John Morgan: “NY Times: Criminal Charges Are Finally in the Wings for Big Banks” – Money News

Posted on :May 01, 2014

By: John Morgan

Money News

May 1, 2014

Federal prosecutors are preparing criminal charges against two of the world’s  mega-banks that could yield the first criminal guilty plea from a major bank in  more than 20 years, The New York Times reported.

Neither of the banks  cited by the Times is a U.S. bank. The charges focus on Switzerland’s Credit  Suisse for its practices in offering tax shelters to Americans, and on France’s  largest bank, BNP Paribas, over doing business with nations like Sudan and Iran  that the U.S. has blacklisted, according to the Times.

“The approach  applies to American banks, though those investigations are at an earlier stage,”  the Times said.

The newspaper reported that the probes, being conducted simultaneously by a  range of government agencies, means prosecutors are “confronting the popular  belief that Wall Street institutions have grown so important to the economy that  they cannot be charged.”

“A lack of criminal prosecutions of banks and  their leaders fueled a public outcry over the perception that Wall Street giants  are ‘too big to jail.’”

According to the Times account, any guilty pleas  would apparently come from the banks themselves or their subsidiaries — there  was no mention that any individual banker might be charged.

In their  pursuit of the criminal cases, prosecutors are reportedly torn by a desire not  to harm the broader economy in a ripple effect. The outcome of some criminal  charges might mean the automatic revocation of a bank’s charter to do business  in the U.S., which could amount to the “corporate equivalent of a death  penalty,” the Times reported.

“Federal guidelines require prosecutors to  weigh the broader economic consequences of charging corporations.”

Those  reportedly involved in the government investigation include the Federal Reserve  Bank of New York, Benjamin M. Lawsky, New York’s top financial regulator; Preet  Bharara, the U.S. attorney in Manhattan; David O’Neil, the head of the Justice  Department’s criminal division in Washington; and Cyrus Vance Jr., the Manhattan  district attorney.

According to the Times’ unnamed sources, Bharara has  also opened his own criminal investigations into alleged fraud at Citigroup’s  Mexican affiliate and other American banks.

Bloomberg noted previous  cases against big banks have been settled through so-called non-prosecution and  deferred-prosecution agreements, which have been criticized by some U.S.  senators for failing to hold banks accountable for law-breaking.

John  Hueston, a former Enron Task Force prosecutor, told Bloomberg, “Prosecutors… rarely indict  large institutions because of the potential widespread collateral damage to  uninvolved employees and investors in the form of lost jobs and shareholder  value.”

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