Banking

Wells Fargo Pays More for Its Sins

When the Consumer Financial Protection Bureau announced in 2016 that it was fining Wells Fargo $100 million for creating fee-generating customer accounts without permission, bank executives may have thought they could simply pay the penalty and move on.

Instead, Wells has had to contend with a series of regulatory and legal consequences. The latest is a $1 billion settlement the bank has just agreed to pay to resolve a class action lawsuit brought by shareholders accusing it of misrepresenting the progress it had made in improving its internal controls and compliance practices. The deal ranks among the largest securities settlements of all time.

In between the initial CFPB action and the new lawsuit resolution, Wells confronted the following:

In 2018 the Federal Reserve forced out several board members and took the unusual step of barring Wells from growing in size until it improved its compliance. It is telling that the asset cap is still in place.
That same year, Wells paid $575 million to settle litigation over the bogus accounts brought by state attorneys general.
In 2020 the U.S. Justice Department announced that Wells would pay $3 billion to resolve potential criminal and civil liability, but the bank was allowed to enter into a deferred prosecution agreement rather than having to plead guilty. The Trump DOJ also declined to bring charges against any individual executives.

While the monetary penalties paid by Wells are not trivial, they are far from punishing for an institution with nearly $2 trillion in assets and $13 billion in annual profits. They also do not seem to have had much of a deterrent effect.

In 2022 the CFPB took new action against the bank, compelling it to pay a $1.7 billion penalty and provide $2 billion in redress to customers to resolve allegations that it engaged in a variety of new misconduct. Wells was found to have repeatedly misapplied loan payments, wrongfully foreclosed on homes, improperly repossessed vehicles, and incorrectly assessed interest and fees, including surprise overdraft charges. Some 16 million customer accounts were said to have been cheated one way or another.

That 2020 deferred prosecution agreement means that Wells has in effect been on probation. Why, in light of the CFPB case, has the bank not been found to be in violation of that agreement? Is it simply because Wells is now focusing its alleged misconduct on real accounts rather than the fake ones it had been creating? That would be like letting a mugger off the hook for using a knife rather than gun.

Not only should Wells have its probation revoked, but it should undergo something analogous to what the FDIC does when a bank is in financial disarray. Federal regulators should find Wells to be in ethical disarray and take it over while fundamental changes are made to bring it back to some semblance of compliance.

The alternative is letting a rogue institution continue to prey on its customers in any way it can.

Goldman Gives In

The verdict in the Trump case was not the only court victory against sexism this week. Lawyers for women who worked in securities and investment banking positions at Goldman Sachs announced that the Wall Street giant has agreed to pay $215 million to settle a long-running gender discrimination case.

Some 2,800 current and former employees at Goldman will share in the settlement, which resolves a case first filed back in 2010. Along with the payout, the company will take steps to improve gender equity in pay and promotions.

For years, Goldman strenuously denied allegations that its personnel evaluation system systematically placed women at lower rankings than men, and it aggressively sought to reverse the certification of the class in 2018. Those efforts were unsuccessful, eventually resulting in the scheduling of a trial in June of this year. Trials are rare in discrimination class actions, since juries are thought to be more sympathetic to plaintiffs.

Goldman finally decided to give in, becoming the latest large company to settle a class action gender discrimination lawsuit. Other cases during the past two decades documented in Violation Tracker include the following:

In 2022 Sterling Jewelers paid $175 million to settle litigation alleging that for years it had discriminated against tens of thousands of women in its pay and promotion practices.
In 2010 drug giant Novartis paid $175 million to settle charges of gender discrimination, including pregnancy discrimination.
In 2022 Google agreed to pay $118 million to settle class action litigation alleging it discriminated against women in its salary practices.
In 2007 Morgan Stanley paid $46 million to a class of about 3,000 women to settle gender discrimination allegations.
In 2018 the retail chain Family Dollar paid $45 million to more than 37,000 former and current managers who alleged they were paid less than their male counterparts. That case took nearly 15 years to get resolved.
In 2004 Boeing paid more than $40 million to a class of female workers who alleged they were denied desirable job assignments, promotional opportunities, and management positions.
In 2013 Merrill Lynch paid more than $38 million to a group of women employed as financial advisors who said they were discriminated against in pay and promotion.
In 2014 United Airlines paid $36.5 million to settle a lawsuit alleging that the company engaged in gender discrimination by requiring female flight attendants to weigh less than comparable male ones.
In 2008 Smith Barney paid $33 million to women formerly employed as financial advisors who claimed they were paid less than their male counterparts.
In 2011 Wells Fargo paid $32 million to settle a lawsuit alleging that its Wachovia Securities subsidiary gave female financial advisers fewer opportunities than their male co-workers with respect to promotions, assignments, signing bonuses and compensation.

What this list show is that gender discrimination has been an issue in a wide range of companies and occupations, but sexism has been especially problematic in the traditionally macho world of Wall Street. Now that perhaps the most elite firm in the industry has capitulated, the worst abuses may finally come to an end.

Rogue Rescuer

Once again federal regulators have turned to JPMorgan Chase to rescue a failing smaller bank. For the moment, the customers of First Republic Bank may be pleased that their accounts are being taken over by a larger and more stable institution.

Yet they may not be quite so happy to learn that their savior has a much worse record when it comes to compliance with laws and regulations. As shown in Violation Tracker, First Republic was named in only a handful of enforcement actions and paid penalties of less than $4 million. JPMorgan, on the other hand, has 236 Violation Tracker entries and has paid over $36 billion in fines and settlements.

The contrast with First Republic is partly a matter of size. JPM’s vast operations give it many more opportunities to get into trouble. Those operations have included the marketing of residential mortgage-backed securities which turned out to be toxic and which resulted in legal actions that cost the company billions. Some of these entanglements were inherited by JPM when it took over Bear Stearns and Washington Mutual in 2008.

Yet JPM has also had problems when it comes to the treatment of its own customers in the course of routine banking functions. This has become clear to me in the course of assembling data for the latest category of class action litigation to be added to Violation Tracker: consumer protection lawsuits.

The collection is not yet done, but I have already identified more than a dozen settlements in which JPM has paid out hundreds of millions of dollars. Among these are the following:

* In 2012 JPM agreed to pay $100 million to settle litigation alleging it improperly raised interest rates on loan balances transferred to credit cards.

* In 2020 JPM agreed to pay more than $60 million to settle litigation alleging it overcharged customers serving in the military, in violation of the Servicemembers Civil Relief Act.

* In 2014 JPM agreed to pay $300 million to settle litigation alleging it pushed mortgage borrowers into force-placed insurance coverage whose cost was inflated due to kickbacks.

* In 2012 JPM agreed to pay $110 million to settle litigation concerning improper overdraft fees resulting from the way that debit-card transactions were processed.

* In 2011 JPM agreed to pay up to $7.8 million to settle litigation alleging it charged credit card customers hidden fees after deceptively marketing special deals on balance transfers and short-term check loans.

* In 2014 JPM and several subsidiaries agreed to pay more than $18 million to settle litigation alleging the use of misleading loan documents to steer borrowers to adjustable-rate mortgages.

* In 2018 JPM agreed to pay over $11 million to settle litigation alleging it improperly charged interest on Federal Housing Administration-insured mortgages that were already paid off.

These were all cases brought by private plaintiffs. JPM also paid hundreds of millions more in consumer protection fines and settlements to federal and state agencies. Among these was a 2013 case brought by the Consumer Financial Protection Bureau in which JPM paid a $20 million penalty to the agency and over $300 million in refunds to two million customers for what were said to be illegal credit card practices.

There is widespread concern that rescue deals are allowing a too-big-to-fail bank like JPM to grow even larger. Yet we should also worry that more and more of the population is being forced to do business with megabanks that seem to regard themselves as too big to have to comply with laws that protect consumers.

A Marriage of Two Tainted Banks

The acquisition of struggling Credit Suisse by its rival UBS may calm the international banking waters, but it will do nothing to improve the compliance profile of the Swiss financial services sector. That’s because both Credit Suisse and UBS have seriously tainted records. Combining them will simply put all those problems under one roof.

Let’s start with Credit Suisse. Its problems extend back at least to the late 1980s, when it was named as one of the banks that allegedly laundered money for a Turkish-Lebanese drug ring. Credit Suisse also played a role in the Reagan Administration’s Iran/Contra scandal.

In the 1990s Credit Suisse was one of the Swiss banks sued in the United States by relatives of Holocaust victims who had been unable to access assets held by the banks for decades. There were also charges that the banks profited by receiving deposits of funds that had been looted by the Nazis. In 1998 the banks agreed to pay a total of $1.25 billion in restitution. The judge in the case later accused the banks of stonewalling in paying out the settlement.

After it acquired a controlling interest in First Boston in the late 1980s and formed CS First Boston, Credit Suisse ended up with more U.S. legal entanglements. CSFB was a target of U.S. divestment activists in the early 1990s because of Credit Suisse’s operations in apartheid-era South Africa. Later that decade, it was one of the investment banks sued for their role in the 1994 bankruptcy of California’s Orange County. In 1998 CSFB agreed to pay $870,000 to settle SEC charges of having misled investors in Orange County bonds and then settled a suit brought against it by the county for $52.5 million.

In 2003, CSFB was one of ten major investment firms that agreed to pay a total of $1.4 billion to settle federal and state charges involving conflicts of interest between their research and investment banking activities. CSFB’s share was $200 million.

In 2009 Credit Suisse agreed to forfeit $268 million to the United States and $268 million to the New York County District Attorney’s Office to resolve criminal charges that it violated economic sanctions in its dealings with customers from countries such as Iran and Sudan.

In 2014 the U.S. Justice Department fined Credit Suisse $1.1 billion and ordered it to pay $666 million in restitution to the IRS after the bank pleaded guilty to charges of conspiring to help U.S. customers evade taxes through the use of offshore accounts.

In 2017 the Justice Department announced a $5.3 billion settlement with Credit Suisse concerning its marketing of toxic mortgage-backed securities a decade earlier. The settlement included a $2.5 billion civil penalty and $2.8 billion in relief to distressed homeowners and affected communities.

Credit Suisse has paid hundreds of millions more in penalties in other cases involving foreign bribery, foreign exchange market manipulation, defrauding investors and much more. Its penalty total in Violation Tracker is more than $11 billion.

And the scandals continue. For example, Credit Suisse is currently embroiled in a corruption case involving the tuna fishing industry in Mozambique.

UBS has a record that is no better. Union Bank of Switzerland and Swiss Bank Corporation, which merged in 1998 to form UBS, were both involved in that same money laundering scandal with Credit Suisse. They were both also embroiled in controversies over investments in South Africa and their polices regarding the accounts of Holocaust victims.

UBS also entered the U.S. market (through the purchase of PaineWebber) and was implicated in the conflict-of-interest scandals. It, too, was prosecuted by the Justice Department for conspiring to aid tax evasion, paying $780 million in penalties.

In 2008 UBS agreed to buy back $11 billion in securities and pay $150 million in penalties as part of the resolution of multi-state litigation alleging it misled customers in the marketing and sale of auction rate securities.

It has paid hundreds of millions more in fines and settlements in cases dealing with financial market manipulation and other offenses. Including that $11 billion securities buyback, its Violation Tracker penalty total is over $17 billion.

In short, the marriage of UBS and Credit Suisse will bring together two banks with highly problematic records. The combined company should work not only to help stabilize financial markets but also to address its legacy of misconduct.

Woke Capitalism or Sleepy Oversight?

Some of the same people who are trying to convince us that January 6 was a peaceful sightseeing outing and that the situation in Ukraine is a minor territorial dispute have come up with a remarkable explanation for the collapse of Silicon Valley Bank. They claim it is the result of what they call “woke capitalism.”

Politicians such as Florida Gov. Ron DeSantis and House Oversight Chair James Comer are echoing claims by propagandist Tucker Carlson that SVB’s collapse was the result of its involvement with ESG—environmental, social and governance policies meant to promote objectives such as sustainability and diversity.

There are two problems with this claim. The first is that SVB was hardly a leader in the ESG world. The bank’s preoccupation was apparently to ingratiate itself with venture capitalists, private equity investors and start-up entrepreneurs, whether or not they were pursuing social goals. It was also chummy with California wineries. SVB wanted to be a power in Silicon Valley, not a crusader. Like most banks, it made some ESG-type investments, but they were a small part of its portfolio.

The other problem is that there is no connection between ESG practices and the forces that led to SVB’s demise. Based on what has come to light so far, it appears what happened at the bank was largely a result of poor risk management. SVB failed to pay adequate attention to the consequences of having loaded up on long-term government debt securities that were rapidly losing value at a time of escalating interest rates.

Along with that poor internal risk management, there was apparently a failure of regulatory oversight. To some extent, this was the fault of the Trump Administration and Congress, which in 2018 watered down the Dodd-Frank Act and exempted banks of SVB’s size from intensive scrutiny.

As pointed out by the New York Times, Moody’s was more alert to the perils at SVB than the regulators or the bank’s own executives. Last week the credit rating agency contacted the bank’s CEO Greg Becker to warn him that SVB’s bonds were in danger of being downgraded to junk status.

This set off a scramble by SVB to raise more capital. Once depositors got wind of this, they began emptying their accounts, many of which had balances above the $250,000 limit normally insured by the FDIC. Soon there was a full-blown run on the bank, prompting regulators to take over SVB and shut it down. The Biden Administration then bailed out the depositors in whole, using assessments from other banks. ESG has nothing to do with any of this.

As this is being written, the business news is focusing on problems at Credit Suisse. It will be interesting to see if the U.S. Right tries to apply the woke label to that situation as well. Although it gives lip service to ESG, Credit Suisse has a track record of less than enlightened practices. Two decades ago, it was being sued over its investments in apartheid-era South Africa. It has a history of lending to oil and gas projects and has been slow to respond to demands to reduce that exposure.

As shown in Violation Tracker, Credit Suisse’s record in the U.S. includes numerous cases in which it paid penalties to resolve allegations relating to the facilitation of tax evasion, foreign bribery and other misconduct. Its U.S. penalty total is over $11 billion.

Come to think of it, the Right will probably decide that a bank with a history of making money from racism, fossil fuels, tax evasion and bribery is worthy of support.

The woke capitalism critique cannot be taken seriously as an explanation of what happened at SVB. Yet there is the danger that it will serve to divert attention for some away from the real problems: reckless bank management and sleepy financial regulation.

The Bank from Hell

Perhaps because it was announced just days before Christmas, the Consumer Financial Protection Bureau’s giant enforcement action against Wells Fargo has not received all the attention it deserves. The agency imposed a whopping $1.7 billion civil penalty and ordered the bank to provide more than $2 billion in consumer redress.

CFPB took these steps in response to what it called illegal practices affecting over 16 million consumer accounts. Wells was found to have repeatedly misapplied loan payments, wrongfully foreclosed on homes, improperly repossessed vehicles, and incorrectly assessed interest and fees, including surprise overdraft charges. Wells Fargo, it seems, was behaving like the bank from hell.

CFPB’s action does not come as a complete surprise. Wells already had a dismal track record. As shown in Violation Tracker, the bank has paid over $20 billion in fines and settlements during the past two decades. It has been especially tainted since 2016, when the CFPB revealed that bank employees, pressured to meet unrealistic sales goals, had been secretly opening unauthorized accounts in the name of unsuspecting customers who found themselves paying fees for services they had not requested.

Wells was initially fined only $100 million by CFPB, but the controversy over the bogus accounts continued. In 2020 the bank had to pay $3 billion to resolve criminal and civil charges brought by the Justice Department and the SEC. The impact of the case was diminished by the fact that DOJ offered Wells a deferred prosecution leniency agreement and by the decision not to prosecute any individual executives.

A different approach was taken by the Federal Reserve in its capacity as a bank regulator. In 2018 it announced that Wells would be subject to restrictions on its growth until it sufficiently improved its governance and internal controls. The Fed also pressured the bank to replace four members of its board of directors.

The new CFPB case suggests that neither the DOJ nor the Fed action was sufficient to get Wells to change its ways. Other evidence comes from private class action lawsuits. These include a $386 million settlement to resolve allegations the bank added unnecessary insurance fees to car loan bills and a $30 million settlement of allegations it improperly charged interest on Federal Housing Administration-insured loans after they were paid off.

All of this leads to two questions: Why does anyone continue to do business with Wells Fargo? And why do regulators allow it to continue to operate? The answers to both have a lot to do with the enormous concentration in the U.S. banking sector. In some parts of the country, Wells may be one of only a tiny number of full-service commercial banks doing business.

Size is also a factor in how Wells is treated by regulators. As outraged as they may be about the bank’s misconduct, they are not inclined to take any punitive action which might threaten its viability. A villainous Wells Fargo is apparently seen as preferable to the collapse of a bank with nearly $2 trillion in assets.

It is difficult to avoid the conclusion that Wells is taking advantage of this situation by pretending to reform its practices while continuing to conduct its dubious form of business as usual. Regulators need to find a way to bring this rogue bank under control once and for all.

Note: The new CFPB action was announced right after we completed an update of Violation Tracker. It will be added to the database as part of the next update later this month.

Another Crooked Bank

When one large corporation is found to be breaking the law in a particular way, there is a good chance that its competitors are doing the same thing. The latest evidence of this comes in an announcement by the Consumer Financial Protection Bureau concerning U.S. Bank.

The CFPB fined the bank $37.5 million for illegally accessing credit reports and opening checking and savings accounts, credit cards, and lines of credit without customers’ permission. U.S. Bank employees were said to have done this in response to management pressure to sell more financial products and thus generate more fee revenue.

If this sounds familiar, it is exactly what came to light in 2016 regarding Wells Fargo, which was initially fined $100 million by the CFPB for the fraudulent practice and subsequently faced a wave of other legal entanglements, including a case brought by the U.S. Justice Department in which Wells had to pay $3 billion to resolve civil and criminal charges.

The U.S. Bank case has not yet generated the tsunami of outrage that accompanied the revelations about the phony accounts at Wells. Perhaps that is because it is the middle of the summer. Yet chances are that the CFPB’s enforcement action will not be the only punishment the bank will face.

U.S. Bank’s practices were no less egregious than those of Wells. According to the CFPB, the management of the bank, which currently has more than half a trillion dollars in assets, was aware for more than a decade that its employees were creating fictitious accounts.

And like Wells, U.S. Bancorp has a long history of questionable behavior. Violation Tracker documents more than $1.2 billion in penalties from 40 cases dating back to 2000. Half of the total comes from offenses involving serious deficiencies in anti-money-laundering practices, including a 2018 case in which the bank had to pay $453 million to settle criminal charges brought by the U.S. Justice Department plus another $75 million to the Office of the Comptroller of the Currency to resolve civil allegations.

In 2014 U.S. Bank had to pay $200 million to settle allegations that it violated the False Claims Act by knowingly originating and underwriting mortgage loans insured by the Federal Housing Administration that did not meet applicable requirements. The bank also had a previous run-in with the CFPB, which penalized it $53 million in 2014 for unfairly charging customers for credit identity protection and credit monitoring services they did not receive.

It is likely that U.S. Bank’s penalty total will rise substantially through additional cases prompted by the CFPB’s latest allegations, which include accusations the bank violated not only the Consumer Financial Protection Act but also the Fair Credit Reporting Act, the Truth in Lending Act, and the Truth in Savings Act.

Apart from monetary penalties, U.S. Bank may face an additional form of punishment applied to Wells: in 2018 the Federal Reserve restricted the growth of the firm until it cleaned up its practices and improved its governance. Since fines have proven to be a weak deterrent against corrupt practices at major financial institutions, more aggressive measures provide the only hope of bringing the big banks under control.

ESG Besieged

Things have been rough lately for those high-minded asset management services promoting ESG investment practices. The Right is dragging ethical investment into its culture war, accusing the ESG world of promoting “woke capitalism.” In a recent op-ed in the Wall Street Journal, former Vice President Mike Pence went so far as to state that “the next Republican president and GOP Congress should work to end the use of ESG principles nationwide.”

Unfortunately, the ESG world has left itself vulnerable to such attacks. Its criteria for deciding which corporations deserve a seal of approval are often less than rigorous and may be based on unverified data produced by the companies themselves.

The problems of ESG have reached the point that the Securities and Exchange Commission recently proposed rules that would impose stricter disclosure standards on ethical investment funds and require them to meet somewhat stricter criteria in order to use ESG or related terms in the name of the fund.

Yet perhaps the biggest embarrassment for the ESG world just occurred in Germany, where dozens of agents from the Frankfurt public prosecutor’s office and the financial regulatory agency BaFin raided the offices of Deutsche Bank and its asset management subsidiary DWS. In the wake of that action, the chief executive of DWS resigned.

The investigators were reported to be seeking evidence that DWS defrauded clients by exaggerating the extent to which its green investment products were actually based on sustainable practices. In other words, the Deutsche Bank subsidiary appears to be under criminal investigation for engaging in greenwashing. The case is said to be related to a probe that the SEC has reportedly been conducting of the matter—though without any dramatic raids.

Without pre-judging the outcome of the investigation, I find it difficult to believe that DWS is innocent. After all, it is part of a corporation with a long history of engaging in misconduct. As shown in Violation Tracker, it has racked up more than $18 billion in fines and settlements for cases involving the sale of toxic securities, manipulation of interest rate benchmarks, promotion of fraudulent tax shelters, violations of anti-money-laundering laws, foreign bribery, and more. This is all on top of Deutsche Bank’s questionable business dealings with Donald Trump and Jeffrey Epstein.

I’ve always found it odd that a bank with a reputation such as this could put itself forth as a practitioner of ethical investing. Yet that is a big part of the problem with ESG. Rap sheets such as that of Deutsche Bank are often ignored, and companies are deemed worthy based on some specific practice that is far from representative of its overall behavior.

The Deutsche Bank case is not the only example of an ESG investment adviser being held to account. Recently, the SEC charged BNY Mellon Investment Adviser for misstatements and omissions concerning the ESG criteria used in some of its mutual funds. The company agreed to pay $1.5 million to resolve the matter.

Cases such as these signal that the ethical investing world is going to have to get a lot more ethical—and rigorous—if it is going to survive.

Reviving the Ultimate Corporate Punishment

Big business has despised the Consumer Financial Protection Bureau since its creation, and now the director of the agency has provided additional basis for that enmity. Rohit Chopra recently delivered a speech to the University of Pennsylvania Law School that amounted to one of the most aggressive statements on corporate misconduct ever made by a federal regulatory official. And he put forth some bold ideas for dealing with the problem.

Chopra began with the observation that the CFPB, which has been in operation for only about a decade, has had to take action against some major financial institutions on multiple occasions—five times in the case of Citigroup and four times against JPMorgan Chase, for example. These cases have resulted in billions of dollars in penalties and consumer redress.

The CFPB’s experience is not unique. “Repeat offenses – whether it’s for the exact same offense or more malfeasance in different business lines,” are, Chopra stated, “par for the course for many dominant firms.”

This conclusion is reinforced by the data collected in Violation Tracker. Over the past two decades, the commercial banks in the Fortune 100 have paid over $190 billion in fines and settlements. More than 100 corporations across all sectors have each paid over $1 billion in penalties.

The central question, as Chopra put it, is: “How do we stop large dominant firms from violating the law over and over again with seeming impunity? Corporate recidivism has become normalized and calculated as the cost of doing business; the result is a rinse-repeat cycle that dilutes legal standards and undermines the promise of the financial sector and the entire market system.”

Chopra’s address was remarkable in that it also put forth a vision for solving the problem. In addition to more prosecutions of individual executives, he calls for a focus on structural remedies, including putting restrictions on the ability of rogue corporations to grow.

This idea is not unprecedented; in fact, as Chopra notes, it was implemented by regulators in the case of Wells Fargo. In 2018, following revelations that the bank had created two million bogus customer accounts to generate illicit fees, the Federal Reserve took the unusual step of barring it from growing any larger until it cleaned up its business practices.

Chopra proposes to take even more aggressive measures. He wants to see misbehaving corporations forced to close or divest portions of their operations. He would deny such companies access to government-granted privileges. For example, pharmaceutical violators could lose their patents; lawless banks could lose access to FDIC deposit insurance.

Chopra indicated he is also exploring the most remedy of all: putting corrupt corporations out of business entirely. He warned that the CFPB will be deepening its collaboration with officials at the state level, where corporations are chartered, “to ascertain whether licenses should be suspended or whether corporate assets should be liquidated.”

In other words, Chopra is proposing greater use of what is often called the corporate death penalty (he doesn’t used that phrase). Such punishment is applied by some states in dealing with bad actors, but they are usually small, fly-by-night operations.

Talk of putting a large company out of business has been largely taboo since the case of accounting firm Arthur Andersen, which shut down in 2002 after being prosecuted for offenses relating to its role as the auditor of the fraudulent energy company Enron. There was a strong backlash in the business world against the prosecution, especially after the conviction was later overturned by the U.S. Supreme Court.

Chopra is no longer daunted by that episode. He argues that terminating corporate charters and licenses “should be considered for institutions of all sizes when the facts and circumstances warrant it.”

His speech may be a turning point in the prosecution of corporate crime. The two decades since the Enron/Arthur Andersen case have seen a tsunami of misconduct. Violation Tracker, whose mission is to document the phenomenon, is now up to more than 500,000 cases with fines and settlements of $786 billion.

While the penalties continue to accumulate, there is no evidence that corporate behavior is improving. Another approach is needed. Chopra’s roadmap is a good place to start.

Credit Suisse and the Oligarchs

Russian banks are among the targets of Western sanctions in response to the invasion of Ukraine, but a financial institution in the middle of Europe is also part of the problem. According to recent press reports, Switzerland’s Credit Suisse is calling for the destruction of certain documents that could involve Russian oligarchs—a move that could impede efforts to locate and perhaps seize their assets.

The Financial Times is reporting that the bank is asking hedge funds and other investors to “destroy and permanently erase” documents relating to securitized loans backed by “jets, yachts, real estate and/or financial assets.” Credit Suisse had created these financial instruments to offload risks associated with its lending to the ultra-rich. When the Financial Times previously reported on these instruments, it described a presentation to potential investors mentioning that the bank had experienced defaults on yacht and aircraft loans to oligarchs related to U.S. sanctions.

It appears that Credit Suisse is concerned that the documents relating to the loans could be leaked. The bank has good reason to worry about unauthorized disclosures. It was recently the subject of a massive release of internal documents, dubbed Suisse Secrets, revealing its extensive dealings with individuals said to be involved in drug trafficking, money laundering and other corrupt practices.

Credit Suisse has a long history of ethically questionable behavior, extending back at least to the Second World War, during which it and other major Swiss banks allegedly profited by receiving deposits of funds that had been looted by the Nazis. In 1998 the banks agreed to pay a total of $1.25 billion in restitution.

After merging with investment bank First Boston in the 1970s, Credit Suisse became a significant player in U.S. financial markets and got into frequent trouble with regulators. Over the past two decades, it is racked up more than $10 billion in fines and settlements, as shown in Violation Tracker. This rap sheet includes a $5 billion settlement in 2017 concerning the sale of toxic securities and a $1.8 billion criminal penalty in 2014 for helping U.S. taxpayers file false returns.

Credit Suisse has also had previous problems relating to sanctions. In 2009 it had to pay $536 million to the U.S. Justice Department and the New York County District Attorney’s Office to settle allegations that it violated the International Emergency Economic Powers Act by engaging in prohibited transactions with Iran, Sudan and other countries sanctioned in programs administered by the Department of the Treasury’s Office of Foreign Assets Control.

The bank has also been implicated in bribery cases, paying $99 million last year to the Securities and Exchange Commission for fraudulently misleading investors and violating the Foreign Corrupt Practices Act in a scheme involving two bond offerings and a syndicated loan that raised funds on behalf of state-owned entities in Mozambique. The bank was also penalized nearly £300 million by the UK’s Financial Conduct Authority for the Mozambique matter.

Returning to the current situation, Credit Suisse is insisting that it has not been destroying any documents in its own possession while not denying it asked investors to do so. The bank may not have broken any laws in making this request, but it is a highly questionable action amid the current situation. Unfortunately, it is very much in keeping with Credit Suisse’s extensive track record of going out of it way to protect the disreputable clients with whom it likes to do business.