Asset Protection Strategies, STAFF NEWS & ANALYSIS
Two-Track Corporate Justice Is Not the American Way
By Staff News & Analysis - December 12, 2012

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.

After Thoughts

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