Receiving Wide Coverage ...
'Tour de Fraud,' $8.9B Fine Drive BNP Share Price Up: Are multibillion dollar fines investor catnip? BNP Paribas's stock price opened 3.4% higher on Tuesday, following Monday's announcement that the bank settled with the U.S. government on an $8.9 billion fine for sanctions violations. The markets may have been soothed by the bank's statement that despite the fine it would be able to pay a cash dividend this quarter. Overall, BNP's share price is down 16% since February. In what U.S. Attorney Preet Bharara called a "Tour de Fraud," U.S. and New York regulators said France's largest bank concealed billions of dollars in transactions on behalf of Sudan, Iran and Cuba from 2002 until 2012, well after the bank was warned it was under investigation and after multiple other banks were penalized for similar transactions. "BNP Paribas went to really elaborate lengths to conceal prohibited transactions, cover its tracks, and deceive U.S. authorities. These actions represent a serious breach of U.S. law," Attorney General Eric Holder said. According to the Wall Street Journal, BNP Paribas provided more than $190 billion of dollar-clearing services for Sudanese, Iranian and Cuban parties. The U.S. imposed sanctions on Sudan in 1997 on the grounds that it was supporting international terrorism and committing human rights abuses. From 2002 until 2007, however, BNP provided letters of credit and financing for Sudan and its financial institutions and processed more than $6 billion in transactions on behalf of Sudan's government and banks through a series of illegal means. Employees stripped the identities of entities under U.S. sanctions from transactions, labeling some "ATTENTION: US EMBARGO" and routing others through accounts at "satellite banks" that had no other business purpose, according to court filings by U.S. state and federal authorities. The Financial Times quotes an internal bank memo in which BNP's senior compliance personnel agreed to continue doing business with Sudan despite the sanctions and human rights violations in Darfur by stating that "the relationship with this body of counterparties is a historical one and the commercial stakes are significant. For these reasons, Compliance does not want to stand in the way." The U.S. action against BNP sets a precedent for further prosecutions of big banks suspected of manipulating foreign currencies, the New York Times suggested. "This outcome should send a strong message to any institution any institution anywhere in the world that does business in the United States: that illegal conduct will simply not be tolerated," Holder said at a news conference on Monday. American Banker's Washington Bureau Chief Rob Blackwell posited that the settlement could have three unwelcome effects on U.S. banks: the Justice Department could go after a native bank for similar criminal charges, international regulators could retaliate against a U.S. bank, and/or foreign banks could pull out of the U.S. or reduce their footprint in this country.
Wall Street Journal
A profile of bitcoin evangelist Charlie Shrem illustrates the ambivalent way U.S. regulators and industry regard the virtual currency. Shrem is living under house arrest in his parents' Brooklyn basement, having been indicted in April in connection with an alleged drug scheme involving his virtual-currency exchange, BitInstant, and an online black market. He has pleaded not guilty and his trial is scheduled for September. Meanwhile, he "speaks at industry events, has been helping New York hotels prepare to accept the virtual currency for payment, and is working as a consultant," the paper reports. He even participated in a panel discussion at New York's Tribeca Film Festival in April, but he was not allowed to attend the after-parties.
Activist investor Nelson Peltz announced his hedge fund has a$1 billion stake in Bank of New York Mellon. But this is no vote of confidence. Peltz's hedge fund Trian has said it would like to meet the bank's management and board to discuss "ideas and initiatives to drive long-term growth and enhance shareholder value." Peltz has a history of pressing for change at companies and has targeted financial companies, including asset manager Legg Mason and, in 2011, BNY Mellon's rival custody bank, State Street, the paper reports. Trian pushed State Street to cut costs, return cash to shareholders and consider separating its asset management division from its custody operations.
New York Times
In a long, investigative piece, the Times tells the story of Stephen Flatow, whose daughter Alisa died in a terrorist bombing in 1995. The case against BNP and other international banks that have been accused of violating U.S. sanctions laws started with Flatow's lawsuit against Iran for the bombing that killed his daughter. The Manhattan district attorney's office "found a stunning accusation: a charity that owned a gleaming office tower on Fifth Avenue was actually a 'front' for the Iranian government, a claim that the prosecutors ultimately verified." Prosecutors discovered that Credit Suisse and Lloyds had acted as Iran's portal to the U.S. financial system, and had stripped the names of Iranian clients from transactions. Later, BNP was caught up in the same investigation.