Lanny Breuer Deputizes Banks Rather than Prosecuting Them

Back when DOJ’s head of criminal prosecutions, Lanny Breuer, let HSBC off without indictments, I noted that he didn’t even mention HSBC’s significant ties to funding terrorists.

When it came to one of the world’s biggest banks, the Assistant Attorney General chose to simply ignore the threat DOJ’s been singularly dedicated to defeating since 9/11, terrorism.

But the Statement of Facts on the HSBC settlement wasn’t quite as reticent as Breuer himself. It said this about HSBC’s ties to terrorist financing:

In addition to the cooperative steps listed above, HSBC Bank USA has assisted the Government in investigations of certain individuals suspected of money laundering and terrorist financing.

That is, the court documents on the settlement talk about HSBC helping to investigate terrorist financing, rather than HSBC playing a key role in making up to a billion dollars available for terrorist financing. DOJ turned HSBC’s complicity in the central threat of our time into purported assistance pursuing it.

Poof! DOJ turned a criminal bank into a law enforcement partner, all through the secret exercise of so-called prosecutorial discretion.

Which is important background for the story about DOJ with which NPR’s Carrie Johnson has begun the year, describing how Lanny Breuer is asking banks–the same banks who crashed the economy with a bunch of criminal scams that have gone unpunished–to serve as “quasi cops.”

Every year, banks handle tens of millions of transactions. Some of them involve drug money, or deals with companies doing secret business with countries like Iran and Syria, in defiance of trade sanctions.

But if the Justice Department has its way, banks will be forced to change — to spot illegal transactions and blow the whistle before any money changes hands.

[snip]

But [former OCC head Eugene] Ludwig, who now consults for banks at the Promontory Financial Group [which makes huge money not finding crimes for the banks], says prosecutors and bank regulators can’t catch all the fraud, so they’re depending on the banks themselves to do a better job.

“Banks are not set up historically really to be kind of quasi law enforcement enterprises, which is really what the U.S. government’s asking of them,” he says.

Every time a financial institution makes a fix, criminals try to work around it. Ludwig calls it a cat-and-mouse game. “Fair or not, it’s what the government is demanding of our enterprises, and everybody has to face up to that reality, I think,” he says.

Ludwig may be publicly complaining. But his firm has already gotten consulting fees to hide the scale of Standard Chartered Bank’s fraud, and the government is about to give up on the badly-conflicted foreclosure abuse review for which Promontory consulted with Bank of American and Wells Fargo. It seems clear that Promontory will get rich whitewashing bank crimes so Lanny Breuer can pretend banks are cops, not robbers.

But that’s not the most lucrative scam here. After all, HSBC was able to reap billions because it served a key role in providing cash that went, in part, to terrorists. And yet it, unlike Muslim men, seems guaranteed under Lanny Breuer to wipe that slate clean by flipping on their former clients at a convenient time (and given that DOJ has taken no action against Al Rajhi bank, in only a limited fashion).

All this remains unstated. In fact, I guarantee you if it were ever asked, DOJ would refuse to divulge precisely what kind of quasi cop HSBC is playing, as it could under a law enforcement exception to FOIAs. Even Carl Levin’s otherwise meticulous report on HSBC was silent about what happened when Treasury’s former Under Secretary for Terrorist Finance went to HSBC.

But as part of the scam, it appears both a criminal bank and our buddies the Saudis have avoided any punishment for funding terrorism.

Which is how it works when the crooks get deputized rather than prosecuted.

 

 

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.

8 replies
  1. Peterr says:

    Ludwig’s official bio at OCC is instructive (emphasis added):

    Comptroller of the Currency
    1993 to 1998

    President Bill Clinton selected Eugene A. Ludwig to become 27th Comptroller of the Currency in 1993. Before becoming Comptroller, Ludwig was an attorney in Washington, DC, specializing in intellectual property law, banking, and international trade. As Comptroller, Ludwig led the agency through a period of substantial change, both within the financial marketplace as well as in the supervisory and examination practices of the agency. He improved safety and soundness supervision through adoption of supervision by risk – an approach that has been emulated by virtually every other supervisory agency in the U.S. and abroad. He spearheaded the Clinton Administration’s efforts to modernize the banking industry by allowing banks to engage in a wide variety of new activities and to operate under a less burdensome set of rules and regulations. And he led the government’s efforts to reform the Community Reinvestment Act and more vigorously enforce the fair lending laws. Ludwig’s activities led to a tremendous increase in lending to – and investment in – America’s low- and moderate-income communities. After his term as Comptroller, Ludwig became a financial consultant.

    By all means, he did such a bangup job in helping “modernize” the banking industry in the 90s that he should get quite wealthy on the other side of the revolving door.

    From the post: “Ludwig says prosecutors and bank regulators can’t catch all the fraud, so they’re depending on the banks themselves to do a better job.”

    I think he knows whereof he speaks, given OCC’s well-deserved reputation as a weak regulator.

  2. Peterr says:

    I guarantee you if it were ever asked, DOJ would refuse to divulge precisely what kind of quasi cop HSBC is playing, as it could under a law enforcement exception to FOIAs. Even Carl Levin’s otherwise meticulous report on HSBC was silent about what happened when Treasury’s former Under Secretary for Terrorist Finance went to HSBC.

    But as part of the scam, it appears both a criminal bank and our buddies the Saudis have avoided any punishment for funding terrorism.

    Which is how it works when the crooks get deputized rather than prosecuted.

    Feature, not bug.

  3. angry bitter drunk says:

    Aw I was gonna be all clever and compare the banks to the Saudis, but you got there yourself.

    Next you’re going to tell me that 2013 won’t be any different?

  4. readerOfTeaLeaves says:

    One of Lanny Breuer’s problems seems to be that he evidently fails to recognize that presently, the banks are making their money from derivatives, which is basically speculative activity on a *massive* scale. They should be broken up and be made to function as utilities.
    But for that to happen, it would be helpful to have a little law enforcement and actual penalties. (Yeah, I’m a dreamer…)

    In case anyone is interested, Barry Ritholtz and Chris Whalen (an expert on banking) expose the lunacy in the megabank situation and predict another, bigger crisis, because the underlying, systemic factors in the poor incentives and bad structures of banking have not been addressed:
    http://www.ritholtz.com/blog/2012/12/ritholtz-dot-com-bonus-envy-stymies-wall-st-reform/
    Yves Smith and her contributors at NakedCapitalism (and linked sites) have done stunning work revealing the tawdry, unstable economics of the megabanks. Scary stuff.
    Apparently, neither Lanny nor his staff have followed these discussions.
    (Those who have, like Ritholtz, seem to be dumping bank stock.)

    Basically, handing out money is a lot like operating a water or electrical utility: people need X, and it needs to be distributed. In and of itself, irrespective of compound interest, circulating money is a lot like circulating water or power. Person A needs ‘x’ amount; Person B needs ‘y’, etc, etc. It’s a distribution issue. There is simply not all that much profit in it, unless and until you can monopolize the activity.

    Along come the Jamie Rubins and (idiots like) Alan Greenspans and they seem to assume that banking has to be a big, testosterone-driven money-fountain aka Silicon Valley. Add on computer networks and hire some physics majors to divide up ‘assets’ into derivatives and then whhhhhheeeee! You generate the **illusion** of ‘creating wealth’, when in fact these asshats are actually destroying it (via securities fraud and really poor business models).

    The fact that people at DoJ can’t seem to get their heads around the difference between economic speculation — as opposed to actual economically productive activities (developing medicines, teaching kids, cutting hair, cooking meals, inventing new kinds of engines, etc, etc) — is beyond tiresome.

    Apparently, protecting banks who help the terrorists requires buying into some truly nutty economic assumptions.
    It requires accepting the megabank business model without question: big mistake.

    I’m developing a deep fondness for the finance guys, who can’t afford to get fooled by bullshit, and who are pretty frank and outspoken about the problems that they see. (Matt Taibbi and Elliot Spitzer also fall into that general category.)

    I feels as if the finance folks see through the banking bullshit a lot more clearly than the attorneys do.
    It’s ironic and sad to see that in the guise of trying to claim that government is ‘doing something’, Lanny is actually de-legitimizing it. Very sad.

  5. thatvisionthing says:

    HuffPo: FBI was investigating Occupy Wall Street, meeting with NYSE, banks and private companies, before Occupy happened:

    http://www.huffingtonpost.com/2012/12/23/fbi-occupy-wall-street_n_2355883.html

    …In certain documents, divisions of the FBI refer to the Occupy Wall Street protests as a “criminal activity” or even “domestic terrorism.”

    …According to the documents, the FBI coordinated extensively with private companies, including banks, that feared they could be affected by Occupy protests.

    …According to the new documents, the FBI began meeting with representatives of the New York Stock Exchange and other businesses as early as August 2011, a month before the Zuccotti Park protests.

    Interesting comments by RainGirl here about Bloomberg: http://www.correntewire.com/interesting_factoid_on_occupy

  6. rosalind says:

    gosh, the NYC couple that got busted for explosives turn out to be wealthy, well-connected junkies, so Police say: never mind that whole terrorism thing. These are just a couple of mixed up kids who, how did they put it, “just had a twisted idea of what’s ‘cool'”

    “Inside the apartment, officers found seven grams of the explosive powder HMTD, which was reportedly used in the 2005 London Underground bombings. Police also found a sawed-off Mossberg 500…several high-capacity magazines…’The Terrorist’s Encyclopedia V. 1.02,’ ‘Improvised and Modified Firearms: Deadly Homemade Weapons,’ ‘A Do-It-Yourself Submachine Gun,’ and U.S. Army manuals for creating and planting booby traps and explosives.”

    so for those keeping score: rich + well-connected + white + a cache of weapons & explosives & how-to manuals = no terrorism.

    http://www.dailymail.co.uk/news/article-2255609/Morgan-Gliedman-Aaron-Greene-junkies-terrorists-police-say.html

  7. What Constitution says:

    The logic here is simple enough to follow: (1) You’re either for us or against us; (2) the Banks simply must be “for” us; therefore (3) it’s time to redefine what “for” and “against” mean; so (4) Banks’ actions are “for” us if we might on some occasion become aware of some Terraist activity through a Bank’s act, so the Banks must be deemed “for” us and the rest is just noise.

    I said the logic was simple, not that it made sense or possessed merit. But don’t we all just bubble over with gratitude to know it’s good enough for the prosecutorial arm of the U.S. government?

Comments are closed.