Two Giant Banks, Seen as Immune, Become Targets – By BEN PROTESS and JESSICA SILVER-GREENBERG APRIL 29, 2014, 8:40 PM


The headquarters of the French bank BNP Paribas in Paris, left, and the Swiss bank Credit Suisse in Zurich.

Jacques Brinon/Associated Press and Arnd Wiegmann/ReutersThe headquarters of the French bank BNP Paribas in Paris, left, and the Swiss bank Credit Suisse in Zurich.

Federal prosecutors are nearing criminal charges against some of the world’s biggest banks, according to lawyers briefed on the matter, a development that could produce the first guilty plea from a major bank in more than two decades.

In doing so, prosecutors are confronting the popular belief that Wall Street institutions have grown so important to the economy that they cannot be charged. A lack of criminal prosecutions of banks and their leaders fueled a public outcry over the perception that Wall Street giants are “too big to jail.”

Addressing those concerns, prosecutors in Washington and New York have met with regulators about how to criminally punish banks without putting them out of business and damaging the economy, interviews with lawyers and records reviewed by The New York Times show.

The new strategy underpins the decision to seek guilty pleas in two of the most advanced investigations: one into Credit Suisse for offering tax shelters to Americans, and the other against France’s largest bank, BNP Paribas, over doing business with countries like Sudan that the United States has blacklisted. The approach applies to American banks, though those investigations are at an earlier stage.

In the talks with BNP, which has a huge investment bank in New York, prosecutors in Manhattan and Washington have outlined plans to extract a criminal guilty plea from the bank’s parent company, according to the lawyers, who were not authorized to speak publicly. If BNP is unable to negotiate a lesser punishment — the bank has enlisted the support of high-ranking French officials to pressure prosecutors — the case could counter congressional criticism that arose after the British bank HSBC escaped similar charges two years ago.

Such criminal cases hinge on the cooperation of regulators, some who warned that charging HSBC could have prompted the revocation of the bank’s charter, the corporate equivalent of the death penalty. Federal guidelines require prosecutors to weigh the broader economic consequences of charging corporations.

Benjamin M. Lawsky, left, New York’s superintendent of financial services, is one of the regulators who is said to have reached an understanding with prosecutors, like Preet Bharara.
Mike Segar/Reuters and Andrew Burton/Getty ImagesBenjamin M. Lawsky, left, New York’s superintendent of financial services, is one of the regulators who is said to have reached an understanding with prosecutors, like Preet Bharara.

With the investigation into BNP, the lawyers briefed on the matter said, prosecutors met in April with the bank’s American regulators: the Federal Reserve Bank of New York and Benjamin M. Lawsky, New York’s top financial regulator. The prosecutors who attended the meeting and are leading the investigation — Preet Bharara, the United States attorney in Manhattan; David O’Neil, the head of the Justice Department’s criminal division in Washington; and Cyrus Vance Jr., the Manhattan district attorney — left largely reassured.

In a recent speech to Wall Street lawyers, Mr. Bharara said this dynamic created a “gaping liability loophole that blameworthy companies are only too willing to exploit.”

Article continues:

http://dealbook.nytimes.com/2014/04/29/u-s-close-to-bringing-criminal-charges-against-big-banks/?_php=true&_type=blogs&hp&_r=0

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