A race between Washington and NY prosecutors ended up “fraying” a government investigation into one of Wall Street’s biggest banks – and also tipped off the company to its impending settlement terms before the government had all the information, according to an explosive congressional report released Monday.
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Politicians and other groups have criticised the Department of Justice for not sufficiently cracking down on big banks following the 2008 financial crisis.
A draft version of the settlement contained language that said HSBC executives’ bonuses would be tied to compliance performance, but the final document said compensation “could” be tied to compliance, according to the report.
As part of HSBC’s arrangement with the US federal government, the bank installed an outdoors display, former prosecutor Michael Cherkasky, to enhance its anti-money laundering controls. The report found that Justice officials feared that HSBC played too important a role in the economy to prosecute.
The report’s findings were published earlier on Monday by The Wall Street Journal.
Specifically, the House Financial Services Committee states in a new report that top officials at the Justice Department overruled an internal recommendation that the government file criminal charges against HSBC Bank for years of violating money laundering laws.
The bank, which has its headquarters in London, paid a $1.92bn (£1.48bn) settlement but did not face criminal charges.
They then “misled” Congress as to why the DOJ failed to prosecute HSBC, according to the majority staff of the House Committee on Financial Services.
A US Congressional report released Monday also accused former Attorney General Eric Holder of misleading congress about the decision.
In addition to Holder’s apparent reported concern that prosecuting the bank would impact the safety and soundness of the global the financial system, DOJ also sent proposed settlement numbers to HSBC before consulting with Treasury’s Office of Foreign Asset Control.
Holder did not immediately respond to a request for comment Monday to Covington & Burling, the law firm he rejoined as a partner a year ago after leaving the Department of Justice.
Then-Attorney General Eric HolderEric H. HolderGOP committee blasts the Justice Department over big bank case Defining moment for Comey in Clinton call Federal Bureau of Investigation director takes center stage in Clinton email case MORE set off a controversy in 2013 when he suggested during congressional testimony that the size of some banks does make it hard to build cases, out of concern for the broader economic repercussions.
The 2012 settlement with HSBC detailed how the bank violated USA sanctions by conducting business for customers in Iran, Libya, Sudan, Burma and Cuba. Justice Department representative Peter Carr stated a series of aspects are weighed when determining how to deal with a case, consisting of “unfavorable repercussions for innocent third parties, such as staff members, customers, investors, pension holders and the general public”.
The Congressional report said both the Justice Department and Treasury did not comply with the committee’s request for documents, forcing them to issue subpoenas.
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The settlement allowed the bank to avoid pleading guilty to any wrongdoing.
