Bharara on Company Crimes, Clearstream, HSBC: Compliance

Preet Bharara, the U.S. attorney in Manhattan, said to expect criminal prosecutions of companies “where the conduct warrants it.”

“It is essential to hold institutions, not just individuals, accountable for misconduct” through prosecutions, deferred prosecutions, non-prosecution agreements and civil enforcement actions, Bharara said March 31 at the annual legal and compliance meeting sponsored by the Securities Industry and Financial Markets Association.

Recognizing the weight of a criminal indictment, he emphasized that prosecutors must consider the “potential collateral consequences of our actions.”

“It may be that a financial institution is blameworthy but its conduct was not so severe and pervasive that it should receive the corporate death penalty,” he said.

Mary Jo White, the chairman of the U.S. Securities Exchange Commission, also spoke at the conference. White focused on the increase in both SEC enforcement actions and its help with parallel criminal actions.

“The SEC’s expertise and extensive cooperation and partnership with the criminal authorities is essential to all-encompassing enforcement of the federal securities laws,” she said.

To read White’s speech, click here. To read Bharara’s, click here.

Compliance Action

Clearstream Banking, Iran’s Central Bank Probed by U.S.

A U.S. grand jury is investigating possible money laundering and other violations by Clearstream Banking SA and Iran’s central bank for the benefit of Iran, a federal prosecutor said in court papers in a New York suit involving victims of terrorist attacks.

The disclosure was made in the case of Deborah Peterson, the sister of James Knipple, a U.S. Marine killed when terrorists bombed the barracks of U.S. military personnel in Beirut in October 1983. Victims of such attacks and their survivors have sued banks including Bank Markazi Jomhouri Islami Iran in Manhattan federal court to enforce collection of a $2.7 billion judgment.

The probe includes an investigation of obstruction and illegal monetary transactions, and violations of the International Emergency Economic Powers Act, according to Assistant U.S. Attorney Alexander Wilson.

Clearstream, based in Luxembourg, agreed in January to pay $152 million to settle civil claims it violated U.S. economic sanctions on Iran. The bank used an account at an unidentified U.S. financial firm to hold $2.81 billion in securities on behalf of the Central Bank of Iran, according to the Treasury Department.

Lindsey Chaffetz, a lawyer for Bank Markazi, didn’t immediately reply to a voice-mail message left at his office seeking comment.

Jessica Sicre, a spokeswoman for Clearstream, didn’t immediately return an e-mail message sent after business hours seeking comment about the U.S. investigation. Jennifer Queliz, a Justice Department, declined to comment.

The case is Peterson v. Islamic Republic of Iran, 10-cv-04518, U.S. District Court, Southern District of New York (Manhattan).

For more, click here.

HSBC Faces ‘Much Work’ in Money-Laundering Accord, U.S. Says

HSBC Holdings Plc has “much work” to do as part of a $1.9 billion agreement with the Justice Department to avoid prosecution for money laundering, the U.S. said in a status report on the U.K.-based bank’s performance.

HSBC must reach an accord this month on a monitor’s recommendations for improving its anti-money laundering and sanctions compliance programs, the government said in a filing yesterday in federal court in Brooklyn, New York. The bank is handling the matter in “good faith,” the U.S. said.

The accord, approved by a judge in July, resolved claims that London-based HSBC failed to monitor more than $670 billion in wire transfers and more than $9.4 billion in purchases of U.S. currency from HSBC Mexico, allowing for money laundering. The bank also violated U.S. economic sanctions against Iran, Libya, Sudan, Burma and Cuba, according to a criminal complaint.

An HSBC spokesman, Rob Sherman, declined to comment on the report yesterday when reached by phone.

The case is U.S. v. HSBC Bank USA NA, 12-cr-00763, U.S. District Court, Eastern District of New York (Brooklyn).

For more, click here.

FBI Seeks Help From High-Frequency Traders to Find Data Abuses

Federal agents are making an unusual public plea for the financial industry to bare its secrets.

The Federal Bureau of Investigation has solicited traders and stock-exchange workers to blow the whistle on possible front-running and manipulation via high-speed computers.

The FBI joins a roster of authorities examining high-frequency trading, in which firms typically use super-fast computers to post and cancel orders at rates measured in thousandths or even millionths of a second to capture price discrepancies. The strategy to invite whistle-blowers was prompted in part by the complexity of proving any misconduct, according to a person with direct knowledge of the matter.

Whistle-blowers are ready to step forward from stock exchanges, Michael Lewis, author of “Flash Boys,” said yesterday in an interview on NBC’s Today Show.

The FBI’s inquiry stems from a multiyear crackdown on insider trading, which has led to at least 79 convictions of hedge-fund traders and others. Agents are examining, for example, whether traders abuse information to act ahead of orders by institutional investors, according to the FBI. Even trades based on computer algorithms could amount to wire fraud, securities fraud or insider trading.

For more, click here.

Goldman Sachs to Nexans Fined by EU for Power Cable Cartel

Goldman Sachs Group Inc. and a group of cable makers including Nexans SA were fined a total of 301.6 million euros ($416 million) by the European Union for fixing the price of high-voltage power cables sold to energy providers.

The fines add to a 953 million-euro penalty for car-parts makers last month. Breaking up cartels and levying fines to deter price-fixing is an EU priority, according to Joaquin Almunia, the bloc’s antitrust chief.

Nexans Chief Executive Office Frederic Vincent has complained about high EU fines, saying the regulator’s power should be curbed.


Caterpillar Says Legal Swiss Tax Move Eliminated Unneeded Costs

A Caterpillar Inc. executive defended her company’s tax maneuvers, telling a Senate panel that moving profits from its parts business to Switzerland from the U.S. was a legal and appropriate way to eliminate unnecessary expenses.

Julie Lagacy, who oversees Caterpillar’s tax operations, said yesterday that the company engaged in standard, prudent business transactions.

“We cannot remain competitive, we cannot create jobs and we cannot increase exports by incurring unnecessary expenses,” she said at a hearing of a U.S. Senate investigative committee. “Americans pay the taxes they owe, but not more. And as an American company, we pay the taxes we owe, not more.”

The committee’s chairman, Senator Carl Levin, released a report March 31 showing that the company’s moves saved it $2.4 billion in U.S. taxes. That, Levin said, was a “paper change” that caused the subsidiary’s profits to be subject to a Swiss tax rate as low as 4 percent.

The report makes the case that offshore profit-shifting by U.S. corporations goes beyond the intellectual property maneuvers of technology companies such as Apple Inc. and Microsoft Corp. that have been the focus of previous hearings by Levin and scrutiny from governments in Europe.

For more, click here.

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