by Brandon L. Garrett, Professor of Law, University of Virginia School of Law. Since the 2011 publication of Convicting the Innocent: Where Criminal Prosecutions Go Wrong, Professor Garrett has written widely on issues of criminal procedure, scientific evidence, corporate crime, and the law. This fall, Harvard University Press published his new book, Too Big to Jail: How Prosecutors Compromise with Corporations.
Prominent cries of “too big to jail” greeted the decision by federal prosecutors in 2012 not to convict HSBC, the international bank headquartered in London. When HSBC was investigated for violations of international sanctions with countries like Cuba, Iran, Libya, Sudan and Burma, and, if that were not enough, facilitating the laundering of “at least $881 million in drug proceeds,” it paid a then-record penalty of $1.4 billion. The scale of the violations was shocking. And prosecutors described concerted efforts to help dirty money transactions avoid detection, with internal notes like: “care sanctioned country,” “do not mention our name in NY,” or “do not mention Iran.” Drug cartels used cash boxes “designed to fit the precise dimensions of the tellers’ windows in HSBC’s Mexico branches.” When HSBC’s compliance officers raised alarms, they were “discouraged” and ignored.
“We accept responsibility for our past mistakes,” said the bank’s CEO at the time HSBC settled the case. A corporate monitor would supervise a revamping of compliance. The bank had hired hundreds of compliance employees and spent millions improving anti-money laundering programs. But the bank was not convicted of any crime. This galled advocates, editorial boards, members of Congress, and the public. The same day prosecutors filed their case, they asked the judge to approve what is called a deferred prosecution agreement. The case would be put on hold to give the bank a chance to show good conduct. A money laundering conviction could have resulted in termination of the bank’s U.S. charter. Yet no employees or officers were prosecuted either. At the time, Assistant-Attorney General Lanny Brueur explained: “Our goal here is not to bring HSBC down, it’s not to cause a systemic effect on the economy, it’s not for people to lose thousands of jobs.” And upon announcement of the settlement, HSBC shares rose.