By “Cooperative Investigations” Does WSJ Mean “Protection Money”?

The WSJ has a funny response to the Standard Chartered Bank settlement. Aside from the predictable claims that Benjamin Lawsky, the NY Superintendent of Financial Services, played hardball to advance his political career, it suggests Lawsky upset a system of “cooperative investigations” that NYC’s District Attorney has in place.

These columns have long supported tough enforcement of Iran sanctions, including efforts by the Manhattan District Attorney and U.S. Treasury against foreign banks. The D.A.’s office has sanctioned four banks in recent years, extracting $1.8 billion in settlements and defining new standards of behavior.

Other cooperative investigations have long been underway, and Mr. Lawsky’s main contribution seems to have been to jump the queue so he could get a big publicity score. He told the D.A.’s office he was going public the night before his announcement and he only told the feds on the same day.

This seems to be the central pique of the editorial. Lawsky “jumped the queue,” which sounds an awful like a queue of regulators in line to get payouts from banks so they can look the other way from money laundering. Is that the problem here? Lawsky violated the DA’s turf, and took what the DA believed was his office’s rightful payment, and oh by the way also exposed the underlying Get Out of Jail Free industry that seems to be the service for which the DA and other regulators have gotten these payments in the past?

Are all the attacks on Lawsky about him taking fines that other regulators had planned on receiving? About money going to NY state, rather than NYC?

Mind you, to paint this as a “cooperative investigation,” the WSJ has to ignore several facts.

  • SCB did not, as WSJ claims, rat itself out to regulators in 2010. On the contrary, in early 2009, law enforcement authorities came to it.
  • Much of the underlying fraud (which WSJ seems to believe is not illegal) happened at a time when SCB was operating under a Written Agreement mandating certain behaviors because of past money laundering violations. Indeed, SCB lied to regulators about its Iranian transactions to get the Written Agreement lifted in 2006.
  • SCB has moved all its Office of Foreign Asset Controls compliance to Chennai and–as with its past efforts to evade regulations–the Chennai office does not communicate on these issues with the NY office. Moreover, SCB’s process still seems to allow for the same methods to process transactions of sanctioned individuals.

Of course, had WSJ admitted to these facts, it would have had to acknowledge that the “new standards of behavior” the DA’s office has put in place includes ongoing efforts to evade money laundering laws.

Marcy has been blogging full time since 2007. She’s known for her live-blogging of the Scooter Libby trial, her discovery of the number of times Khalid Sheikh Mohammed was waterboarded, and generally for her weedy analysis of document dumps.

Marcy Wheeler is an independent journalist writing about national security and civil liberties. She writes as emptywheel at her eponymous blog, publishes at outlets including the Guardian, Salon, and the Progressive, and appears frequently on television and radio. She is the author of Anatomy of Deceit, a primer on the CIA leak investigation, and liveblogged the Scooter Libby trial.

Marcy has a PhD from the University of Michigan, where she researched the “feuilleton,” a short conversational newspaper form that has proven important in times of heightened censorship. Before and after her time in academics, Marcy provided documentation consulting for corporations in the auto, tech, and energy industries. She lives with her spouse and dog in Grand Rapids, MI.

9 replies
  1. earlofhuntingdon says:

    “Dog Bites Man!”, screams the WSJ in utter surprise at the surliness of this pet. A bidnessman is entitled, in the Journal’s opinion, to treat every regulator as his best friend, his help mate, his guide to increased profitability through evading liability for wrongful conduct, through outsourcing costs onto the public, and through privatizing profits.

    This strange development must not stand. The wardens will be called. Ensure that your pets are properly mannered and name-tagged lest they be caught up in the general ire to restrain or retire such unruly pets.

  2. earlofhuntingdon says:

    Mr. Lawsky played hardball – the kind required by his job description – solely to advance his political career? Goreblimey, knock me down with a spoon.

    Every politician considers politics in making professional decisions, just as fish swim by moving through water. The two are as unitary as economics and politics, which are joined at the hip notwithstanding the myth that the two are separate and independent. Mr. Schneiderman assuredly acted politically when he reversed his hardball position and chose not to prosecute banksters for committing massive mortgage fraud as an explicit business policy.

    The issue is whose interests was Mr. Lawsky promoting: those of the vast majority of voters or those of a few banksters and their clients whose business models assume that they can flout the law with impunity while enriching themselves?

    Mr. Lawsky found common ground between doing his job and coming down modestly hard on crime committed by a major bank involving $250 billion or more in transactions. A rare act – promoting the rule of law – for a politician with national aspirations.

    I don’t imagine that the WSJ would understand that any more than it would understand the harm to most Americans that Mr. Ryan’s budget would do. But that’s what it’s paid to do, promote the interests of the wealthy. Mr. Obama would be happy to do that, too; he’d just prefer to get credit for it, while convincing rope-a-dopey Main Street voters that some small aspect of his doing so was actually in their interest.

  3. chetnolian says:

    You will be disappointed if I don’t point out that the alleged SCB offences are only “fraud” by the most stretched US focussed definition and there really appears to be an arguable case that most of the alleged illegal transactions were not in fact illegal.

    Of course the very beauty of a protection racket is that you don’t go to law to enforce it. It’s an offer you can’;t refuse. If Mr Lawsky is going to metaphorically “burn down your business” (publicly holding the removal of your banking licence over you while the underlying issue is settled) you pay up even if you weren’t wrong. We, both the US and the international community, deserved to have the isssue of the legality of this international legal issue properly argued rather than settled by bullying.

    Shorter answer yes it is a protection racket..

  4. earlofhuntingdon says:

    Oh, and that $250 billion or more was only Standard Chartered’s slice of the sanctions flouting pie. If total fines to date were in the area of “$1.8 billion”, it suggests that the banking system’s oligopoly of major international players shared a standard business policy of flouting the law. But that would make them different from other large multinational corporations how? Conversely, what does it say of this administration’s rule of lawlessness that Mr. Lawsky’s hardball play is a standout?

  5. earlofhuntingdon says:

    OT, but interesting. Ecuador has temporarily upset US and Swedish plans for Julian Assange by agreeing to his request for political asylum. How Mr. Assange gets to South America from the Ecuadoran embassy in London, running the gauntlet of British police and US contractors, is a different matter entirely.

    In another OT, the NYT taps outgoing head of the BBC as its new CEO. I hope he’s not just Bill Keller with a posh accent. With the family’s ownership remaining unchanged, I suspect this will be a case of plus ca change, but for the Times playing harder at its digital game.

  6. earlofhuntingdon says:

    @emptywheel: Repeat after me: Just paperwork problems, paperwork problems, paperwork problems. No intent to deceive or to rely on a business model dependent on illegally gotten gains. Nope. None at all.

  7. earlofhuntingdon says:

    @earlofhuntingdon: The current siege of the Ecuadoran embassy in London by British elite police and/or Army SAS special forces units (which normally storm embassies to rescue hostages detained by murderously violent criminals) suggests that Mr. Assange was correct in viewing the Swedish attempt to extradite him for “questioning”, not prosecution, in connection with alleged sex crimes in Sweden is at least in part manufactured cover for his being rendered into US hands, presumably for indefinite detention at an undisclosed location and his questioning about “national security” matters. No doubt the US is working closely with and stiffening the backbone of UK authorities.

    This follows within hours Ecuador’s attempt to grant Mr. Assange political asylum, which should trump Sweden’s attempted extradition, which was solely about interviewing him, and not yet about prosecuting him.

    The UK’s only appropriate interest in this matter relates to its compliance with the extradition request; it does not relate properly to any underlying, implied claims about the substance or legitimacy of the charges not yet pending in Sweden. That is, unless the UK has made non-public agreements with the US about the priority of its demand that the UK or Sweden stand and deliver Mr. Assange. The rogue actor here is not Mr. Assange.

    Perhaps Mr. Assange should adopt a nomme de guerre; I recommend Winston Smith.

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