BNP Pleads Guilty, Will Pay $8.9B in Fines

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July 1 (Bloomberg) -- A U.S. crackdown on financial institutions for alleged sanctions-busting threatens to penalize more European banks after France’s BNP Paribas SA was fined a record $8.97 billion for dealing with blacklisted countries. Harvard University Professor Robert Kaplan and Gilt Group CEO Michelle Peluso speak on “Bloomberg Surveillance.” (Source: Bloomberg)

You para suit in, what you tear -- you parachute in, would you tell everybody at bnp paribas?

From the outset, it looks like a cultural problem.

They have been warned about this.

They still had money laundering, and i cannot figure out why, so there is a compliance issue, and maybe a leadership problem.

There is a cultural problem.

How do you define air against?

You have to teach error against, rather, at hbs.

How do you manage a normal human condition?

We try not to teach arrogance at hbs, but the truth is, people follow what they think senior management wants, and obviously there was a culture in this company that even though this was the law, they felt that they did not need to follow it.

I do not really understand from the outside wide.

The idea of the government is saying it is not what bmp did, it was that they kept doing it, even when we told them maybe this was not the thing to do.

It speaks to belligerence.

I'm not sure that deciding to maintain a given when a years worth of profits will be handed over to the government -- that is not belligerence, but it certainly speaks to something.

What is your take of maintaining a dividend when literally an entire yours profit is yanked out?

That is the right thing to do.

If i run into this big right now, you want to create a stability and look to the future and move forward.

I think you can be given and what the right decision.

They will does not have any other capital return other than that.

Ask bnp says, according to the sp and people familiar with the situation, a couple of senior executive will be forced to leave the np.

We've all heard how regulators are going after individuals are not just the bank itself.

How does a bank like bnp then attract more talent and make sure there is not a brain drain?

They have to convince people that they are serious about following the law and this will be a great place to work.

There is a culture where they are going to follow the law and it is a place you can thrive.

There is a theory, modigliani and miller, a corporate finance perfect model that we learn and then forget.

Let me ask a dumb question of the day -- who pays this fine in the end?

Shareholders.

Equity shareholders take this on the.

You bet.

You would suggest that the institution does not pay a dime of this.

The shareholders, the owners of this company, are the ones paying be fine.

There's no question about that.

So the stopper be closer to, i don't know, in the 60's, high 50's if it were not for this.

As i hear you say it, it is not found there.

Do you not penalize the company but instead go after the individuals?

And prosecute them criminally?

I think they have done that here, but they doing it in a way that is not failed the future of the government.

French government does not -- it is a very importing company to france.

Shareholders always ultimately pay.

What does this do for the competitive landscape out there for other wall street banks and boutique investment bank?

Every wall street bank knows that the regulatory oversight and scrutiny is at a historic high on money-laundering and everything else, and it just reminds everyone we had better make sure we have good processes because if we are found to have violated the law, we are going to get a tough penalty.

Michelle colusa with us from gilt groupe as well.

-- michelle colusapeluso with us as well.

I can respect your awareness of citigroup.

As a ceo, how do you control the controls whether you are at 187 employee bank, how many employees does gilt groupe have?

Over 1000. how you do this?

Is a clear to the organization what matters, is it clear what the consequences are, certain actions?

Secondly, part of the problem with the big global banks is their complex operations, so complexity used to create a lot of value for sure, but think now when you think technology needed for controls, simplicity -- this is a huge issue.

Do you agree complexity is the bane of jamie dimon and others?

Just complex systems get into trouble?

Yes.

But i agree, tone at the top has never been more important, but complexity in that every business has its own pressures.

You have got to get into it and talk about it, discuss it.

I had a ceo on the show tell me i guess the last two weeks he does not say the message five times a day, he has failed.

Do you do that?

Do you say the single gilt groupe message five times a day?

It is critical for a team to understand -- i do not know if i repeat of five times a day.

We talked about for things over the past 18 months.

One is accelerating consumer revenue growth come under big help many and -- understanding the customer.

And then spending more and innovation, which is critical.

Third is about a more indispensable to our brand partners.

And forth is about being the most awesome place to work.

Minus i cannot find that -- mine is that i cannot find that rep dress.

You have got a lovely lady to buy a dress for.

Quick question, robert, how do you at harvard business school teach aspiring ceo's to do that sort of thing?

I like what michelle to set.

I would color vision, priorities, and alignment.

You have got to over communicate.

Your is our aspiration, here is how we add value, here are our priorities, and you're on the ethics and the values we believe in.

You have got to talk about it over and over and over.

And then as a leader, you have got to model it.

Speaking of leaders, we will talk about american apparel.

Coming up, we will discuss this corporate showdown taking place.

This is "bloomberg surveillance." we are on bloomberg television, streaming on your tablet, your smartphone, and bloomberg.com.

This text has been automatically generated. It may not be 100% accurate.

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