By Jan D. Weir

In my other article, I discussed how bankers, through control of the right government departments, got to keep their obscene bonuses made from the financial crisis while millions lost their homes. And why fining banks is a penalty that does not punish. After the bailouts, banker criminal behavior continues unabated.

In the last couple of months, The New York Times broke a story that the Wells Fargo fake customer account scandal was vastly understated at the time — and raises suspicion it was done intentionally until the news cycle passed.

At the same time, a new scandal surfaced involving Wells Fargo staff selling unnecessary car insurance to low-end borrowers resulting in the wrongful repossession of some 20,000 cars.

In 2013, the LA Times broke the story of the pressure by managers who trained lower-level employees to oversell customers for bank products they did not need and the CEO’s famous mantra “eight is great” meaning every employee should ensure that every customer had eight bank products.

The repercussions of Wells Fargo’s scandal were exactly what we’ve come to expect from the government’s lenient, lassez-faire attitude towards bank fraud.

The government brought a class action on behalf of customers that was settled for a payment of $185 million by the bank. The CEO was replaced and given a retirement allowance of $133 million (what would you have gotten if you had screwed up and cost your company a multi-million-dollar loss?).

None of the managers or executives who had decided on the policy or enforced it suffered the slightest harm. They kept all of their salary and commissions earned by the illegal practice. None saw the inside of a jail cell for even a day.

On hearing of the new allegations against Wells Fargo, Senator Elizabeth Warren (D-MA) grilled Fed chair, Janet Yellen. We’ll let you watch this magnificent takedown for yourself.

“And here is what worries me: Time after time, the banks cheat their customers and no actual human beings are being held accountable. Instead, there is a fine, which ultimately is paid by shareholders and not by executives and certainly not by directors. And nothing is going to change at banks if that doesn’t change.” Elizabeth Warren

When the Board of Directors of Wells Fargo were considering the $133 million retirement allowance for CEO John Stumpf, did it cross their minds that a $1 million stipend might be sufficient for a CEO who had screwed up so badly?

The better solution would have been to divide the remaining $132 million among their lowest paid employees. Whether that would mean a few thousand dollars or a few hundred dollars, any such amount would be a great relief to employees that lived on poverty line wages.

Surely the directors had seen the newspaper reports that many tellers were driven to frequent food banks because of their low salaries. Of course this idea didn’t, and in fact, couldn’t enter their minds — which tells us all we need to know about today’s banker mentality.

How Do Bankers Avoid Personal Consequences From Criminal Behavior?

Bankers understand power.

We could fret on Twitter on how offensive it is that bankers got millions in bonuses from taxpayer bailout money while average people lost their home, but that would be as far as we could make our outrage heard because bankers have implemented a strategy that has seized hold of our democracy.

There were politicians who wanted to see bankers, whether they were criminal or merely foolish, take the hit for the 2008 crisis, but even those politicians were powerless against the banks. Much earlier, bankers had seen how to turn what should have been a protection against abuse of power into a way to rig the system in their favor.

We all learned in school that the Legislative, Executive, and Judicial branches of the United States government are kept distinct in order to prevent abuse of power.

Accordingly, politicians cannot give orders to the AG’s office. It operates independently and can completely defeat what the politicians may want. Which is exactly what the AG’s office does to protect bankers and help them profit from fraud.

How did banks protect themselves from prosecution for fraud? Law firms that make multi-millions on banker retainer fees help the bankers get control of the AG’s office. And for the banks, this has been an amazingly successful strategy.

High End, Elite Financial Laundromats

In the days running up to 2008, while the banks were putting our economy at risk with their toxic CDOs in the housing market, some were also laundering money for Columbian and Mexican drug cartels. Cartels like El Chapo Guzman’s Sinaloa drug cartel ultimately helped businesses trade with enemies of the United States.

The US Drug Enforcement Agency exposed Wachovia, named after a German province, as Guzman’s preferred bank in 2008. As one example of the blatant evidence against Wachovia, one London UK branch staffer, Martin Woods, a former London Metropolitan Police officer, came across large quantities of travelers’ checks for significant amounts in round numbers with serial numbers following each other — all to one aircraft manufacturer. You don’t need high-level forensic accounting training to realize that travelers don’t buy airplanes when they’re vacationing.Woods raised the suspicious transactions with his boss and got fired.

By happy coincidence, he met some members of the US DEA, who were on a conference in England, at a London pub and conveyed the story. Wachovia was also deep into the toxic CDO business, but when the money-laundering charges were revealed, it could not be saved by a bailout and collapsed.

Lanny Brueur, head of the criminal division of the AG’s office, took charge of the Wachovia case. No criminal charges were laid. No one went to jail.

The drug lords, in need of a new bank, found one that could meet all their needs in HSBC — the Hongkong and Shanghai Banking Corporation, a British Corporation founded in Asia when those countries were British protectorates.

In 2011, when HSBC got caught transferring illegal cash from Mexico’s Sinaloa cartel and Colombia’s Norte del Valle cartel into the legal money stream, Senators vowed this time the bankers were not going to get away with a slap on the wrist.

They instituted their own investigation and assembled all the evidence. Their findings, released in June of 2012, devoted one section exclusively to HSBC. The Senate uncovered far more than just money laundering for organized crime.

“They [HSBC] violated every goddamn law in the book. They took every imaginable form of illegal and illicit business.”Jack Blum, a former Senate investigator.

As one example, the Senators found the same suspicious use of traveler’s checks again, with HSBC clearing over $290 million illegibly signed checks that were obtained in Russia and deposited into Japanese accounts for the sale of used cars.

Assisting Al Qaeda

The Senate report also found HSBC had cleared transactions for Al Rajhi Trading, evidence of terrorist funding. The four Al Rajhi Brothers had established Al Rajhi Bank and Al Rajhi Trading. In 2002, the CIA had discovered one of the brother’s name on a list of Al Qaeda’s ‘Golden Chain’ of financiers.

Back in 1983, one of the four brothers in the Rajhi bank had established the SAAR Foundation in Virginia. Those are his initials (Sulaiman Abdul Aziz Al Rajhi). It was given U.S. charitable status, which permitted it to give out receipts for tax deductions. In 2002, acting on the Golden Chain evidence, a combined U.S. law enforcement task force raided the SAAR offices.

The documents they found proved the links to al Qaeda. American taxpayers had indirectly and unknowingly supported the 9/11 attacks in 2001 with tax deductions.

After the 2002 incendiary revelations, the HSBC had, at first, issued a no dealing directive for both organizations, but gradually chipped away at that absolute prohibition to allow dealing with Al Rajhi Trading.

“Group has clarified the Al Rajhi guidance issued last month. They have evaluated Al Rajhi Banking and Al Rajhi Trading and now believe that the two are separated enough that relationships may be maintained with the latter but not with the former. To be clear, recommendation is to sever with Banking only at this time.”

Translating the bankerspeak, that memo says that the head office has given the okay to do any transactions for Trading. We can pretend that we are really dumb and believe that the two companies are acting at arm’s length and that Trading would never, ever do money laundering for Banking.

The report also detailed HSBC subsidiaries assisting customers to evade sanctions to countries like North Korea, Libya (under Gaddafi), Iran, Sudan, Burma and Cuba.

 Weir is a trial lawyer, teach business law at the University of Toronto, co author of The Critical Concepts of Canadian Business Law.

To be continued…