Big Banks and Terrorism
What is the purpose of law enforcement? To enforce the law, and make public the results.
What deterrent effect does law enforcement have if the public is not aware of the results of the law enforcement?
And yet, when it comes to big banks and major financial institutions, the Treasury Department enforces the law in private. Why? To protect the reputation of the big banks.
We thought about this the other day when President Bush and Treasury Secretary Paul O'Neill stood together at the White House Rose Garden and announced a crackdown on big banks and other financial institutions who do business with terrorists.
President Bush signed an executive order providing the Treasury Department with the authority to block funds of terrorists and anyone associated with a terrorist or terrorism.
"With the signing of this executive order, we have the President's explicit directive to block the U.S. assets of any domestic or foreign financial institution that refuses to cooperate with us in blocking assets of terrorist organizations," O'Neill said. "This order is a notice to financial institutions around the world -- if you have any involvement in the financing of the al Qaeda organization, you have two choices: cooperate in this fight, or we will freeze your U.S. assets -- we will punish you for providing the resources that make these evil acts possible."
What good does it do to punish the big banks if no one knows about the punishment?
If the history of law enforcement against corporate criminals is any indication, the fines will probably be a slap on the wrist. But in this case, we have no way of knowing, because the Treasury Department won't tell us.
President Bush's executive order -- and all laws governing trading with the "enemies" of the United States -- terrorists, Cuba, Libya -- are enforced by the Treasury Department's Office of Foreign Assets Control (OFAC).
Which American citizens are most concerned about OFAC's enforcement powers? Big banks and financial institutions. Why? Because they do business with the "enemies" of the United States and they have the most to lose if that dirty little secret gets out. They have corporate reputations to protect.
So, they have worked a deal with OFAC -- enforce the law against us, fine us if you must, but don't tell the public. And for years, OFAC has agreed to be a party to this cover-up.
How do we know this is going on?
Because the white-collar criminal defense lawyers who the banks and financial institutions hire to defend them against OFAC criminal and civil enforcement actions readily admit it.
Last week, Dale Chakarian Turza, a partner in the Washington, D.C. office of Clifford Chance Rogers & Wells, told us that she believes that OFAC enforcement officials, led by chief of the penalty division, Betsy Sue Scott, run a "very active case load." That means that big banks and financial institutions are being cited with law violations and are paying fines. And the enforcement activity never sees the light of day.
Of course, the banks and financial institutions like it that way. And they will like even more now, as they search their databases to determine which terrorists have deposits at their institutions.
Which bank would want the public to know that they are doing business with Osama bin Laden?
"None of our clients want any publicity in this area," Turza said. "It is not a badge that any financial institution or others who are tagged by OFAC wear proudly. These are very serious statutes. Violations are generally inadvertent. No bank or other financial institution likes to have any publicity or press on an enforcement action."
"So the defense bar is generally very pleased when our clients don't get press in this area," Turza said.
Secret settlements are unusual when it comes to enforcing the law against corporations. Every time the Federal Trade Commission enforces the law, it puts the result up on its web site. Same for the Securities and Exchange Commission. Same for the Occupational Safety and Health Administration. In most cases, when the Justice Department enforces the law against a major corporations, the public finds out about it -- one way or another.
Publicity is supposed to have a deterrent effect. Why should OFAC be different?
"In some ways I think they get better compliance through silence," Turza said.
Yeah, right. And if we ever got arrested for a street crime, we wouldn't want the public to know, either. Could we have that deal, too?
The Treasury Department's policy of cutting secret deals with big banks is an indefensible embarrassment. The Department refuses to return reporters' calls about the subject.
Last month, we sued the Treasury Department to compel enforcement officials there to produce records of enforcement actions settled by OFAC.
The public has a right to know.
Russell Mokhiber is editor of the Washington, D.C.-based Corporate Crime Reporter. Robert Weissman is editor of the Washington, D.C.-based Multinational Monitor.