A Bank Too Big to Jail

Attorney General Eric Holder will leave office with a perfect record of not having busted a single senior banker

By John Lawrence

The bank, HSBC, has been involved in criminal enterprises from dealing with terrorists and drug dealers to advising clients how to escape paying taxes. Yet no HSBC banker has gone to jail.

Dealing with drug dealers is nothing new for HSBC, also known as the Hong Kong and Shanghai Banking Corporation. They have always been associated with drugs. Founded in 1865, HSBC became the major commercial bank in colonial China after the conclusion of the Second Opium War. That’s the war in which European powers forced the Chinese to legalize the drug trade.

If you or I got caught with a few certain illegal drugs, we would go to jail. HSBC laundered money for the Sinaloa drug cartel, but yet they had to pay only a small fine and got off the hook. The fine, $1.9 billion, is about five weeks of income for the bank. Their executives had to partially defer their bonuses as well. This made some publications such as Rolling Stone apoplectic with rage:

And not only did they sell out to drug dealers, they sold out cheap. You’ll hear bragging this week by the Obama administration that they wrested a record penalty from HSBC, but it’s a joke. Some of the penalties involved will literally make you laugh out loud. This is from [Assistant Attorney General] Lanny Breuer’s announcement:

As a result of the government’s investigation, HSBC has . . . “clawed back” deferred compensation bonuses given to some of its most senior U.S. anti-money laundering and compliance officers, and agreed to partially defer bonus compensation for its most senior officials during the five-year period of the deferred prosecution agreement.

Wow. So the executives who spent a decade laundering billions of dollars will have to partially defer their bonuses during the five-year deferred prosecution agreement? Are you fucking kidding me? That’s the punishment? The government’s negotiators couldn’t hold firm on forcing HSBC officials to completely wait to receive their ill-gotten bonuses? They had to settle on making them “partially” wait? Every honest prosecutor in America has to be puking his guts out at such bargaining tactics. What was the Justice Department’s opening offer – asking executives to restrict their Caribbean vacation time to nine weeks a year?

The Department of Justice said it didn’t want to upset the international banking system. Well, they could have jailed just those individual bankers involved in the scam who later quit HSBC anyway, but it failed to do so. They just proved themselves to be the biggest hypocrites in the world capable of prosecuting the little guy for a fraction of the criminal activities HSBC was involved in, but unwilling to prosecute bankers who bought a plane for the cartel to smuggle drugs with.

Matt Taibbi reported in Rolling Stone:

The deal was announced quietly, just before the holidays, almost like the government was hoping people were too busy hanging stockings by the fireplace to notice. Flooring politicians, lawyers and investigators all over the world, the U.S. Justice Department granted a total walk to executives of the British-based bank HSBC for the largest drug-and-terrorism money-laundering case ever. Yes, they issued a fine – $1.9 billion, or about five weeks’ profit – but they didn’t extract so much as one dollar or one day in jail from any individual, despite a decade of stupefying abuses.

The bank also moved money around for organizations and states that had official sanctions against them like Al Qaeda and Hezbollah. They helped countries like Iran, the Sudan and North Korea evade sanctions. And just to round out their criminal and gangster rap sheet they aided countless common tax cheats in hiding their cash.

“They violated every goddamn law in the book,” says Jack Blum, an attorney and former Senate investigator. “They took every imaginable form of illegal and illicit business.”

So why and how does HSBC get away with this stuff? It turns out that prosecutors thought that by punishing HSBC, they would pull down the whole world banking system. “Had the U.S. authorities decided to press criminal charges,” said 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.”

Yeah, sure. Believe that and I have a bridge in Brooklyn to sell you. Many of the individuals involved have left the company anyway and the institution has still survived. If it could survive without them, it could have survived without them while they were sitting in jail cells.

While no individuals at HSBC were punished, plenty of lowly everyday Janes and Johns have been. Two top executives of JM2 Auto Sales of Orlando, Florida, got 40 months and 72 months in jail after they sold the Sinaloa cartel two automobiles. They were convicted for money laundering.

In 2013, a Mississippi woman named Bridget Michelle Bland was sentenced to 60 months in prison for laundering drug proceeds by setting up a trucking company. In 2014, a California truck driver named Adolfo Pulido was sentenced to 50 months in prison for transporting $1.5 million in cash the old-fashioned way across the border from Mexico.

While these guys paid a stiff price, no one at HSBC spent a day in jail after they helped the Sinaloa cartel buy a plane which they used to fly drugs over the border. What’s more is that $1 billion in cash was moved by HSBC from the cartel’s Mexican hometown of Culiacán to New York between 2006 and 2008.

Other people were prosecuted as tax cheats after they believed HSBC who had advised them about how to escape paying taxes. These cases would never have come to light except for the fact that there was a whistleblower – the “Edward Snowden of HSBC.” While these clients and, as it turns out, dupes, of HSBC went to jail, no one at HSBC ever did.

The DOJ went after the little guys while letting the big fish off the hook. That’s how they do business. DOJ aggressively prosecuted private citizens such as a New Jersey businessman who was lured into a tax scheme by HSBC and a Virginia doctor who sought to avoid paying taxes on money his deceased mother had stashed in a secret HSBC account in Switzerland.

HSBC and its executives were never so much as named in court papers and proceedings. Even as the doctor, Andrew Silva, pleaded guilty to tax evasion in June 2010, the government termed HSBC only as “the International Bank.” The DOJ is afraid to call a spade a spade even for a non-US bank. They could easily have revoked HSBC’s US license, but, evidently, it is more important not to prosecute a foreign criminal bank than it is to prosecute – to the full extent of the law – low level US citizens.

According to the Daily Beast:

A New Jersey businessman named Sanjay Sethi also received probation after pleading guilty in June 2012 to a tax-evasion scheme that court papers say was conceived and proposed by HSBC—which again was named only as “the International Bank.”

The criminal complaint charges that the bank “marketed offshore banking services for U.S. citizens of Indian descent,” encouraging them “to open undeclared bank accounts in India.”

Sethi opened such an account in India in 2001. He received a call the following year from someone identified in the complaint as U.S. Banker A, a senior vice president at the New York office of the International Bank.

U.S. Banker A allegedly set up a meeting between Sethi and someone identified as U.K. Banker A, a London-based “high-ranking executive of the International Bank” who headed a division “focused on developing and serving clients worldwide with ties to countries in south Asia.”

Not long afterward, Sethi met with U.K. Banker A in the International Bank’s New York offices and discussed opening another undeclared account, this one in Switzerland.

“U.K. Banker A told Sethi that the undeclared account would allow Sethi’s assets to grow tax-free and that the bank secrecy laws in Switzerland would allow Sethi to conceal the existence of the account,” the complaint says.

Sethi proceeded to stash $3.4 million in an HSBC account in Switzerland. Neither he nor the bank could have foreseen that an HSBC computer analyst turned whistleblower in Switzerland would hack into the bank’s computers in 2008.

HSBC is clearly an outlaw, criminal, renegade institution and not even an American one, but the Justice Department under Eric Holder was a bunch of fools who couldn’t even correctly assess who and what to prosecute. Their only consideration is that by prosecuting some individuals, the whole world wide banking system would collapse. This is sheer and patent nonsense to anyone who has any inkling of common sense or rationality concerning the banking system.

The DOJ probe which resulted in criminal information against HSBC was signed by the U.S. attorney for the Eastern District,Loretta Lynch, who is now the nominee to become the next attorney general. So it looks like we’re in store for more of the same mealy mouthed DOJ prosecutions – get the little guy, let the big guy go. That is if Loretta Lynch can ever get herself confirmed. She’s been waiting for over four months while Republicans do everything they can to gum up the works for an Obama appointee.

A top Senate Democrat accused Republican leadership of treating the would-be first African-American woman attorney general like a second-class citizen, having to wait at the back of the bus. Lynch has waited longer for a vote in the full Senate than the past five nominees to the post combined.

Outgoing Attorney General Eric Holder said: “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 you do prosecute, if you do bring a criminal charge, it will have a negative impact on the national economy, perhaps even the world economy.” Holder will go down as an aider and abettor of criminal institutions such as HSBC while presiding over prosecuting little guys to the max.

Holder will leave office with a perfect record of not having busted a single senior banker. Will Loretta Lynch do the same or will she try to prove that the office of the AG has some real teeth to it?

Senator Elizabeth Warren was notably outraged when she found out about the Deferred Prosecution Agreement. “The new allegations that HSBC colluded to help wealthy people and rich corporations hide money and avoid taxes are very serious, and, if true, the Department of Justice should reconsider the earlier deferred prosecution agreement it entered into with HSBC and prosecute the new violations to the full extent of the law,” she said.