Going Down?

Loretta Lynch confirmation as attorney general dogged by HSBC scandal

Dan Roberts, The Guardian

Friday 20 February 2015 13.58 EST

Opposition to Barack Obama’s nominee for US attorney general over her handling of the [HSBC ] scandal is growing in Congress after she admitted deciding not to prosecute the bank for money laundering offences without hearing from key regulators or a separate investigation into tax secrecy.

A Senate vote to confirm Loretta Lynch, who as US attorney in the case instead agreed a $1.9bn financial settlement, has already been postponed until next Thursday amid concern she was insufficiently aggressive in pursuing Wall Street criminal allegations.

…

But new responses to questions on HSBC put to Lynch by Senate judiciary chairman Chuck Grassley reveal just how isolated her decision was from other allegations swirling around the giant bank and has now prompted another member of the committee, Senator David Vitter, to demand further disclosures.

“These decisions by the [Department of Justice] and Ms Lynch’s office raise troubling questions about whether pertinent information of public concern regarding HSBC was ‘swept under the rug’, if justice was served, and why HSBC was given special treatment that allowed it to walk away from such serious offences unscathed,” Vitter writes in a letter to current attorney general Eric Holder. “This case is increasingly relevant and pressing now that Ms Lynch has been nominated as the next attorney general.”

Lynch has confirmed she was not aware of the damning tax allegations against the bank when negotiating a deferred prosecution agreement (DPA) over it facilitating money laundering by Mexican drug cartels and helping clients evade US sanctions.

This was despite a separate investigation into documents from whistleblower Hervé Falciani showing HSBC’s role in colluding with Swiss bank clients to hide their assets from tax authorities, which were passed to the US government by French authorities.

“To my knowledge, my office did not have access to the Falciani documents prior to execution of the DPA,” said Lynch in responses published on Thursday. “I am not aware of whether or how the information was conveyed to the department, nor do I have information about why my office did not have access to it.”

The admission has angered campaigners who say the crucial Facliona documents were “lost in the haystack of information” at the DoJ but their public existence could have been easily verified.

“She could have looked it up on Wikipedia,” said Bart Naylor, an expert at Public Citizen. “She oversees 340 attorneys; at least somebody should have been thinking about this and put it on Google alerts,” he added. “At the time of December 2012 when she signs this deal she should have said to somebody, can I have a fuller account of this?”

…

“From a policy perspective, that’s the most troubling aspect of this: that people not expert in this made an otherwise momentous policy that this bank was too big to jail.”

The ‘too big to jail’ argument was subsequently undermined by successful prosecutions of Credit Suisse and BNP Paribas, who entered guilty pleas in similar cases without triggering a banking meltdown.