A shocking congressional report released this week revealed that a competition between Washington and New York prosecutors resulted in the “fraying” of a government investigation into one of the largest banks on Wall Street. The battle over which government agency would be first to resolve the case also allowed the company to learn of its imminent settlement terms before the government had all the information.
HSBC, directed by outgoing Chief Executive Stuart Gulliver, concluded a settlement with United States and United Kingdom prosecutors for $1.9 billion in 2012. Additionally, the bank agreed to five years of increased supervision to straighten out its anti-money laundering practices — a process that has been subject to criticism for its drawn out time frame and lack of toughness.
It now looks like the disarray between the United States Department of Justice and New York’s Department of Financial Services was a significant element of how HSBC managed to successfully negotiate its settlement with the government.
The Justice Dept.’s prosecutors were “scrambling” to arrive at a settlement with the huge bank, “apparently in hopes of avoiding being beaten to the punch again by the NY Department of Financial Services,” Matthew Tuchband, the acting chief counsel for Treasury’s Office of Foreign Asset Control, claimed in August of 2012.
The report further determined that former US Attorney General Eric Holder overruled the recommendations of his own prosecutors to prosecute HSBC, partly due to worries that the company was “too big to jail.”
The report “raises questions that are so serious it may deserve a full congressional investigation,” stated Bartlett Naylor of Public Citizen.