Saturday, February 3, 2007
The pending merger between Bank of New York and Mellon Financial may present what looks like a first in the field of non-prosecution agreements: two companies joining their monitors appointed as a result of settling criminal investigations. Bank of New York entered into a non-prosecution agreement with the U.S. Attorney's Offices for the Southern and Eastern Districts of New York in November 2005 (press release here) related to improper procedures for monitoring possible money laundering and fraud in its accounts. The settlement involved $38 million in penalties and restitution, and Bank of New York agreed to appoint a monitor for three years to ensure its compliance with the transaction reporting obligations imposed on financial institutions. Meanwhile, in August 2006, Mellon Financial reached a settlement with the U.S. Attorney's Office for the Western District of Pennsylvania and the IRS (see press release here) related to "the April 2001 destruction of over 77,000 tax returns and payments at the Mellon Client Service Center in Pittsburgh, United States." Six former employees were indicted and a seventh entered a guilty plea to charges arising from the destruction of the returns. The company made restitution of $18 million and appointed its own monitor for the ubiquitous three-year term to oversee its compliance.
With the banks merging, the question is whether the monitors will also merge. An article from Corporate Counsel (here) notes that the Department of Justice may agree to such a combination into a single monitor's office, but that nothing has been worked out yet. With deferred and non-prosecution agreements growing in popularity, this situation was almost inevitable, and the decisions made in this transaction are likely to become the template for future mergers or acquisitions of corporations with monitors. (ph -- thanks to Yolanda H. for passing this item along)