US plays role of stern global business cop

Washington extending reach beyond its borders

WasHiNGTON: Handing out multibillion-dollar fines right and left to domestic and foreign financial giants, the United States has taken on the role of the unforgiving global cop of the business world.

In stark contrast to the relative inertia of white-collar law enforcement in Europe, Washington most recently brought the hammer down on Deutsche Bank and Credit Suisse, which sold junk- filled, mortgage- backed securities ahead of the 2008 financial meltdown.

Deutsche Bank has agreed to a payout of US$7.2bil (RM32.3bil), while Credit Suisse settled for US$5.3bil (RM23.8bil) to resolve American authorities’ allegations and avoid the lengthy headache of a trial.

Instead of dragging financial firms to court, the US has taken them to the cashier.

American giants have not been spared: JP Morgan Chase, Citigroup, Morgan Stanley and Bank of America collectively have shelled out US$40bil (RM179.3bil) to settle cases linked to toxic, crisis-era financial products.

“There’s a kind of fundamentalism to US law,” said Nicolas Veron, a senior fellow at the Brussels- based think tank Bruegel and the Washingtonbased Peterson Institute.

“If you break the law, punishment comes down.”

To be sure, British authorities have taken action over the Libor interest rate manipulation scan- dal but such retribution remains rare in the rest of Europe.

“It isn’t so much a difference in the rules as in the manner in which they are applied. Things are much more severe in the US,” said Veron, adding that on many occasions European countries “do not dare” punish their national flagship companies.

The American legal framework nevertheless offers the US the means to extend the long arm of the law well beyond its borders.

In the most recent cases, the United States imposed US$2.6bil ( RM11.66bil) in criminal penalties on the Brazilian construction conglomerate Odebrecht – most of which will be paid to Brazil – and a half billion on the Israeli generic drugmaker Teva Pharmaceutical.

Both the matters which involved corruption occurred outside the US.

The US pioneered the prosecution of such foreign bribery cases, adopting the Foreign Corrupt Practices Act in 1977 in the wake of the Watergate scandal, which allows US officials to hunt down corrupt payments abroad when the companies involved are traded on Wall Street or are otherwise exposed to US jurisdiction.

In the decades since, member countries of the Organization for Economic Cooperation and Development have adopted similar laws but do not enforce them with the same vigour or frequency. — AFP