WASHINGTON — A federal judge on Tuesday voiced his apprehension about a proposed $298 million settlement that would allow Barclays Bank PLC to avoid prosecution on criminal charges that it facilitated financial payments for parties and countries facing U.S. sanctions.
U.S. District Court Judge Emmet G. Sullivan, who must approve the proposed settlement for it to become final, called the agreement "a sweetheart deal" and an "accommodation to a foreign bank, and that concerns me."
"Why isn't the government getting rough with these banks?" Sullivan asked during a brief court hearing. The judge noted that no one was being indicted or going to jail.
"I'd like some answers tomorrow," he said.
The judge scheduled a Wednesday hearing to consider whether to approve the agreement. Sullivan told lawyers for the government and Barclays that he wanted to voice his concerns up front so they would be prepared to give detailed responses during Wednesday's hearing.
Lawyers for the parties said little during Tuesday's brief court proceedings, though a Justice Department attorney assured Sullivan the $298 million forfeiture by Barclays "was well in excess" of the amount of money the bank earned on processing payments from entities facing U.S. sanctions.
Prosecutors filed a two-count criminal information in court Monday, charging Barclays with facilitating and hiding transactions for banks and other entities in countries facing economic sanctions, including banks from Cuba, Iran, Libya, Sudan and Burma.
The conduct allegedly took place from 1995 to 2006.
Under the proposed agreement, Barclays will forfeit $149 million pursuant to an agreement with the U.S. Justice Department and another $149 million in a separate agreement with the New York County District Attorney's office.
As part of the settlement, Barclays will be subject to a two-year deferred prosecution agreement, which will allow it to avoid prosecution if it complies with a list of requirements.
Prosecutors said in court documents that they entered into the agreement in part because the bank voluntarily disclosed its actions and turned over documents related to its conduct.
The use of deferred-prosecution agreements continues to be a controversial tactic in corporate-crime cases.
These types of agreements were largely unheard of a decade ago, but their use has grown rapidly in recent years, especially since accounting firm Arthur Andersen LLP collapsed after its 2002 criminal conviction on obstruction-of-justice charges related to the Enron scandal. The firm's demise resulted in the loss of tens of thousands of jobs. The conviction was later overturned by the Supreme Court, but the damage already had been done.
The Justice Department has argued deferred prosecution agreements ensure corporations face serious consequences for wrongdoing while also minimizing the impact to innocent third parties, such as employees, shareholders and customers, who can be harmed when a corporation is prosecuted.
But critics, including some U.S. lawmakers, have suggested the agreements encourage disrespect for the law and fail to hold corporations fully accountable for their actions.
The Barclays agreement, if approved, will mark the fourth time since January 2009 that the Justice Department has obtained financial forfeitures from major banks charged with processing client payments originating from countries facing U.S. economic sanctions. In each of the other cases, the defendants — Lloyds Banking Group PLC, Credit Suisse Group and the former ABN AMRO Bank N.V. — entered into deferred prosecution agreements that were approved by courts. Two of those agreements were approved without the judge deciding to hold hearings.
Sullivan in the past has shown a willingness to scrutinize Justice Department settlements in business-related cases.
Notably in 2006, Sullivan chose to take a close look at major telecommunications settlements in which the Justice Department allowed the mergers of AT&T with SBC Communications and Verizon Communications Inc. with MCI. Sullivan eventually approved the settlements in 2007, deciding they were in the public interest.
Joseph Warin, a lawyer with Gibson, Dunn & Crutcher who tracks deferred prosecution agreements, said it would be highly unusual for the judge to reject the Barclays settlement, which he said was the product of highly calibrated negotiations. "What is absolutely clear is that the parties have worked very hard on this," he said.
