News & Analysis
Two-Track Corporate Justice Is Not the American Way
HSBC to Pay $1.92 Billion to Settle Charges of Money Laundering ... State and federal authorities decided against indicting HSBC in a money-laundering case over concerns that criminal charges could jeopardize one of the world's largest banks and ultimately destabilize the global financial system. Instead, HSBC announced on Tuesday that it had agreed to a record $1.92 billion settlement with authorities. The bank, which is based in Britain, faces accusations that it transferred billions of dollars for nations like Iran and enabled Mexican drug cartels to move money illegally through its American subsidiaries. While the settlement with HSBC is a major victory for the government, the case raises questions about whether certain financial institutions, having grown so large and interconnected, are too big to indict. Four years after the failure of Lehman Brothers nearly toppled the financial system, regulators are still wary that a single institution could undermine the recovery of the industry and the economy. But the threat of criminal prosecution acts as a powerful deterrent. If authorities signal such actions are remote for big banks, the threat could lose its sting. Behind the scenes, authorities debated for months the advantages and perils of a criminal indictment against HSBC. – New York Times
Dominant Social Theme: The crooks are caught.
Free-Market Analysis: The bottom line here is that the crooks are NOT caught. Bear in mind as a libertarian paper, we don't buy into any of these pseudo crimes. Money laundering, drug buying, regulatory transgressions ... none of these have anything to do with natural law.
They are all made-up crimes. Nonetheless, they show us the larger sickness of modern-day Western society. Average citizens are imprisoned for decades for the "crimes" that those who work in corporations perform without serious personal consequences.
Were we to observe this behavior in ancient times we would be well aware of just how immoral it really is. If we studied ancient examples of large organizations, favored by the emperor, that avoided criminal consequences, we would easily see the favoritism and unfairness.
If we read that such organizations were exempt from policing because their very size made them a threat to the social order, we would likely scoff. We would surmise that such an attitude was merely a justification for inaction.
But let the same thing happen today and many take it at face value. Again, we are not advocating civil or criminal penalties for any of these "crimes" ... but the disparity between the ruined lives of individuals and the non-consequences of the same actions within a corporate environment is startling. Here's some more from the article:
Some prosecutors at the Justice Department's criminal division and the Manhattan district attorney's office wanted the bank to plead guilty to violations of the federal Bank Secrecy Act, according to the officials with direct knowledge of the matter, who spoke on the condition of anonymity. The law requires financial institutions to report any cash transaction of $10,000 or more and to bring any dubious activity to the attention of regulators.
Jonathan Bachman/ReutersIn 2010, Lanny A. Breuer, left, head of the Justice Department's criminal division, created a task force on money laundering.
Given the extent of the evidence against HSBC, some prosecutors saw the charge as a healthy compromise between a settlement and a harsher money-laundering indictment. While the charge would most likely tarnish the bank's reputation, some officials argued that it would not set off a series of devastating consequences.
A money-laundering indictment, or a guilty plea over such charges, would essentially be a death sentence for the bank. Such actions could cut off the bank from certain investors like pension funds and ultimately cost it its charter to operate in the United States, officials said.
... After months of discussions, prosecutors decided against a criminal indictment, but only after securing record penalties and wide-ranging sanctions.
The HSBC deal includes a deferred prosecution agreement with the Manhattan district attorney's office and the Justice Department. The deferred prosecution agreement, a notch below a criminal indictment, requires the bank to forfeit more than $1.2 billion and pay about $700 million in fines, according to the officials briefed on the matter. The case, officials say, will claim violations of the Bank Secrecy Act and Trading with the Enemy Act.
The charges sound grave, indeed. Without granting any of them credibility (what "enemy" does the US have, after all?), we can certainly say in good faith that an individual facing the same laundry list of transgressions would likely have ended up incarcerated.
As far as destabilizing the system goes, we're all for it. The system SHOULD be destabilized. The too-big-to-fail banks should be allowed to fail.
Strictly from a judicial standpoint, the idea of not prosecuting certain people because they work for large entities is a terrifically corrosive one. There is basically a formal two-track system of justice in the US now, and that simply cannot be good for civil comity.
The CIA is said to make a lot of money via drug dealing. This is probably one of the REAL reasons that such cases are not prosecuted.
Any way you examine it, most of these white-collar laws were only recently enacted and ought to be done away with. And then the too-big-to-fail banks ought to be un-propped. Let them tumble at will.
Conclusion: If the system itself falls down, we'll build a better one.
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Posted by dkmeller1 on 12/15/12 05:54 PM
For most of my life (I am 60),I have heard that there were two systems of law in this country, one for the "rich", and one for everyone else. I hope that this didn't surprise anybody at the Daily Bell too much.
PEACE AND FREEDOM!!
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Posted by MetaCynic on 12/13/12 12:57 PM
The laws, regulations and rules on the books at the federal, state and local levels probably total in the millions. This tsunami gushes forth, unabated 24/7. And, of course, as we're sternly reminded by the law makers and enforcers, ignorance of the law is no excuse. Every single one of us is unwittingly guilty of some, perhaps even many, felonies.
One purpose of government's frenetic spying, monitoring and eavesdropping on all our movements, transactions and communications is to build a comprehensive database of each person's life history. This database can be mined to find evidence of "criminal" behavior in order to selectively prosecute (or persecute) "enemies" of the regime. This could be one explanation for the spinelessness of major corporations and institutions in standing up to power. They are being blackmailed into silence.
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Posted by Robert Eastman on 12/13/12 10:44 AM
This is another case of government demanding its "share of the loot." Obviously HSBC had failed to take care of the "right people" so they must be humiliated. Even the dumbest "street-level gangsters" understand that everyone must get their cut. This has nothing to do with morality only with message... "YOU MUST PAY TO PLAY" and don't you ever forget that!
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Posted by Hapa on 12/12/12 09:18 PM
We are quickly reaching the end game. Somewhere, sometime the system will falter badly. It will likely be an engineered fall, but this is where it can get out of hand. TPTB have an outcome in mind, but this transition is the most vulnerable time. Don't believe this outcome is preordained. Humans have never been at this place and time before. All kinds of things can happen.
Though there are many sheeple across the land, we are not the wholly uneducated masses of past generations. We may lack a prior native intelligence that people who lived closer to the land once had, but we have a new global consciousness that wasn't there before. We were isolated and cut off in the past, and they could corall and kill off people behind the scenes. There are too many people now to hoodwink.
What do you think will happen when people don't have jobs, the currency has gone kaput, and they start looking around for answers from their government? Once the military is on the streets, curfews in place, and sniper killings, people will get the message real quick.
The sooner the system fails the better. If we go through untold austerity it will sap the will and spirit of the people, which is what is being engineered in Europe.
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Posted by taxesbyanyothername on 12/12/12 08:06 PM
Excellant article but I have to step back from the conclusion. Whether or not it will be better remains to be seen.
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Posted by Rasoir on 12/12/12 07:58 PM
Yes, I read of this yesterday, yawned and turned the page.
That's what it has come down to. Ever since Eric Holder revealed he didn't have the stones to prosecute Goldman Sachs for their role in taking the opposing side of the trades they were selling to their "muppet" clients, I gave it away. It is too late for this society - fascists are at the door, and the seating arranged for them at the table of government.
Will HSBC actually be required to hand over the cash? Doubt it. It does make good press though, and the plebiscite can relax in the full knowledge that there is still some sort of guardian of natural justice on the job.
Isn't there?
America represents to all that is wrong and evil in the world, from warmongering, to drug dealing, to pornography, to violence in the street, to corporate crime, to corruption in government, to persecution (Assange, Manning, Troy Davis, yada yada), manipulation of the markets in all forms and so on - nothing good coming out of the stinking cess-pool called the USA.
The really scary thing is that the same is happening in Australia now ... increasing gun crimes despite the population being disarmed in 1996-98, violent playstation games now legalised as "R"rated, corporate fraud and oh the list goes on. You could just write your own.
There is no place to hide - they are coming for us ... no doubt - and the end result will be slavery and no value on human life or individual rights.
But we got what we wanted - a godless society, where spiritual values and virtue are ridiculed, and the money-god in the temple and in the high place.
The middle-class is the bastion. Once it is gone, there is nothing between the Elite and the poor.
What then? Auschwitz?
Not very much to look forward to ... but looking forward, it is hard to see anything else. These Elite are now running unchecked.
There is no law that guides them.
No regulation to restrain them.
No judge to bring them to account.
No recompense for their evil.
No constitution to remove them.
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Posted by Bobby7 on 12/12/12 04:14 PM
PRISONS ARE FULL OF POOR PEOPLE.
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Posted by 1776 on 12/12/12 03:16 PM
Friends, It's now December 12, and the headlines are the same as they were two weeks ago: The so-called 'Fiscal Cliff' is looming. From watching the news and listening to the politicians in Washington, DC, we would believe the sky will come crashing down January 1 if the President and Congress don't miraculously save us - from the very mess they themselves created.
If the sky falls, it won't be because of the Fiscal Cliff. The panicked politicians will undoubtedly once again pull out the duct tape and baling twine and somehow put together a deal that will let them pretend that a crisis has been averted - for now. But at the end of the day, they will have really done nothing.
Even if we go over the cliff, federal spending would only be reduced by about $65 billion in 2013 - a pittance compared to a deficit of more than a trillion dollars. Where is the proposal for spending cuts that will actually eliminate the deficits that are the REAL fiscal cliff?
How can anyone believe the politicians are serious about cutting government when, according to Investor's Business Daily, the federal government has added an average of 101 NEW employees every day for the past four years?
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