DOJ cites ‘Breathtaking Flagrancy’ in charges against five banks
By Jenna Greene, From The National Law Journal
Major banks agree to felony charges over currency manipulation and will pay more than $5B in penalties.
Five major banks on Wednesday agreed to plead guilty to felony charges and pay more than $5 billion to resolve allegations that they rigged the U.S. dollar-euro exchange rate.
The fines are historic. But the more perilous consequences for the banks may come as they seek waivers from regulators such as the U.S. Securities and Exchange Commission that will allow them to continue as felons to do things like manage pensions and issue securities.
Citicorp, JPMorgan Chase & Co., Barclays PLC, The Royal Bank of Scotland PLC were charged by the U.S. Department of Justice with manipulating the price of dollars and euros exchanged in the foreign-exchange spot market. The banks pleaded guilty to a one-count felony charge of conspiring to fix prices and rig bids.
UBS A.G. agreed to plead guilty a one-count charge of wire fraud related to manipulating the London Interbank Offered Rate and other benchmark interest rates. UBS will pay a $203 million criminal penalty for breaching its December 2012 nonprosecution agreement related to the rate probe. Barclays also agreed that its foreign currency exchange practices violated its June 2012 nonprosecution agreement, and will pay an additional $60 million penalty.
U.S. Attorney General Loretta Lynch, speaking to reporters on Wednesday, cited the “breathtaking flagrancy” of the conspiracy, which she described as “brazenly illegal.”
“This Department of Justice intends to vigorously prosecute all those who tilt the economic system in their favor, who subvert our marketplaces and who enrich themselves at the expense of American consumers,” Lynch said in a statement.
The penalties—a combined $2.5 billion for antitrust violations—are the largest set of antitrust fines in DOJ history, Lynch said. The fines were apportioned based on blame, and Lynch said the $925 million to be paid by Citicorp is the biggest ever for a single violation of the Sherman Act. The Commodity Futures Trading Commission, the Federal Reserve, the New York State Department of Financial Services and the United Kingdom’s Financial Conduct Authority also assessed fines.
Lawyers representing the banks include David Braff, Yvonne Quinn, Karen Seymour and Alexander Willscher of Sullivan & Cromwell for Barclays; Lev Dassin, Mark Leddy, Mark Nelson and Jonathan Kolodner of Cleary Gottlieb Steen & Hamilton for Citi; John Carroll of Skadden, Arps, Slate, Meagher & Flom for JPMorgan; Greg Andres of Davis Polk & Wardwell for RBS; and Gibson, Dunn & Crutcher’s Gary Spratling, F. Joseph Warin, D. Jarrett Arp and David Burns for UBS.
The settlement does not include agreements with other federal and state bank regulators to grant waivers from automatic disqualification provisions for certain business practices following a felony conviction. Lynch said the regulators have “their own rules. It’s their decision.”
Earlier this month, Deutsche Bank A.G. secured such a waiver from the SEC. The SEC in the past year also issued waivers for Royal Bank of Scotland, BNP Paribas and Credit Suisse A.G.
Democratic commissioners Kara Stein and Luis Aguilar voted against the Deutsche Bank and Royal Bank of Scotland waivers. “It is safe to assume that these waiver requests will continue to roll in, as issuers are now emboldened by an unofficial commission policy to overlook widespread and serious criminal conduct—and ensure that the largest companies retain their array of advantages in our capital markets,” Stein wrote in May 4 dissent. “It is unclear to me how this waiver can be granted … the egregious criminal nature of the conduct and the duration of the manipulation (almost a decade) weigh heavily in my mind.”
Commissioner Daniel Gallagher in a speech in February defended the practice of granting waivers.
“If a disqualification is now a sanction, then the waivers must be part of the settlement negotiations. This is especially true for financial-services firms, which can effectively be sentenced to a corporate death penalty if certain waivers … are not granted,” Gallagher said. “If the commission wants to put firms out of business, something that always should be on the table in extreme enforcement cases, we should be doing so with our authority over the registration provisions of the securities laws, not through automatic disqualifications.”
IMAGE: Attorney General Loretta Lynch announcing during a press conference at the Department of Justice that five major banks have agreed to plead guilty to felony charges of conspiring to manipulate the price of U.S. dollars and euros. May 20, 2015. Photo: Diego M. Radzinschi/NLJ
For more on this story go to: http://www.nationallawjournal.com/id=1202726965996/DOJ-Cites-Breathtaking-Flagrancy-in-Charges-Against-Five-Banks#ixzz3amKlpTim
See also iNews Cayman related story published May 20 2015 “Major banks admit guilt in Forex probe, fined $6 billion” at: http://www.ieyenews.com/wordpress/major-banks-admit-guilt-in-forex-probe-fined-6-billion/