Why the U.S. won’t send cor­rupt bankers to prison


The list is long and shame­ful.

The Wa­chovia Bank helped laun­der hun­dreds of mil­lions for Mex­i­can drug car­tels.

Wells Fargo il­le­gally cre­ated nearly two mil­lion fake ac­counts and then charged cus­tomers ser­vice fees for them.

Bar­clay’s Bank ex­ec­u­tives ma­nip­u­lated and fixed international in­ter­est rates for its own prof­its.

The U.S. op­er­a­tions of Deutsche Bank cre­ated more than $1 bil­lion in fake mort­gages.

HSBC was, ac­cord­ing to the U.S. Department of Jus­tice, the “pre­ferred fi­nan­cial in­sti­tu­tion for drug car­tels and money laun­der­ers” for international ter­ror­ist groups. It also im­ple­mented a so­phis­ti­cated scheme that helped end-run sanc­tions on Iran, Su­dan and North Korea.

Coun­try­wide Mort­gage helped cre­ate a wide­spread sys­tem of junk mort­gages.

Cit­i­group mis­rep­re­sented bil­lions in toxic loans and mort­gages to cus­tomers and the U.S. gov­ern­ment.

Those last two led to the Great Re­ces­sion of 2008 that caused, ac­cord­ing to the U.S. Trea­sury Department, $19.2 tril­lion (U.S.) in dam­age to the Amer­i­can econ­omy.

All these ac­tiv­i­ties have been ad­mit­ted to. Some banks have paid bil­lions in fines. Yet not a sin­gle big bank ex­ec­u­tive has been charged, ar­rested or con­victed of any crime.

In fact, many are ei­ther still in charge or have re­tired with mil­lions in golden para­chutes pack­ages. Two — Robert Ru­bin of Cit­i­group and John Stumpf of Wells Fargo — left with pay­outs of more than $120 mil­lion.

Everett Stern, a for­mer HSBC em­ployee turned whistle­blower, thinks he knows why.

“The bank­ing and fi­nan­cial in­dus­try is the lead­ing fi­nan­cial con­trib­u­tor in this elec­tion. Hands down. Bank­ing has the most to lose,” Stern said in an in­ter­view. “So they are try­ing to buy as many politi­cians as pos­si­ble. The banks are very smart. They know that if they get their voices heard in Washington and they buy the politi­cians they’ll be OK.”

Stern, who is run­ning for the Se­nate in Penn­syl­va­nia as an in­de­pen­dent, is backed by data gath­ered by Washington-based group OpenSe­crets.org, which tracks po­lit­i­cal do­na­tions. Its fig­ures show that the fi­nan­cial in­dus­try con­trib­uted more than $912 mil­lion to can­di­dates in the past five years, mak­ing it the No.1con­trib­u­tor to po­lit­i­cal cam­paigns in the United States.

Stern thinks the real prob­lem is who gets the money.

“The peo­ple on the Se­nate bank fi­nanc­ing com­mit­tee are the main tar­gets of the banks — be­cause they’re the ones who have the pow­ers to make the de­ci­sions to be able to in­flu­ence the reg­u­la­tory en­vi­ron­ment. They are the ones who de­ter­mine that the bankers will go to jail if they do some­thing wrong.”

Lawrence Les­sig, a Har­vard pro­fes­sor who spe­cial­izes in the study of cor­rup­tion and had a quixotic run for the 2016 Demo­cratic pres­i­den­tial can­di­dacy, said in an in­ter­view with the Star: “This is business as usual. It is deeply cor­rupt, but it’s not crim­i­nal. This is why the sys­tem needs to change.”

The reg­u­la­tion of the Amer­i­can fi­nan­cial sys­tem is a se­ries of shift­ing parts that in­cludes the Fed­eral Re­serve, Trea­sury and sev­eral other agen­cies. The Se­nate is sup­posed to over­see this com­pli­cated ma­chin­ery through the 22-mem­ber bank­ing com­mit­tee.

“The Amer­i­can sys­tem is made de­lib­er­ately to have a num­ber of over­lap­ping veto points,” Les­sig said. “So all (the banks) have to do is cap­ture one of those veto points and they can make sure that noth­ing gets into leg­is­la­tion. In fact, con­trol over a veto point gives tremen­dous power over ques­tions of staffing and per­son­nel as well.”

Pa­trick Toomey, the Repub­li­can se­na­tor for Penn­syl­va­nia and one of Stern’s op­po­nents this elec­tion, dis­agrees. He de­scribes Wall Street reg­u­la­tion “as a dis­as­ter.”

Toomey, a for­mer banker, has fought hard to dis­man­tle the Con­sumer Fi­nan­cial Pro­tec­tion Bureau (CFPB), the agency that dis­cov­ered the fraud­u­lent prac­tices at Wells Fargo. Toomey calls the CFPB an “ill­con­ceived and badly gov­erned en­tity that is not ac­count­able to any­one.”

Toomey, a mem­ber of the bank­ing com­mit­tee, has re­ceived $4.8 mil­lion from the banks that the com­mit­tee over­sees. They are his largest cam­paign con­trib­u­tors.

Toomey needs all the money he can get. The race in Penn­syl­va­nia against Demo­cratic chal­lenger Katie McGinty is the most ex­pen­sive Se­nate elec­tion in U.S. his­tory — Toomey’s seat and pos­si­ble Repub­li­can con­trol of the Se­nate is at risk — as more than $140 mil­lion has been poured into the con­test.

When Stern dis­cov­ered that Toomey was ac­cept­ing money from HSBC, he de­cided to run against him.

Stern doesn’t think he has a chance, his polling num­bers are about 2 per cent, but he is undaunted.

“I am run­ning to make a sig­nif­i­cant dif­fer­ence and to send a mes­sage that we are not go­ing to be sold out any more . . . It is ab­so­lutely crazy that Se­na­tor Toomey can sit on the Se­nate bank fi­nance com­mit­tee and take money from a bank that is un­der in­ves­ti­ga­tion. That is not jus­tice.”

Stern’s con­ver­sion started when he joined the com­pli­ance department of HSBC.

“This was one of the rich­est banks in the world but their com­pli­ance department — sup­posed to en­sure all the trans­ac­tions were le­gal — was at the back of a strip mall in Delaware,” Stern said. “The boss used to stand up on the desk and scream that if we could not ‘clear’ 72 sus­pi­cious trans­ac­tions a week there were prob­lems.”

Within weeks, Stern dis­cov­ered sec­tions of HSBC were al­low­ing ter­ror­ist groups to laun­der cash through the international bank­ing arm. Stern took his dis­cov­ery to the CIA. They vin­di­cated his find­ings. HSBC ad­mit­ted wrong.

“I was forced to leave HSBC,” Stern said. “Things were tough. My fa­ther was bat­tling can­cer and I was so short of money I was work­ing as a waiter in a Chi­nese restau­rant.”

He has since set up a re­search com­pany that he de­scribes as pro­vid­ing in­tel­li­gence — “like a pri­vate CIA.” He points out that it is not only Repub­li­cans who ac­cept con­tri­bu­tions from banks.

“This is ba­si­cally banks try­ing to buy Washington, they don’t care if they are Repub­li­can or Demo­crat so long as they are buy­ing them. (The politi­cians) are like real es­tate, they are up for sale.”

McGinty, mean­while, is do­ing what Stern can­not do and mount­ing a tough chal­lenge to Toomey. Polls late last week had her lead­ing. She has brought in stars such as Cyndi Lau­per and De­bra Mess­ing, and Katy Perry is even giv­ing a free con­cert. Yet her most suc­cess­ful tac­tic has been to adopt Stern’s cause. Some of the Demo­crat’s ads at­tack her ri­val as a “water-car­rier for the fi­nan­cial in­dus­try.”

“Pat Toomey has spent the last six years do­ing ev­ery­thing he can to dis­man­tle the CFPB and if he had his way Wells Fargo would likely still be scam­ming its own cus­tomers,” she also wrote in a state­ment.

The at­tack res­onated so well that in Septem­ber, Toomey and the bank­ing com­mit­tee is­sued a rare in­vi­ta­tion to a CEO of a ma­jor bank.

Toomey bran­dished a dic­tio­nary at John Stumpf of Wells Fargo and asked: “Most peo­ple un­der­stand the def­i­ni­tion of fraud . . . How does falsely sign­ing a cus­tomer up for an ac­count they don’t want, how does it not meet that def­i­ni­tion?”

But as he cam­paigns, Toomey is care­ful to point out that Democrats also re­ceive money from the banks — in­clud­ing his op­po­nent. Ac­cord­ing to OpenSe­crets.org data, while Toomey has re­ceived mil­lions from the fi­nan­cial in­dus­try, McGin­ity has ac­cepted $650,000.

Stern is one of a base­ball team-sized group of for­mer U.S. bank em­ploy­ees turned whistle­blow­ers. They have formed an alliance called Bank Whistle­blow­ers United. Richard Bowen is one of the lead­ers. He was a re­gional Citibank ex­ec­u­tive when he told the then-Cit­i­group CEO Ru­bin that his bank was mis­rep­re­sent­ing bil­lions of dol­lars in loans. Bowen was fired two years later. He said that things used to be dif­fer­ent.

“In the sav­ings and loan cri­sis of the 1980s . . . over 800 se­nior bankers were sent to jail. . . . There used to be well-de­fined crim­i­nal re­fer­ral pro­cesses that were in place such that ev­ery­one was trained. . . . That was dis­man­tled. It was taken apart. . . . And it was de­lib­er­ate, be­cause this was dur­ing the age of dereg­u­la­tion (in the 1990s).”

Bowen and other whistle­blow­ers are stunned by the in­flu­ence that banks have had on suc­ces­sive ad­min­is­tra­tions since then.

“The thing that has shocked me is the story emerg­ing from the hacked emails at Wik­iLeaks. When I left Cit­i­group in 2008, it was func­tion­ally bank­rupt. We took two bailouts to­talling $45 bil­lion from the U.S. gov­ern­ment and loan guar­an­tees for an­other $300 bil­lion.

Yet at the same time, the Cit­i­group ex­ec­u­tives were shap­ing soon-to-be Pres­i­dent Obama’s staff and cabi­net.”

Bowen is re­fer­ring to emails to Hil­lary Clin­ton’s cam­paign chief John Podesta and re­leased by Wik­iLeaks over the past month. The emails, from Oc­to­ber 2008, show Cit­i­group ex­ec­u­tives giv­ing the Obama tran­si­tion team a list of those who should be con­sid­ered for Obama’s cabi­net and se­nior staff. At the time, Cit­i­group was re­ceiv­ing bil­lions in gov­ern­ment re­lief. Most of their sug­ges­tions were ac­cepted in­clud­ing the im­por­tant po­si­tion of sec­re­tary of the Trea­sury.

Many Cit­i­group se­nior ex­ec­u­tives were for­mer Clin­ton staffers. For ex­am­ple, Ru­bin, the CEO, had been Trea­sury sec­re­tary in the Bill Clin­ton ad­min­is­tra­tion of the 1990s that abol­ished many U.S. bank­ing reg­u­la­tions. Ru­bin’s son was a se­nior mem­ber of Obama’s tran­si­tion team.

This over­lap­ping of gov­ern­ment or ad­min­is­tra­tion staff — what­ever the party — and the banks is no sur­prise to Stern. He thinks that this re­volv­ing door is an­other rea­son why bank ex­ec­u­tives do not get pros­e­cuted.

“In the HSBC case that re­sulted in a $9-bil­lion fine but no crim­i­nal pros­e­cu­tions, the lead pros­e­cu­tor quit the gov­ern­ment and went to take a job in pri­vate prac­tice. Now she is head of com­pli­ance for HSBC.”


Whistle­blow­ers are stunned by the in­flu­ence that Wall Street has had on ad­min­is­tra­tions since the 1980s.

Both Penn­syl­va­nia Demo­cratic Se­nate can­di­date Katie McGinty and Sen. Pa­trick Toomey have ac­cepted money from the banks.

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