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Banks 'too big to
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Written by Christina Rexrode and Larry Neumeister Associated Press
Dec. 18
delawareonline.com

Banks 'too big to jail'?

Debate renewed as HSBC avoids charges

NEW YORK — When the Justice Department announced its record $1.9 billion
settlement against British bank HSBC last week, prosecutors called it a
powerful blow to a dysfunctional institution accused of laundering money
for Iran, Libya and Mexico’s murderous drug cartels.

But to some former federal prosecutors, it was only the latest case of the
government stopping short of bringing criminal money laundering charges
against a big bank or its executives, at least in part on the rationale
that such prosecutions could be devastating enough to cause such banks to
fail.

They say it sounds a lot like the “too big to fail” meme that kept big but
sickly banks alive on the support of taxpayer-funded bailouts. In these
cases, they call it “too big to jail.”

“Shame on the Department of Justice. Shame on them,” said Jimmy Gurulé, a
former federal prosecutor who teaches law at the University of Notre Dame.

“These are actions that facilitated major international drug cartels to
continue their operations,” he said. “Now, if that doesn’t justify criminal
prosecution, I can’t imagine a case that would.”

Oregon Democratic Sen. Jeff Merkley shot off a letter to U.S. Attorney Eric
Holder after the HSBC settlement, saying the government “appears to have
firmly set the precedent that no bank, bank employee, or bank executive can
be prosecuted even for serious criminal actions if that bank is a large,
systemically important financial institution.”

Neil Barofsky, the former inspector general of the government’s Troubled
Asset Relief Program and a former federal prosecutor in New York, warned
that big banks could interpret the Justice Department’s leniency as “a
license to steal.”

Since 2009, several European banks have paid heavy settlements related to
allegations they moved money for people or companies on the U.S. sanctions
list: Switzerland’s Credit Suisse, $536 million; British bank Barclays,
$298 million; British bank Lloyds, $350 million; Dutch bank ING, $619
million; and the Royal Bank of Scotland, $500 million for alleged money
laundering at Dutch bank ABN Amro.

While those cases involved deals with such countries as Iran, Libya, Cuba
and Sudan, the HSBC case was notable for the government’s allegation that
it also helped launder $881 million in drug-trafficking proceeds for
Mexican drug cartels.

As bad as those allegations were, prosecutors say they could not prove HSBC
executives conspired to aid drug organizations or rogue nations. Breakdowns
in security controls within the company had occurred gradually, over
decades, with a motive of increasing profits rather than committing crimes,
prosecutors said.

Prosecutors also expressed fear of “collateral consequences” – that going
further could have sunk a company that employs tens of thousands of people
and is tied tightly to the economies of the roughly 80 countries where it
does business