Vote on Lynch delayed in wake of HSBC revelations

Introduction

The Senate Judiciary Committee has delayed a vote on the nomination of Loretta Lynch to become U.S. attorney general amid questions about how she handled the money laundering prosecution of British banking giant HSBC in 2012.

The delay comes after revelations that the Swiss arm of the bank may have helped individuals and companies worldwide hide their money from tax authorities.

Sen. David Vitter, R-La., was among the senators who asked that the committee vote on Lynch’s nomination be delayed at least two weeks while lawmakers ask her additional questions. Vitter said he was concerned about the 2012 HSBC settlement.

“The investigation found that HSBC had violated many anti-money laundering statutes,” Vitter said during today’s committee meeting. “The settlement was a fine — a significant fine, but a fine. No criminal action, nothing more serious.”

The International Consortium of Investigative Journalists, a project of the Center for Public Integrity, released information this week on thousands of accounts held at HSBC’s Swiss subsidiary until 2007. The files include details of more than 8,600 accounts tied to U.S. citizens that were worth more than $13 billion.

The revelations have raised questions as to why the Justice Department did not charge the bank with any tax-related infractions and has also drawn additional scrutiny to the 2012 settlement spearheaded by Lynch, who was U.S. attorney in Brooklyn.

“It’s very reasonable and incumbent on us, in fact, to get the details of this settlement,” Vitter said. “I’m certainly working on that.”

The bank was charged in 2012 with helping drug dealers launder money and with illegally completing transactions for clients in Iran, Libya, Syria and other countries under U.S. economic sanctions.

On the same day, the bank entered into a deferred prosecution agreement in which it forfeited $1.26 billion and paid another $665 million in penalties. The company also replaced all of its senior management at that time, and has been working under a court-appointed monitor. The agreement could be terminated if the bank commits further crimes.

No HSBC executives were criminally charged.

Lynch, in a statement to the Senate Judiciary Committee on Monday, said the punishment at that time was considered “significant, and in some respect extraordinary.”

Lynch added that she “carefully considered sufficient admissible evidence to prosecute an individual and whether such a prosecution otherwise would have been consistent with the principles of federal prosecution.”

She said the agreement she reached with the company does not preclude the Justice Department from pursuing more charges.

“The [deferred prosecution agreement] explicitly does not provide any protections against prosecution for conduct beyond what was described in the statement of facts,” she wrote. “Furthermore, I should note the DPA explicitly mentions that the agreement does not bind the Department’s tax division, or the fraud section of the criminal division.”

The newly revealed files were stolen by an HSBC employee who turned them over to the French government. According to court files, French authorities shared the files with the U.S. Internal Revenue Service in 2010 but it’s not clear whether the IRS turned the information over to the Justice Department.

IRS spokeswoman Julianne Breitbeil declined to say whether the agency shared the information with the Justice Department, citing a federal law that bars her from discussing such matters.

The files reveal that global banking giant HSBC profited from doing business with arms dealers who channeled mortar bombs to child soldiers in Africa, bag men for Third World dictators, traffickers in blood diamonds and other international outlaws. The files covered accounts up to 2007, with more than 100,000 individuals and legal entities from more than 200 nations.

The Guardian newspaper reported this week that federal prosecutors are examining HSBC’s activities. Justice Department spokesman Brian Fallon did not respond to several emails and phone calls seeking confirmation of the fresh probe.

While Lynch’s confirmation will be delayed at least two weeks, it appears that the judiciary committee is likely to approve her nomination when it reconvenes on Feb. 26. Several senators, including Orrin Hatch, R-Utah, said they would support her.