Sen. David Vitter (R-LA) pushed Attorney General nominee Loretta Lynch in a letter sent Monday for more information on her involvement with megabank HSBC and its settlement agreement.
According to a report Vitter cites, HSBC officers did not fulfill their required terms on its Deferred Prosecution Agreement. Lynch previously told the Senate the lack of fulfillment would be grounds for remedial action.
HSBC Holdings is a British multinational banking and financial service company out of London. It was charged in 2012 with permitting a massive money laundering involving Mexican drug cartels and terrorist organizations across the globe. HSBC allegedly completed illegal transactions for individuals in Iran, Libya, Syria and other countries under economic sanctions by the United States. Lynch, as a United States attorney, negotiated a deal that allowed the company to pay fines instead of facing criminal prosecution. Vitter notes that HSBC’s settlement was for $1.26 billion and it also paid $665 million dollars in penalties.
Vitter also questioned Lynch about information from a whistleblower that British Prime Minister David Cameron allegedly pushing the U.S. government against any criminal prosecution of HSBC so it would not lose its American banking charter. Vitter noted the White House discussed banking issues with Cameron on March 14, 2012. Vitter’s office reports that he has communicated with a whistleblower formerly employed by HSBC.
“In the course of her nomination process, Ms. Lynch has gone against her word on whether she would take action against these sorts of cases. And it has international implications – HSBC’s case is being traced all the way to Prime Minister Cameron,” Vitter said. “This empty threat sends a message to Wall Street and foreign governments alike that the Justice Department will turn a blind eye to non-compliance.”
Vitter has asked U.S. Attorney General Eric Holder and Lynch many times for more information regarding this case. Lynch has stated she would take action if HSBC failed to comply with the agreement.
Vitter’s office released the text of his letter to Lynch. It is published below:
Dear Ms. Lynch:
Two new issues have come to light in the case you handled as U.S. Attorney against HSBC. Before the Senate votes on the confirmation of your nomination to be Attorney General of the United States, you must first clarify the serious allegations surrounding this case. First, a report from an independent compliance monitor revealed that HSBC officers have been uncooperative in fulfilling the terms of the Deferred Prosecution Agreement (DPA) which you have told the Senate could be grounds to take remedial action. Second, it has been alleged that British Prime Minister David Cameron asked that the United States government not criminally prosecute HSBC for fear that the bank would lose its ability to conduct business in the United States.
The New York Times aptly captured the findings of independent compliance monitor Michael G. Cherkasky in his First Annual Follow-Up Review Report in their April 1, 2015 article, “HSBC Is Deemed Slow to Carry Out Changes.” Cherkasky’s report, as well as the government’s submission which you signed, notes that the resistance, “combativeness… and a basic lack of cooperativeness” towards internal auditors calls into question the government’s decision to not only scrap the DPA altogether, but to not undertake the intermediate step of extending the five-year DPA. I am deeply concerned that your inaction has rewarded HSBC’s obstinacy and squandered a unique opportunity to name specific corporate officers responsible for the slow progress noted by Cherkasky’s report.
In your response to written questions for the record of the Senate Judiciary Committee posed by Chairman Chuck Grassley (R-Iowa) regarding the DPA you negotiated with HSBC in your role as U.S. Attorney for the Eastern District of New York, you stated, “In the event of a failure to comply with the DPA—including the requirement to cooperate—we would take appropriate remedial action.” Clearly, you failed to take appropriate remedial action in this case, which demonstrates a pattern of lax enforcement of mega banks and sends a message to Wall Street that the Justice Department will turn a blind eye to non-compliance and corporate recidivism. This is exactly the opposite message Wall Street should be hearing from the Justice Department.
Recently, embattled British Prime Minister Cameron has been the subject of news articles examining his close political and personal connections with HSBC executives and private citizens with accounts in HSBC’s Swiss subsidiary embroiled in an alleged tax avoidance scheme. According to these recent news reports, it appears that HM Revenue and Customs received credible information of HSBC Swiss’ alleged tax avoidance scheme as early as April 2010.
Interestingly, President Barack Obama and Prime Minister Cameron met at the White House on March 14, 2012 and the joint remarks available on the White House’s Press Office website make clear that banks were discussed.
A whistleblower has alleged that Prime Minister Cameron made a plea to President Obama to not pursue a criminal prosecution against HSBC for fear that HSBC would lose its U.S. banking charter and would no longer be able to conduct business in the United States. The timing of this meeting and the unanswered questions surrounding Prime Minister Cameron’s knowledge of these alleged tax avoidance schemes by HSBC subsidiaries calls into question the decision to not pursue a criminal prosecution.
Therefore, I request that you answer the following questions to clear the air regarding your involvement in negotiating the DPA with HSBC and the decision to not prosecute criminally.
- Does Mr. Cherkasky’s independent report lead you to believe that there is a failure to comply with the DPA by HSBC?
- In light of Mr. Cherkasky’s report, are remedial actions against the bank warranted?
- Did you receive any communication from the White House, the Attorney General’s office, the Department of Justice, the Department of Treasury or any of the federal banking regulators regarding the potential that an HSBC criminal prosecution would result in the bank losing its U.S. banking charter?
- Did you receive any communication from the White House, the Attorney General, or anyone else in the administration, regarding Prime Minister David Cameron’s concerns that a prosecution of HSBC would cause the bank to lose its banking charter?
- Did the meeting in March 2014 between President Obama and Prime Minister David Cameron factor into your decision to secure a DPA instead of a criminal prosecution?
- During the decision-making process regarding whether to pursue a DPA or criminal prosecution, did you, or any attorney working for you, speak with the Federal Reserve, the Office of the Comptroller of the Currency, or the Federal Deposit Insurance Commission?
- Did you, or any attorney working on your behalf, receive any communications from the Federal Reserve, the Office of the Comptroller of the Currency, or the Federal Deposit Insurance Commission regarding HSBC’s American banking charter?
- If you are confirmed as the next Attorney General, will you investigate, and if appropriate, prosecute HSBC for tax evasion?