Wednesday, July 2, 2014

BNP Paribas Conviction Commendable, But Length of Investigation and Failure to Prosecute Individuals Raise Questions

Both the Department of Justice (DOJ) and the District Attorney of New York County (DANY) deserve commendation for the criminal conviction of France's largest bank, BNP Paribas, and the securing of penalties of approximately $9 billion (including $2.25 billion to New York State's bank regulatory agency, the Department of Financial Services), and, for the first time, a seemingly not insignificant collateral sanction imposed by a regulator (although how significant remains to be seen).  BNP for ten years falsified transactions in order to be able to use the American banking system to do business with Sudan, Iran and Cuba, countries deemed rogue states by the U.S. government (but not necessarily by France).  See here.  While I accept that those crimes were serious crimes, I would much have preferred a prosecution-to-conviction of an American bank whose wrongs made it and its bankers much richer while making millions of other Americans much poorer.

The investigation, according to a story in the New York Times (see here) began in 2006 under the venerable New York County District Attorney Robert Morgenthau, whose expansive view of jurisdiction included the planet of Saturn (one of his bureaus was called "DANY Overseas"), when an Israeli-American DANY financial analyst developed a lead from reviewing the court papers of a civil suit against Iran brought by a grieving lawyer father whose daughter was killed in a terrorist suicide bombing in Gaza in 1995.  See here.  The investigation was continued by District Attorney Cyrus Vance when he took office in 2009.

No individuals have been indicted (although 13 have been required to leave their jobs), perhaps because the statute of limitations had run during the lengthy investigation.  One wonders why such an important investigation took seven to eight years and has resulted (at least so far) in no indictment of individuals.  Perhaps it was due to the difficulty to forge cooperation between federal and state law enforcement agencies.  New York's federal and state prosecutors have not always played well together.

In any case, the appearance of the District Attorney of New York as a player in the prosecution of big banks is a welcome step.  New York is, as Mr. Vance said, "the financial capital of the world," and therefore probably the financial crime capital of the world.  Perhaps strong prosecutorial action by a local prosecutor -- in a sense a competitor with DOJ for high-profile cases -- will goad DOJ into stronger actions against financial institutions.  Although the U.S. Attorney's Office under Preet Bharara has done a creditable job in fighting insider trading, it -- and DOJ -- had not until six weeks ago (see here) secured a criminal conviction against a major financial institution.

(goldman)

http://lawprofessors.typepad.com/whitecollarcrime_blog/2014/07/see-here-see-here-see-here.html

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