[corp-focus] The Big Bank's Dirty Little Secret

[Robert Weissman]

The Big Bank's Dirty Little Secret
By Russell Mokhiber and Robert Weissman

What is the purpose of law enforcement?

To enforce the law, and make public the results.

What deterrent effect does law enforcement have if the public is not aware
of the results of the law enforcement?

Not much.

And yet, when it comes to big banks and major financial institutions, the
Treasury Department enforces the law in private. Why? To protect the
reputation of the big banks.

We thought about this the other day when President Bush and Treasury
Secretary Paul O'Neill stood together at the White House Rose Garden and
announced a crackdown on big banks and other financial institutions who do
business with terrorists.

President Bush signed an executive order providing the Treasury Department
with the authority to block funds of terrorists and anyone associated with
a terrorist or terrorism.

"With the signing of this executive order, we have the President's
explicit directive to block the U.S. assets of any domestic or foreign
financial institution that refuses to cooperate with us in blocking assets
of terrorist organizations," O'Neill said. "This order is a notice to
financial institutions around the world -- if you have any involvement in
the financing of the al Qaeda organization, you have two choices:
cooperate in this fight, or we will freeze your U.S. assets -- we will
punish you for providing the resources that make these evil acts
possible."

So what?

What good does it do to punish the big banks if no one knows about the
punishment?

If the history of law enforcement against corporate criminals is any
indication, the fines will probably be a slap on the wrist. But in this
case, we have no way of knowing, because the Treasury Department won't
tell us.

President Bush's executive order -- and all laws governing trading with
the "enemies" of the United States -- terrorists, Cuba, Libya -- are
enforced by the Treasury Department's Office of Foreign Assets Control
(OFAC).

Which American citizens are most concerned about OFAC's enforcement
powers? Big banks and financial institutions. Why? Because they do
business with the "enemies" of the United States and they have the most to
lose if that dirty little secret gets out. They have corporate reputations
to protect.

So, they have worked a deal with OFAC -- enforce the law against us, fine
us if you must, but don't tell the public. And for years, OFAC has agreed
to be a party to this cover-up.

How do we know this is going on?

Because the white-collar criminal defense lawyers who the banks and
financial institutions hire to defend them against OFAC criminal and civil
enforcement actions readily admit it.

Last week, Dale Chakarian Turza, a partner in the Washington, D.C. office
of Clifford Chance Rogers & Wells, told us that she believes that OFAC
enforcement officials, led by chief of the penalty division, Betsy Sue
Scott, run a "very active case load."  That means that big banks and
financial institutions are being cited with law violations and are paying
fines. And the enforcement activity never sees the light of day.

Of course, the banks and financial institutions like it that way. And they
will like even more now, as they search their databases to determine which
terrorists have deposits at their institutions.

Which bank would want the public to know that they are doing business with
Osama bin Laden?

"None of our clients want any publicity in this area," Turza said. "It is
not a badge that any financial institution or others who are tagged by
OFAC wear proudly. These are very serious statutes. Violations are
generally inadvertent. No bank or other financial institution likes to
have any publicity or press on an enforcement action."

"So the defense bar is generally very pleased when our clients don't get
press in this area," Turza said.

Secret settlements are unusual when it comes to enforcing the law against
corporations. Every time the Federal Trade Commission enforces the law, it
puts the result up on its web site. Same for the Securities and Exchange
Commission. Same for the Occupational Safety and Health Administration. In
most cases, when the Justice Department enforces the law against a major
corporations, the public finds out about it -- one way or another.

Publicity is supposed to have a deterrent effect. Why should OFAC be
different?

"In some ways I think they get better compliance through silence," Turza
said.

Yeah, right. And if we ever got arrested for a street crime, we wouldn't
want the public to know, either. Could we have that deal, too?

The Treasury Department's policy of cutting secret deals with big banks is
an indefensible embarrassment. The Department refuses to return reporters'
calls about the subject.

Last month, we sued the Treasury Department to compel enforcement
officials there to produce records of enforcement actions settled by OFAC.

The public has a right to know.


Russell Mokhiber is editor of the Washington, D.C.-based Corporate Crime
Reporter. Robert Weissman is editor of the Washington, D.C.-based
Multinational Monitor. They are co-authors of Corporate Predators: The
Hunt for MegaProfits and the Attack on Democracy (Monroe, Maine: Common
Courage Press, 1999).

(c) Russell Mokhiber and Robert Weissman