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  March 1, 2015

HSBC Offshore Tax-Evading Scandal Widening


Former financial regulator Bill Black details emerging revelations about HSBC bank's tax-evading practices and lack of accountability from European governments who were aware of the practice
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biography

William K. Black, author of The Best Way to Rob a Bank is to Own One, teaches economics and law at the University of Missouri Kansas City (UMKC). He was the Executive Director of the Institute for Fraud Prevention from 2005-2007. He has taught previously at the LBJ School of Public Affairs at the University of Texas at Austin and at Santa Clara University, where he was also the distinguished scholar in residence for insurance law and a visiting scholar at the Markkula Center for Applied Ethics.

Black was litigation director of the Federal Home Loan Bank Board, deputy director of the FSLIC, SVP and general counsel of the Federal Home Loan Bank of San Francisco, and senior deputy chief counsel, Office of Thrift Supervision. He was deputy director of the National Commission on Financial Institution Reform, Recovery and Enforcement.

Black developed the concept of "control fraud" frauds in which the CEO or head of state uses the entity as a "weapon." Control frauds cause greater financial losses than all other forms of property crime combined. He recently helped the World Bank develop anti-corruption initiatives and served as an expert for OFHEO in its enforcement action against Fannie Mae's former senior management.


transcript

HSBC Offshore Tax-Evading Scandal WideningSHARMINI PERIES, EXEC. PRODUCER, TRNN: Welcome to this edition of the Bill Black report. I'm Sharmini Peries, coming to you from Baltimore.

In 2006-2007, Hervé Falciani began extracting data from inside the HSBC swiss bank. By 2009, the French tax authority had received the data from Falciani, and it was considered the biggest bank leak in history. He uncovered files of over 30,000 accounts that was held between 2005 and 2007.

Joining us to talk about all of this is Bill Black. And as you know, Bill is an associate professor of economics and law at the University of Missouri-Kansas City. He's a white-collar criminologist and former financial regulator. He is the author of The Best Way to Rob a Bank Is to Own One.

Thank you so much for joining us again, Bill.

BILL BLACK, ASSOC. PROF. ECONOMICS AND LAW, UMKC: Thank you.

PERIES: So, Bill, outline for us the HSBC scandal and what we know so far from last week.

BLACK: Okay. So this is, like, the 12th installment in the HSBC scandals, of course, indeed that's one of the scandals that the sanctions for the past scandals--they didn't seem to have any effect. So, as you've explained, the banking and tax authorities in much of Europe have had this information or access to this information actually typically since 2008. And looking at the calendar, that's a whole lot long ago.

So why are we just hearing about all of this now? Well, in part we're not. There were various leaks about this, but there was precious little action. In the United Kingdom, for example, where it's a who's who list of elites and complete scum of the earth--.

PERIES: Now, Bill, here you're referring to the recently leaks, which they're calling the Swiss leaks, which contain some 3,500 names of those who are holding offshore accounts.

BLACK: Yes, at least. And in United Kingdom context, there are at least 1,000. And of those, in the seven years since they've had the information, the U.K. authorities have prosecuted one person. So you can see that (A) they've been hiding information, they being the governments that have the information in many cases, (B) not acting on it to prosecute folks, and (C) letting the statute of limitations run, so that they could then say, oh, gosh, it's too late to prosecute anybody as well. So it's quite despicable.

PERIES: And this is particularly damning in the U.K. because HSBC is actually a British home-based bank.

BLACK: It's not only a British home-based bank, but it is generally considered the second largest bank in the world. It's a bank with a record of felonies that stretches deep, deep, deep. And it's after they got this information, the Tories, the Conservative Party, when they came to power, said, you know what? We should make the head of HSBC, the former head of HSBC, a peer and we should give him a ministry.

Also, various senior folks, including the senior minister types that are supposed to be in charge of the tax authorities, it's come out there on the list. But they're explaining--and you've got to love this--we only engaged in vanilla tax evasion. So if you don't have, apparently, the whipped cream and the nuts and the maraschino cherry on top, it's okay. So it's a lot like Timothy Geithner, the tax cheat, running the IRS when he was head of Treasury in the United States.

PERIES: So, Bill, tell us more in terms of who are the kinds of people that we would recognize who are holding these offshore accounts? Now, it's also alleged that they have, HSBC has assisted drug lords and people who are involved in human trafficking bank their money in offshore accounts. So who is involved, and what kind of activity are they engaged in?

BLACK: So HSBC is an equal opportunity aider and abetter of tax evasion. No matter what you're interested in, somebody on the list is your kind of person. Right? So if you really love sports, it's filled with sports stars. If you really love royalty, it's filled with royalty. If you like to follow rich people, it's follow--it's rich people. If you like to learn that politicians were doing awful things, it's filled with politicians.

But as you say, it is filled also with the absolute scum of the earth. I mean, incredibly violent drug lords, people engaged in trafficking and every other crime you can imagine. It was really the complete death of ethics at HSBC.

And remember, this is the 13th or 14th shoe to drop in this context. This has a U.S. political aspect as well that is heating up even as we speak because the prior big scam that we sort of kind of did a little bit about (but very, very little) was when HSBC was disclosed for a full decade to have laundered over $1 billion for the Sinaloa cartel, drug cartel in Mexico, which has decapitated more people than ISIS has at this juncture, and which had such a close relationship with HSBC in Mexico that they had specially designed containers to bring massive amounts of cash. These containers precisely fit the drive-up windows of the HSBC branches so that they could launder the money more efficiently. And nobody was prosecuted for that. And HSBC and Standard Chartered, which is another massive U.K. bank, did that, but they also funded the genocidal folks who are on sanctions lists in the Sudan and allegedly--and I know this is more controversial with many people--assisting Iran to develop nuclear weapons.

In all these cases, they didn't simply sit there and allow frauds to come. These are things where they're actively recruiting these frauds, where they actually had training manuals for their staff to show them how to violate U.S. law and not get caught.

And the person who decided not to prosecute anybody for these frauds is Loretta Lynch. And she, of course, is the nominee to be attorney general of the United States, replacing Eric Holder, who has also refused to prosecute anybody of the elite bankers for these frauds that actually caused the crisis. And so Senator Grassley has basically now taken the nomination, which appeared to be Greece, to be strongly approved. It's now at least at issue. They'll probably have--well, they'll definitely have more questions, possibly more oral hearings, and any fast-track vote has been removed by Grassley and his colleagues on the Republican side of the Senate Judiciary Committee.

PERIES: And, Bill, for our average common audience out there who don't have such bank accounts and who've actually been paying for these kinds of fraudulent activity and the lack of income or taxes that the wealthy and the rich have not paid into the public treasury, just walk us through what was happening to the average citizen on Main Street during this period that HSBC has been so involved in such corrupt activity.

BLACK: Right. So this is a service not offered to everyone. This is only offered to very, very wealthy people through the Swiss subsidiary or affiliate of HSBC. And so everybody knows that inequality has grown enormously. Everybody knows in the United States context how personal income taxes on the wealthy were reduced to unprecedented lows. And the supposed logic of that is that those wealthy people, those were good people. Those were not profligate like the rest of us. They were savers and they were going to fund investments. And they had been discouraged because of those crippling rates and taxes--which, by the way, were half the rate frequently we had in the United States. And now they'll be good citizens and they bring their capital back to the United States and they'd invest in productive business and the economy would grow massively.

Well, guess what? When you dramatically reduce taxes on the wealthy, their first decision/action was how can we reduce them to almost zero? And so this is yet another reason why inequality has surged. And it's bad in the United States, but the United--the average person doesn't know HSBC except insofar as they travel internationally in airplanes, because HSBC advertises like crazy in airports.

But if you were a Brit, you would know that HSBC and the other big four city of London banks had massively targeted Main Street and Fred and Mary through the grotesquely inappropriate sale of loan products. So if you went in for a mortgage loan in the United kingdom during the crisis era, there was a very high probability you were sold an insurance product that had an 80 percent markup, right? Just a complete ripoff. And it was sold to you even if you could never collect on this insurance product.

So the claimants are winning 80 to 90 percent of their protests about this, and the big U.K. banks have paid roughly 20 billion sterling--20 billion pounds--which is a considerably bigger than a dollar, in fines and recompense on this. And if you were an entrepreneur--remember, supposedly the conservative meme that, you know, we're good to the small entrepreneur, that's the people we like--well, the big five banks absolutely went after the small entrepreneur. When they borrowed money, they would sell them these really complex collared swaps, which we struggle to teach in a second specialized finance class, graduate students, to understand these things. These were sold to mom-and-pop stores, and they lost enormous amounts of money, suffered lots of consequential damages. They're, again, winning their claims, but they're being forbidden, typically, to recover the consequential damages of this. So if you were a Brit, you would see HSBC doing everything possible for the most powerful, the wealthiest, and the sleaziest people in the world, while simultaneously predating, acting like an apex predator, going after Main Street (which they call High Street), and going after just regular Fred and Mary whenever Fred and Mary was foolish enough to come in and to seek something esoteric like a mortgage loan.

PERIES: It's very depressing listening to all of this. I'm sure that this is not the end of HSBC scandals unfolding. And, Bill, I hope you come back and keep us abreast of further developments on this.

BLACK: Yes, it is depressing.

PERIES: Thank you for joining us on The Real News Network.

End

DISCLAIMER: Please note that transcripts for The Real News Network are typed from a recording of the program. TRNN cannot guarantee their complete accuracy.



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