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Bill Black: Federal regulators remain the leading opponents of vigorous prosecutions

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ANTON WORONCZUK, TRNN PRODUCER: Welcome to The Real News Network. I’m Anton Woronczuk in Baltimore. And welcome to another edition of the Black finance and fraud report.

Now joining us is Bill Black. He’s an associate professor of economics and law at the University of Missouri-Kansas City, a white-collar criminologist, and a former financial regulator.

Thanks for joining us, Bill.

So let’s get your take on the latest news that French bank BNP Paribas has to pay a record $9 billion fine for U.S. sanctions violations?

BILL BLACK, ASSOC. PROF. ECONOMICS AND LAW, UMKC: So it’s good news that there are actually tiny bits of criminal requirements in this case, that Paribas had to plead guilty. It was caught red-handed not only having deliberately violated a host of sanctions, including on outright genocidal regimes that used the funding to kill their own citizens, but of then covering up those crimes, and indeed in covering up while they knew they were being investigated–they continued these felonies.

The number of, of course, is large, but insignificant relative to the size of the bank. It’s being billed by the prosecutors here in the United States as, see, we proved that nobody’s too big to jail, but, of course, nobody’s going to jail. Not because of the federal regulators, but because of the state regulator in New York, Mr. Lawski, there is actually a requirement that 11 people lose their jobs. But they don’t get prosecuted and they don’t get their fraudulent proceeds clawed back, so crime still pays big-time, even for those individuals.

And, of course, from the standpoint of the bank, the fines by definition can’t be terribly significant relative to the size of the bank, because otherwise they might cause, quote-unquote, the bank to fail, and it’s clear that the federal regulators will never allow that to happen still. So it’s a variant of the old story.

There are still no prosecutions related to the crisis of any of the senior officers. This case has nothing to do with the financial crisis. But fortunately, because of the insistence of a New York regulator, there at least was the removal of some of the fraudulent officers from being in charge of the largest bank in France.

WORONCZUK: Okay. And how does this compare to the lawsuits or the settlements with HSBC and Credit Suisse?

BLACK: So they are admitting it Paribas by to having done things very similar to Standard Chartered, and there were no prosecutions in Standard Chartered’s case, and the United States did not require any officers to even give back their money, much less sue them, and there were no prosecution at all, as I say, in Standard Chartered from the United States’ side.

HSBC was in some ways even worse, in that for a decade it deliberately laundered money for one of the most violent drug cartels in the world. So they do have the blood of thousands of people on their hands, except, of course, corporations don’t have hands, and the officers there were, again, not prosecuted, not sued individually, got to keep the proceeds that resulted from these frauds.

So is this a good result? Of course not. It’s maybe one-eighth of the way to where you should be. But compared to HSBC and Standard Chartered it’s a dramatic improvement. Does it indicate that the federal regulators have finally become regulators? No, they were still the problem, they’re still the leading opponents of vigorous prosecutions, whereas we used to be the most vigorous proponents, supporters of prosecutions. Fortunately in this particular case we’re saved by a state regulator who still believed that regulators ought to regulate.

WORONCZUK: Okay. Bill Black, thanks for that report.

BLACK: Thank you.

WORONCZUK: And thank you for joining us on The Real News Network.


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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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.