFICs bet the company and lost it but still were getting their parachutes, saw one of the MFICs in the company gym, beat him silly, and had nothing happen to him. Whether or not the story was true, that it had the staying power it did says volumes about the mindset in NYC in that timeframe, where street justice for banksters would have been a welcome event, even despite finance being the City’s largest industry.
    .
    No. Holder was thinking toward campaigns future and donations yet to be made.

    • scribe says:

      One has to wonder whether bank executives, having been party to a deferred prosecution agreement, get a pass on making campaign contributions in the future.
      .
      I mean, assume for the sake of discussion that some AG has that in the back of his mind when deciding on a DPA. If the banksters later make campaign contributions after their bank goes through the DPA, the Average Joe would (probably rightly) conclude that the later contributions were payback for the easy treatment earlier, where no one went through the indignity of a trial, let alone prison. So, to avoid the appearance of impropriety, the banksters would refrain (or even be told to refrain) from donating to pols and the pols might even turn away their campaign cash. Even while the banksters surely got access through their lobbyists (or directly) because they were TBTF.
      .
      Sounds to me like an incentive to edge up to and over the line of criminality – you don’t get hit up for donations any more (and therefore get to keep the money yourself).

      • Peterr says:

        Take it a step further, scribe.
        .

        Bankster: Congressman, we’d really like you to do X.
        .
        Congressman: I’m not sure that’s a good idea.
        .
        Bankster: You misunderstand me. I wasn’t asking you to think about the wisdom of doing X – I was telling you to do X.
        .
        Congressman: Uh, I don’t think so.
        .
        Bankster: Again with the thinking? Let me put it this way: do X, or on Monday morning we make a very public and very significant contribution to your campaign. We will proclaim that you are the best thing ever to happen to our bank. We will take great delight in tying you to us with every rope, cord, and thread we can find.
        .
        Of course, we will strenuously object to all the allegations from your opponent that you are in our pocket, but you know how much people believe bankers.
        .
        Congressman: When do you want X done?

  2. thatvisionthing says:

    Loretta Lynch to Congress: Furthermore, I should note the DPA explicitly mentions that the agreement does not bind the Department’s Tax Division, nor the Fraud Section of the Criminal Division.

    She’s fingering Holder, right?

  3. thatvisionthing says:

    When I first skimmed this I thought, what, no mention of Lanny Breuer?! But then I saw you linked to him: https://www.emptywheel.net/2012/12/12/lanny-breuer-covers-up-material-support-for-terrorism/

    Fond memories of “Martin, look at my suit” — in youtube satire of Frontline episode The Untouchables:

    https://www.youtube.com/watch?v=FHWTsDPaCXk

    MARTIN SMITH: We have been able to contact a number of people who were inside the banks, doing due diligence work as contractors, who all told us that they were never contacted by the Justice Department.

    LANNY BREUER: Look. If I contact people who have firsthand knowledge of fraud, I’m going to have to follow up on it. We have found that with enough security we can keep whistleblowers from getting in the front door.

    MARTIN SMITH: But it shouldn’t be so easy for journalists to go out and find whistleblowers that, at this point, four years after the meltdown, that haven’t been contacted by Justice.

    LANNY BREUER: Martin, look at my suit. I’m an attorney. I have to think about my future. If I prosecute the most powerful people in the world, what will be left of my career? Nothing. Nada. So, think before you ask these questions.

    MARTIN SMITH: You gave a speech before the New York Bar Association. And in that speech you made a reference to losing sleep at night, worrying about what a lawsuit might result in. Is that really the job of a prosecutor, to worry about anything other than simply pursuing justice?

    LANNY BREUER: I think about a lot of things, including justice. Justice is one of the many things that I have to consider. Another thing I have to consider is my career. I am a well-respected attorney and I have a stellar career ahead of me if I play my cards right and I use the revolving door in Washington properly. If I go after bankers, I’m going to end up like Bill Black, marginalized, an assistant professor at some small university somewhere. That is just not satisfactory given how many asses I have kissed and how many Americans I have screwed out of justice.

    TED KAUFMAN: That was very disturbing to me, very disturbing. That was never raised —

  4. thatvisionthing says:

    Also remembering I think David Dayen twitter quip about Wall St. position/office being held open for Eric “Placeholder” until he could step into it…
    .
    Actually, I saved a link to this tweet (it’s transparently corrupt!) — https://twitter.com/ddayen/status/618460373369274368 — but not to original placeholder…maybe that’s common nickname for Eric.
    .
    Can find “eric placeholder” in comment in January 2013 Zero Hedge article
    The Farce Must Go On: Senate Suddenly Furious With Eric Holder For Allowing Banks To Become “Too Big To Jail”
    .
    seems to be a common thread I’m pulling…

  5. thatvisionthing says:

    And… HSBC. This is not satire, although I wonder if any “poor shlub’s defense lawyer” ever did what Eliot Spitzer suggested below. Spitzer and Taibbi on Viewpoint (Current TV) in December 2012:

    https://web.archive.org/web/20121219141311/http://www.rollingstone.com/politics/videos/taibbi-spitzer-fume-over-hsbc-settlement-20121214

    ELIOT SPITZER: And it just strikes me that the next time an assistant United States Attorney is in front of a jury with some poor shlub who’s caught with some low level amount of drugs, the defense lawyer should stand up and utter the letters “H S B C.”

    MATT TAIBBI: Right.

    ELIOT SPITZER: They let them off, and they’re sending this poor guy to jail? Where’s the equity? Where’s the sense of justice in this?

    MATT TAIBBI: Right. Because if the law doesn’t apply equally to everybody, then you don’t really have a system of law, and so you have a built-in defense for everybody in every drug case forever. I mean, if you get caught with a stem of marijuana, how do you not stand up and say, “You’re going to send me to jail for this, where a guy who laundered a billion dollars for a bunch of murderers gets nothing?”

    (Now missing video segment might be viewable here: https://archive.org/details/CURRENT_20121214_100000_Viewpoint_With_Eliot_Spitzer#start/1800/end/1860)

  6. Denis says:

    . . . and then at some point James Comey steps in and is appointed to the board of directors of HSBC. The gravitational force is incredible: Lynch, HSBC, & Comey drawn together in one black-hole and Lynch, Hillary, & Comey drawn together in another, like a binary black-hole system, the two orbiting each other. But do the two black-holes coalesce into a mega-black-hole of filth?
    .
    The investigator who goes where no man has gone before and connects the dots Hillary, HSBC, Comey, and Lynch wins the Kewpie doll and the eternal gratitude of the Republican Party.

  7. Avattoir says:

    I want to say first that disagreements inside the DoJ, inside US attorney’s offices, inside DA’s offices, among line prosecutors and between the consensus on the line and the line supervisors in hardly unusual. I know of one case where a local office debated not just charges but prosecution for several weeks and was simply unable to reach a consensus, leaving the officer in charge to make the decision (which was to prosecute fully; it went badly). I know of another where the discussion went on for several MONTHS, eventually bleeding out of a special unit into the line, from there into Main, from there to committees of local offices across the region, and even involved solicitation of opinions from at least 3 outside private firms, with very little feedback from Main as to what if any consensus was out there, yet, despite a SENSE from the perspective of one group in one of the outside consultants that the consensus view among current and past line prosecuting attorneys was that the evidence was at once compelling yet beyond the capacity of non-elected officials to know where it might end up (it ended up being punted over to hearings in the legislature, soon to be overtaken by sexier events). I know of a third that ended up in a consensus that the evidence was overwhelming but a strong sense among a vocal and very experienced minority that it was SO MUCH SO that there was a risk of the thing taking on a life of its own and costing in the tens to even hundred of millions in public monies (which is what happened, as the cautionary notes were overridden by elected officials with various agendas, was utterly disastrous from a fiscal perspective, yet ended up being declared at once a fiasco and a practical success, in some instances by the same people).

    That said, the problem generally being appreciated here is that there are deep concerns about political agendas and even official corruption inherent in the resort to DPAs. Well, d’uh.

    That more said, I don’t get what “contributions” are being suggested in relation to Holder. He’s not ever run for elective office and has never even expressed any serious interest in doing so. He’s almost exactly my age and one can accept or reject as one might that given the arc of attorney’s careers, it’s possible for some of his age and career arc to have known him over parts of 5 decades. IMO those outside the system would do well to consider how being at various times within and without various administrations over the course of a 40 years plus legal career can leave the impression of personal corruption when all that’s really happened is attorneys acting in accordance with their professional mandate to represent their clients, no matter who their clients are or what they’re charged with or might be.

    I don’t know if your bmaz knows this from personal experience, but he would certainly be personally acquainted with this from knowing attorneys who have such long and often quite senior career arcs both in and out of government. An attorney might spend the better part of a decade rising in government criminal prosecution offices, to the point of prosecuting the most dangerous and powerful of people and organizations, then see the political writing on the wall, leave government service for a number of years, during which they become engaged largely in defending the same sorts of people and organizations as they pursued and prosecuted before, and then after a time return again to government service that much more experienced, and hopefully wiser (at least more philosophic), yet stay just as dedicated to serving their clients as ever.

    I’ve heard and seen a lot of cheap, uniformed yapping from the peanut galleries over the years. This is a great blog; it’s disappointing to see so much of it going on here.

    Focus instead on the institution, not the players. The players are just data points, hopefully leading to greater understanding of the institutional realities. In my experience, from the first time a government office accommodates a large commercial concern for it’s hypothetical lapse in judgment, from that point on it becomes increasingly, exponentially more difficult to ever again seize the higher ground. I’m going to suggest here that the roots the HSBC DPA go back deeper than 2012. I have no difficulty allowing for the problems since 2008 being in many ways traceable to the disposition of the then-freshly sworn new president to ‘move on’ – I thought then that was distressingly naive for the Rule of Law in this country, even as I respected it as politically astute beyond my capacity to judge, and it’s was several years thereafter before I saw a president who’d matured to the point of understanding the implications of that naivete.

    But insofar as we’re concerned here with the motives of Holder, Lynch and Comey, I find it also a distressing that I need to remind the thread that we live in a manichean political system here, one that’s intimately bound up with an awful lot of magically mysterious national security adventurist crap, and both with the justice system. Personal corruption isn’t, IMO, the issue here: it’s about institutional pressures.

    FWIW, IMO Comey did something last week that was at once ruthless yet naive, at once selfless and self-serving, and it didn’t go well. But for the life of me, I can’t think of what other Hail Mary pass could have been attempted in the circumstances. He could have done better, IMO he WOULD have come to a better result without the moralizing, he SHOULD have acted more like the Sgt Joe Friday I expect he imagined he was pulling off. But just like with DPAs, there’s lots of back story that would explain them (for good or bad), and once they’re done, the implications have a tendency not to disappear but increase and multiply. Why is that so few Dems in power in Washington understand how readily orcs turn on each other, and with such relish?

    • bmaz says:

      Fantastic comment, and very good to see you again. Sadly, I was always private side, and I kind of regret that now in many ways. But absolutely have many friends and acquaintances that have moved in and out of the public sector, including judging, which is another area of interest to this conversation.
      .
      Think what you say about it being more institutional than personal is accurate. Though when individuals become such avatars for what is being done at critical periods, cases or events, it is kind of impossible to separate them. And there are always a few that flat earn their reputation, but think it is less than we all let on sometimes. And you are right that Holder is a decent example. Frankly, I have always thought of Holder as a decent and fairly righteous guy, and a lot of what he is pegged with came out of the policy side at the White House as you describe. And, yeah, there were some naive decisions made early that set arcs that never got bent back. Tough decisions, and I understand them, even if disagree on many such as surveillance, state secrets/transparency and, of course, the financial mess.
      .
      Also, heh, your description of the process of determining charges on high profile, especially politically hot and public cases, is perfect from what I have seen. There are factions in the “staffing” of those cases, and while they are arguing with each other, there are equal groups from the defense side and public trying to lever all of them. It cracks me up how many people are either convinced Clinton was absolutely guilty and it was a no brainer that didn’t happen because the fix was in, and others who feel it was never any close call at all. Well, no, both of those were wrong. From best as I can discern from deep diving into it over the long gestation period for the declination, there was clearly sufficient evidence to support charging. But the odds or a resulting conviction were thin, at best. And, therefore, declination was absolutely the right call.
      .
      But I was very taken aback by the way Comey handled it, and thinks set a dangerous precedent for prosecutors taking to press conferences (which then force partisan legislative inquiry) to, as you say moralize and rationalize. I would have MUCH preferred a traditional declination where the Department, at most, issues a press release notice. Yes it was an unusual situation, but there are always unusual situations coming along. Lynch truly stepped in it by meeting with Mr. Clinton at Sky Harbor. I would love to know how it would have been handled but for that. My bet is it would have been a lot less messy, and correspondingly more appropriate.

  8. thatvisionthing says:

    it’s was several years thereafter before I saw a president who’d matured to the point of understanding the implications of that naivete.

    When was that?

      • thatvisionthing says:

        I’m mystified by what you see in your space. I never saw a wiser, better president. I’m still mad as hell at him and also sick at heart because I voted for him in 2008 and was ready for great things at last. I loved that he was black, or black-and-white, and thought that that might contribute to his wisdom and wide perspective. I thought now we’re going to see something! Turns out not. From where I stand, he’s been worse than useless.
        .
        Since I guess I’m part of the peanut gallery you criticize, could you address the “transparently corrupt” thing Eric “place” Holder did or was beneficiary of in my comment @4:20? David Dayen cited law and is above peanut gallery status I think.
        .
        This division into peanut gallery versus lawyers/qualified participants is part of the problem I’d say. Immune TBTF insiders vs. disserved outsiders is another way to describe the systemic problem being discussed in three diaries back in the bomb robot precedent post. I’m still thinking about how to reply to bmaz there but I do blame the courts and do think the answer is to involve citizens more through juries, which of course HSBC never has to face, tyvm doj.
        .
        Also, regarding the Spitzer/Taibbi video from Dec 2012 above, where I wondered if any poor shlub’s defense attorney ever did as Spitzer said, say “H S B C” in defense, by going back through HSBC tags here, I see a January 2013 post by emptywheel where Karen Gasparian’s lawyer actually did do that, generally: http://www.emptywheel.net/2013/01/15/once-again-jamie-dimon-gets-special-treatment/ How’d that go? Oh:

        Predictably, Lanny Breuer (strikeout) waved his dick around (end strikeout) boasted about this conviction.

        “Karen Gasparian, Humberto Sanchez and their company G&A Check Cashing purposefully thwarted the Bank Secrecy Act, making it easier for others to use G&A to commit illegal activity,” said Assistant Attorney General Breuer. “They knew they were required to report transactions over $10,000, but deliberately failed to do so. As this case shows, check cashing businesses must adhere to our anti-money laundering rules, or else pay the consequences.”

        This is the guy who, just one month ago, failed to even mention he was letting a bank that sent hundreds of millions in cash to a terrorist bank off without any charges.

        Gasparian got a five-year sentence.

        Regarding your wish that we would look beyond the people to the institution, I wonder what your thoughts are on emptywheel’s post from March 2015 wondering if HSBC gets let off because they’re spying for the government and immunity from prosecution is baked in? Her wild-arse guess… https://www.emptywheel.net/2015/03/21/have-the-banks-escaped-criminal-prosecution-because-theyre-spying-surrogates/
        .
        Thanks. I appreciate being able to hear the view from your perspective, even if it does make me mad/frustrated. Like, where to start fixing anything if the people filling the jobs are all so nice and diligent and helpless? How diligent are they, after all? See the Frontline report, and I heard David Dayen on a podcast supporting his new book Chain of Title and he made the point that it was individuals (peanuts) like Lisa and Michael and Lynn who did more investigation and turned up more evidence in fraudclosure than the whole DOJ and state AGs combined, and that in the end after at most pitiful wrist slaps the same crimes are still going on now and are still going unprosecuted. Carl in Congress turned in a report of over 300 pages of evidence/investigation into HSBC (http://www.hsgac.senate.gov/download/report-us-vulnerabilities-to-money-laundering-drugs-and-terrorist-financing-hsbc-case-history) Eric? Barack? Loretta? Lanny? . . . ????

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