Fifa fumble
Brazilian bank named in probe no stranger to scandal.
WASHINGTON • A small private bank controlled by a reclusive Brazilian billionaire shows up more than two dozen times in U.S. prosecutors’ corruption charges against world soccer officials.
It’s hardly the U.S. bank’s first brush with scandal.
Delta National Bank & Trust Co. has had at least three previous run-ins with authorities on two continents over the past 15 years, including when Brazilian lawmakers probed its role as the banker for a scandal-tinged head of national soccer. In 2003, Delta pleaded guilty in the U.S. to failing to report transactions linked to a Colombian drug cartel.
Even so, Delta, with U.S. assets of US$467 million, continued operations from its offices in New York, Miami and Geneva.
Some of that business, U.S. prosecutors alleged last week, included processing millions of dollars in bribe payments from a Sao Paulo-based sports marketing business to soccer officials affiliated with FIFA. Delta wasn’t named as a defendant or accused of any wrongdoing in a 47-count indictment released by the Justice Department.
Delta’s U.S. regulator, the Office of the Comptroller of the Currency (OCC), is now investigating the bank’s role in those transactions, according to a person with knowledge of the matter who asked not to be named because the probe is ongoing.
The latest scrutiny of Delta comes after more than a decade of red flags about its business, according to a review of lawsuits, regulatory filings and reports documenting government investigations.
It isn’t clear how the bank may have changed its reporting or compliance programs over that time, including after the U.S. Justice Department conviction 12 years ago. The OCC imposed no further penalties on the bank, said OCC spokesman Bryan Hubbard, and allowed it to continue doing business in the United States.
Hubbard declined to com- ment on the OCC’s latest Delta investigation.
“There’s not much of a track record of closing banks down for bad behaviour, is there?” said Jack Blum, a former U.S. Senate investigator and expert on money laundering. Delta is “just another bank in this big sea of trouble in the banking business.”
The history of Delta shows that even a small bank can keep operating following a criminal conviction, much as the world’s biggest banks have after agreeing to plead guilty in recent years to charges including doing business with rogue nations and rigging global interest rates.
At times, the alleged FIFA bribes were channelled from Delta through larger banks including Citigroup Inc. and JPMorgan Chase & Co., according to Justice Department proceedings announced last week. U.S. prosecutors have said they are investigating banks as part of their probe into corruption at FIFA, the world soccer governing body, but didn’t name any specific lenders.
While banks in the U.S. have an obligation to report suspicious transactions to authorities, the department’s indictment doesn’t say whether any lenders failed to do so.
Citigroup and JPMorgan weren’t the only banks that had relationships with Delta. Over the course of a decade, it wired tens of millions of dollars on behalf of Traffic Group, the Brazilian sports marketer, through those banks and HSBC Holdings PLC, Wells Fargo & Co. and Banco do Brasil SA, according to Justice Department documents.
Spokesmen for Citigroup, JPMorgan, Wells Fargo and Traffic Group declined to comment. HSBC is reviewing the FIFA indictment “to ensure that our services are not being misused for financial crime,” bank spokesman Rob Sherman said.
Banco do Brasil said in a statement that it hasn’t been notified of any investigations and that the bank “has adopted stringent controls to prevent and combat money laundering.”
The fallout from the scandal is growing, as Sepp Blatter, FIFA’s president, said on Tuesday that he would resign.
Delta was established in the 1980s by Aloysio de Andrade Faria, a 94-year-old billionaire with an affinity for breeding prized milk cows and Arabian horses.
With a reputation among Brazilian media outlets for rarely granting interviews, Faria has built a business empire that includes Sao Paulobased Banco Alfa de Investimento SA, hotels, a palm-oil producer and a home improvement chain. In 1998, he sold a bank founded by his father for US$2.1 billion.
Delta’s business was based “entirely” on helping Latin American clients reduce their taxes, the OCC said in a 1996 report. Faria has maintained ties to Delta through a Cayman Islands investment company, according to a recent Federal Reserve document and a former employee. Faria couldn’t be reached for comment, and a spokeswoman for Banco Alfa declined to comment.
Delta’s biggest blemish came in 2003 when the Justice Department accused it of allowing Colombian drug dealers to launder money through accounts at the bank.
After being convicted of failing to file suspicious activity reports on as much as US$10 million of transactions, Delta agreed to pay a US$950,000 fine.
Years later, the Justice Department officials who oversaw the case wrote a legal article that said Delta’s conduct was an “intentional decision by the bank to allow these types of transactions,” not a compliance failure.
In 2008, Brazilian prosecutors sought help from the Justice Department as part of a new investigation into one of Delta’s clients. They requested information about a Delta account for an examination of alleged money laundering and tax crimes involving a Brazilian sugar executive, U.S. court documents show.
Last week’s indictment isn’t Delta’s first brush with a soccer scandal.
In 2001, a Brazilian senate investigation concluded the country’s soccer operations were beset by corruption — much of it focused on the head of the Brazilian Football Confederation, Ricardo Teixeira. Delta handled tens of millions of dollars in loans for Teixeira and the confederation, which prompted questions from investigators, according to the Senate’s report.
Years later, Teixeira resigned from FIFA’s executive committee. Epoca, a Brazilian news magazine, reported this week that federal police have accused him of money laundering and fraud following a two-year investigation.
There’s not much of a track record of closing banks down for bad behaviour