Tallahassee Journal

Justice Department Is Seeking Felony Pleas by Big Banks in Foreign Currency Inquiry

Justice Department Is Seeking Felony Pleas by Big Banks in Foreign Currency Inquiry

The Justice Department is pushing some of the biggest banks on Wall Street — including, for the first time in decades, American institutions — to plead guilty to criminal charges that they manipulated the prices of foreign currencies. In the final stages of a long-running investigation into corruption in the world’s largest financial market, federal prosecutors have recently informed Barclays, JPMorgan Chase, the Royal Bank of Scotland and Citigroup that they must enter guilty pleas to settle the cases, according to lawyers briefed on the matter. The pleas would be likely to carry a symbolic stigma, if limited actual fallout, in handing felony convictions to some of the world’s biggest banks.10BANKS2-articleInline

Yet even as those cases head toward negotiations over potential plea deals — a development that has not been previously reported — additional currency misconduct has surfaced in a New York state investigation, confidential documents show. The documents, excerpts from online chat rooms reviewed by The New York Times, suggest that banks designed electronic trading platforms that effectively drove up the price of currencies sold to clients. In the chats, replete with expletives and industry jargon, employees described and even joked about how the platform would cancel trades that ceased to be profitable for the bank.

New York’s financial regulator, Benjamin M. Lawsky, initially focused on platforms at Barclays and Deutsche Bank, but he has since subpoenaed four other banks: Goldman Sachs, Credit Suisse, BNP Paribas and Société Générale. None of the banks have been accused of wrongdoing, and they are cooperating with the investigation. The Justice Department’s plea deals, if ultimately reached, would not cover any wrongdoing that surfaces from Mr. Lawsky’s investigation. Negotiations with the Justice Department are likely to center on which entity will plead guilty: the bank’s parent company, or a subsidiary that housed the misconduct. The banks, which have argued that the wrongdoing was isolated to midlevel employees, prefer that a subsidiary take the fall.

The currency case is expected to ensnare traders but not top-level executives. As a result, it may add fuel to the criticism that prosecutors have not charged one top executive on Wall Street. Without charges to mollify the public anger over the financial crisis, the recent cases have presented little more than a pyrrhic victory for the Justice Department. Still, the developments underscore a broader reality on Wall Street of late: One investigation begets another. With each settlement for money laundering, manipulating interest rates or aiding tax fraud, new cases crop up, often unearthed in the course of the previous investigation.

The currency investigation would expand on those cases, which produced guilty pleas only from foreign banks. In pursuing cases last year against those foreign banks, Credit Suisse and BNP Paribas, prosecutors confronted the popular belief that banks had grown so important to the economy that they could not be charged.


January 2018
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