The Banking Dirty Dozen: A Cheat Sheet

March 21st, 2013 by Phil Mattera

JPM-banksterWith the posting of a dossier on Barclays, the inventory of Corporate Rap Sheets on the banking industry now stands at twelve. Looked at together, the track records of these major financial institutions since the mid-2000s amounts to one of the most brazen corporate crime waves in the entire history of capitalism.

The dirty dozen includes six banks based in the United States (Bank of America, Citigroup, Goldman Sachs, JPMorgan Chase, Morgan Stanley and Wells Fargo); three in the United Kingdom (Barclays, HSBC and the Royal Bank of Scotland); two in Switzerland (Credit Suisse and UBS); and one in Germany (Deutsche Bank).

Although the prosecution of their crimes has been far from adequate, quite a few cases have been brought by a variety of agencies and plaintiffs. The charges have also been wide-ranging: from investor deception and mortgage abuses to violation of economic sanctions and the facilitation of tax evasion and money laundering.

Even if we limit the universe to those cases in which there was a penalty or settlement worth $100 million or more, the list presented below comes to more than three dozen. The recoveries in these megacases add up to an astounding $82 billion (including mandated repurchases of securities and mortgage modifications). And this figure does not include many large cases that remain unresolved—not to mention the cases that have yet to be brought.

Beyond the numbers, it is difficult to say what all this amounts to. The penalties, while substantial in comparison to those imposed in the past, do not seem to be serving as much of a deterrent against the reckless and unscrupulous business practices that gave rise to the financial meltdown just a few years ago.

The answer may be that the penalties need to be much larger, so that they force crooked banks to taken more drastic actions such as selling off major assets. Or it may be that changes are necessary to those tax code provisions that allow banks (and other corporations) to deduct many of these penalties. Another possibility is that only more aggressive criminal prosecutions of both banks and their executives will get them to clean up their act. Other remedies such as charter revocations also need to be given new consideration.

One way or another, the banking crime wave needs to be brought to an end.


MEGACASES INVOLVING THE BANKING DIRTY DOZEN DISCUSSED IN THEIR CORPORATE RAP SHEETS

Deceiving investors

  • Bank of America (SEC cases re Merrill Lynch): $183 million (2009 and 2010)
  • Bank of America (class actions re Merrill Lynch): $2.7 billion (2011 and 2012)
  • Bank of America (re securities sold to Fannie Mae): $10.3 billion (2013)
  • Citigroup: $285 million (2011)
  • Citigroup: $590 million (2012)
  • Citigroup (class action): $730 million (2013)
  • Credit Suisse: $120 million (2012)
  • Goldman Sachs: $550 million (2010)
  • JPMorgan Chase: $153 million (2011)
  • Wells Fargo: $125 million (2011)


Disputes with purchasers of auction rate securities

  • Deutsche Bank: $1.3 billion (2009)
  • UBS: $18.2 billion (2008 and 2010)
  • Wells Fargo: $1.4 billion (2009)


Mortgage and foreclosure abuses

  • Bank of America (re Countrywide Financial): $463 million (2010 and 2011)
  • Bank of America, Citigroup, JPMorgan Chase, Wells Fargo (and Ally Financial): $25 billion (2012)
  • Bank of America, Citigroup, JPMorgan Chase, Wells Fargo and six others): $8.5 billion (2013)
  • Goldman Sachs: $330 million (2013)
  • HSBC: $249 million (2013)
  • Morgan Stanley (re Saxon Mortgage Services): $227 million (2013)
  • Wells Fargo (racial discrimination): $175 million (2012)
  • Wells Fargo: $2 billion (2010)


Defrauding of federal government regarding mortgage insurance

  • Citigroup: $158 million (2012)
  • Deutsche Bank: $202 million (2012)


Municipal bond bid rigging and illegal payments

  • Bank of America: $137 million (2010)
  • JPMorgan Chase: $747 million (2009)
  • JPMorgan Chase: $228 million (2011)
  • UBS: $160 million (2011)
  • Wells Fargo: $148 million (2011)


Manipulation of the LIBOR interest rate index

  • Barclays:  $450 million (2012)
  • Royal Bank of Scotland: $612 million (2013)
  • UBS: $1.5 billion (2012)


Facilitation of tax evasion and money laundering by customers

  • Deutsche Bank: $553 million (2010)
  • HSBC: $1.3 billion (2012)
  • UBS: $780 million (2009)


Violations of economic sanctions regarding countries such as Iran

  • Barclays: $298 million (2010)
  • Credit Suisse: $536 million (2009)
  • Royal Bank of Scotland (re ABN AMRO): $500 million (2010)


Improper increases in credit card minimum monthly payments

  • JPMorgan Chase: $100 million (2012)


Manipulation of electricity markets

  • Barclays: $470 million (2012)

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