Will HSBC Probes Sink Loretta Lynch?

Sen. David Vitter (R-La.), a member of the Senate Judiciary Committee, was reportedly instrumental in persuading the Committee last week to delay their vote on the nomination of Loretta Lynch to be Attorney General. The delay was based on the recent allegations about Lynch’s role in the 2012 settlement with HSBC during her present tenure as U.S. Attorney for the Eastern District of New York. That settlement, through a “deferred prosecution agreement,” (DPA) held off criminal prosecution of HSBC for a probationary period of five years, with a view toward dropping the charges after that time. On February 13, Vitter sent nine “questions for the record” to Lynch. The questions and her answers are intended, as those previously sent by Committee Chair Chuck Grassley and Ranking Member Patrick Leahy, to supplement Lynch’s testimony before the Committee.

In his introduction to the questions, Sen. Vitter explicitly referred back to the 200+ pages of responses to questions on various subjects, which Lynch sent on February 9 to Grassley and Leahy. Vitter pointed out that her answers about the 2012 HSBC deal said they were made “in the context of recent media reports regarding the release of HSBC files pertaining to its tax clients.” Vitter noted that the media reports are new, but DOJ had the information as early as 2010, and no steps have apparently been taken toward prosecution in the subsequent five years. His questions to Lynch are:

1) When did the U.S. Department of Justice receive the leaked information from French authorities detailing HSBC’s scheme to shield its clients from their tax liabilities?

2) When did you personally become aware of the HSBC leaked information detailing the tax evasion scheme?

If the media reports are correct, the U.S. Department of Justice received this information as early as 2010, yet in 2012 you negotiated a Deferred Prosecution Agreement with HSBC to avoid criminal prosecution only for the crimes of money laundering and facilitating transactions with countries sanctioned by the U.S. It has been reported that you had full prior knowledge of HSBC’s alleged earlier fraud and tax evasion violations.

3) Why did you choose not to immediately prosecute?

4) Given that HSBC admitted in the DPA to money laundering and conducting business with five countries sanctioned by the US, and given the strong evidence it also committed tax evasion, fraud and possibly other crimes, do you believe that HSBC’s ‘penalty’ truly fits the severity of its conduct against the U.S.?

5) As has been noted, the HSBC DPA that your office negotiated while you were U.S. Attorney for the Eastern District of New York does not preclude future prosecutions for HSBC’s other criminal violations for tax evasion, fraud or for failure to meet its duties and responsibilities under the DPA, but why, nearly 5 years after the Department of Justice became aware of the tax evasion scheme, have no criminal charges been brought?

The details of HSBC Money Laundering Deferred Prosecution Agreement has hardly been made public.

6) Exactly how much did HSBC profit from the transactions, loans, accounts, etc associated with the money-laundering accusations included in the DPA?

7) Who in your office or at the Department of Justice determined the penalty paid by HSBC and how did they come to that amount?

8) What process was used to ensure that the penalty matches the crime?

9) If the alleged identity theft took place, during the course of HSBC’s participation in a money laundering scheme, have all affected persons been notified?

These questions appropriately begin to focus the inquiry on U.S. Attorney Lynch’s own actual position and knowledge in the HSBC matter, regarding the decisions ultimately made by higher authority at Main Justice in Washington. ‘Til now, commentary on Lynch and the HSBC deal has missed this more important point — which her answers to Sen. Vitter’s questions may begin to answer. Was Lynch a proponent of the deal with HSBC, in the DOJ and inter-agency debate? Or did she argue for prosecuting HSBC, only to be over-ruled by the DOJ Criminal Division (which must authorize such prosecutions before they proceed)? Was Lynch to blame, or was this yet another instance of the “too big to jail” policy of AG Holder and Criminal Division chief Lanny Brewer? If the latter, will Lynch, if confirmed as Attorney General, act to reverse the “too big to jail” policy, and prosecute HSBC and other megabanks for federal crimes?

Vitter’s press release containing his letter to Lynch implies that she is expected to answer these and other questions from Committee members before a vote is taken on her nomination.