December 2012, Week 3


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Mon, 17 Dec 2012 00:37:30 -0500
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(1) Outrageous HSBC Settlement Proves the Drug War is 
a Joke
(2) Why HSBC "money-laundering" is Mostly about US 
Bullying Foreign Policy

Outrageous HSBC Settlement Proves the Drug War is a Joke
Matt Taibbi
Rolling Stone
December 13, 2012

If you've ever been arrested on a drug charge, if you've
ever spent even a day in jail for having a stem of
marijuana in your pocket or "drug paraphernalia" in your
gym bag, Assistant Attorney General and longtime Bill
Clinton pal Lanny Breuer has a message for you: Bite me.

Breuer this week signed off on a settlement deal with
the British banking giant HSBC that is the ultimate
insult to every ordinary person who's ever had his life
altered by a narcotics charge. Despite the fact that
HSBC admitted to laundering billions of dollars for
Colombian and Mexican drug cartels (among others) and
violating a host of important banking laws (from the
Bank Secrecy Act to the Trading With the Enemy Act),
Breuer and his Justice Department elected not to pursue
criminal prosecutions of the bank, opting instead for a
"record" financial settlement of $1.9 billion, which as
one analyst noted is about five weeks of income for the

The banks' laundering transactions were so brazen that
the NSA probably could have spotted them from space.
Breuer admitted that drug dealers would sometimes come
to HSBC's Mexican branches and "deposit hundreds of
thousands of dollars in cash, in a single day, into a
single account, using boxes designed to fit the precise
dimensions of the teller windows."

This bears repeating: in order to more efficiently move
as much illegal money as possible into the "legitimate"
banking institution HSBC, drug dealers specifically
designed boxes to fit through the bank's teller windows.
Tony Montana's henchmen marching dufflebags of cash into
the fictional "American City Bank" in Miami was actually
more subtle than what the cartels were doing when they
washed their cash through one of Britain's most storied
financial institutions.

Though this was not stated explicitly, the government's
rationale in not pursuing criminal prosecutions against
the bank was apparently rooted in concerns that putting
executives from a "systemically important institution"
in jail for drug laundering would threaten the stability
of the financial system. The New York Times put it this

Federal and state authorities have chosen not to indict
HSBC, the London-based bank, on charges of vast and
prolonged money laundering, for fear that criminal
prosecution would topple the bank and, in the process,
endanger the financial system.

It doesn't take a genius to see that the reasoning here
is beyond flawed. When you decide not to prosecute
bankers for billion-dollar crimes connected to drug-
dealing and terrorism (some of HSBC's Saudi and
Bangladeshi clients had terrorist ties, according to a
Senate investigation), it doesn't protect the banking
system, it does exactly the opposite. It terrifies
investors and depositors everywhere, leaving them with
the clear impression that even the most "reputable"
banks may in fact be captured institutions whose senior
executives are in the employ of (this can't be repeated
often enough) murderers and terrorists. Even more
shocking, the Justice Department's response to learning
about all of this was to do exactly the same thing that
the HSBC executives did in the first place to get
themselves in trouble - they took money to look the
other way.

And not only did they sell out to drug dealers, they
sold out cheap. You'll hear bragging this week by the
Obama administration that they wrested a record penalty
from HSBC, but it's a joke. Some of the penalties
involved will literally make you laugh out loud. This is
from Breuer's announcement:

As a result of the government's investigation, HSBC has
. . . "clawed back" deferred compensation bonuses given
to some of its most senior U.S. anti-money laundering
and compliance officers, and agreed to partially defer
bonus compensation for its most senior officials during
the five-year period of the deferred prosecution

Wow. So the executives who spent a decade laundering
billions of dollars will have to partially defer their
bonuses during the five-year deferred prosecution
agreement? Are you fucking kidding me? That's the
punishment? The government's negotiators couldn't hold
firm on forcing HSBC officials to completely wait to
receive their ill-gotten bonuses? They had to settle on
making them "partially" wait? Every honest prosecutor in
America has to be puking his guts out at such bargaining
tactics. What was the Justice Department's opening offer
- asking executives to restrict their Caribbean vacation
time to nine weeks a year?

So you might ask, what's the appropriate financial
penalty for a bank in HSBC's position? Exactly how much
money should one extract from a firm that has been
shamelessly profiting from business with criminals for
years and years? Remember, we're talking about a company
that has admitted to a smorgasbord of serious banking
crimes. If you're the prosecutor, you've got this bank
by the balls. So how much money should you take?

How about all of it? How about every last dollar the
bank has made since it started its illegal activity? How
about you dive into every bank account of every single
executive involved in this mess and take every last
bonus dollar they've ever earned? Then take their
houses, their cars, the paintings they bought at
Sotheby's auctions, the clothes in their closets, the
loose change in the jars on their kitchen counters,
every last freaking thing. Take it all and don't think
twice. And then throw them in jail.

Sound harsh? It does, doesn't it? The only problem is,
that's exactly what the government does just about every
day to ordinary people involved in ordinary drug cases.

It'd be interesting, for instance, to ask the residents
of Tenaha, Texas what they think about the HSBC
settlement. That's the town where local police routinely
pulled over (mostly black) motorists and, whenever they
found cash, offered motorists a choice: They could
either allow police to seize the money, or face drug and
money laundering charges.

Or we could ask Anthony Smelley, the Indiana resident
who won $50,000 in a car accident settlement and was
carrying about $17K of that in cash in his car when he
got pulled over. Cops searched his car and had drug dogs
sniff around: The dogs alerted twice. No drugs were
found, but police took the money anyway. Even after
Smelley produced documentation proving where he got the
money from, Putnam County officials tried to keep the
money on the grounds that he could have used the cash to
buy drugs in the future.

Seriously, that happened. It happens all the time, and
even Lanny Breuer's own Justice Deparment gets into the
act. In 2010 alone, U.S. Attorneys' offices deposited
nearly $1.8 billion into government accounts as a result
of forfeiture cases, most of them drug cases. You can
see the Justice Department's own statistics right here:

Justice Department If you get pulled over in America
with cash and the government even thinks it's drug
money, that cash is going to be buying your local
sheriff or police chief a new Ford Expedition tomorrow

And that's just the icing on the cake. The real prize
you get for interacting with a law enforcement officer,
if you happen to be connected in any way with drugs, is
a preposterous, outsized criminal penalty. Right here in
New York, one out of every seven cases that ends up in
court is a marijuana case.

Just the other day, while Breuer was announcing his slap
on the wrist for the world's most prolific drug-
launderers, I was in arraignment court in Brooklyn
watching how they deal with actual people. A public
defender explained the absurdity of drug arrests in this
city. New York actually has fairly liberal laws about
pot - police aren't supposed to bust you if you possess
the drug in private. So how do police work around that
to make 50,377 pot-related arrests in a single year,
just in this city? Tthat was 2010; the 2009 number was

"What they do is, they stop you on the street and tell
you to empty your pockets," the public defender
explained. "Then the instant a pipe or a seed is out of
the pocket - boom, it's 'public use.' And you get

People spend nights in jail, or worse. In New York, even
if they let you off with a misdemeanor and time served,
you have to pay $200 and have your DNA extracted - a
process that you have to pay for (it costs 50 bucks).
But even beyond that, you won't have search very far for
stories of draconian, idiotic sentences for nonviolent
drug crimes.

Just ask Cameron Douglas, the son of Michael Douglas,
who got five years in jail for simple possession. His
jailers kept him in solitary for 23 hours a day for 11
months and denied him visits with family and friends.
Although your typical non-violent drug inmate isn't the
white child of a celebrity, he's usually a minority user
who gets far stiffer sentences than rich white kids
would for committing the same crimes - we all remember
the crack-versus-coke controversy in which federal and
state sentencing guidelines left (predominantly
minority) crack users serving sentences up to 100 times
harsher than those meted out to the predominantly white
users of powdered coke.

The institutional bias in the crack sentencing
guidelines was a racist outrage, but this HSBC
settlement blows even that away. By eschewing criminal
prosecutions of major drug launderers on the grounds
(the patently absurd grounds, incidentally) that their
prosecution might imperil the world financial system,
the government has now formalized the double standard.

They're now saying that if you're not an important cog
in the global financial system, you can't get away with
anything, not even simple possession. You will be jailed
and whatever cash they find on you they'll seize on the
spot, and convert into new cruisers or toys for your
local SWAT team, which will be deployed to kick in the
doors of houses where more such inessential economic
cogs as you live. If you don't have a systemically
important job, in other words, the government's position
is that your assets may be used to finance your own
political disenfranchisement.

On the other hand, if you are an important person, and
you work for a big international bank, you won't be
prosecuted even if you launder nine billion dollars.
Even if you actively collude with the people at the very
top of the international narcotics trade, your
punishment will be far smaller than that of the person
at the very bottom of the world drug pyramid. You will
be treated with more deference and sympathy than a
junkie passing out on a subway car in Manhattan (using
two seats of a subway car is a common prosecutable
offense in this city). An international drug trafficker
is a criminal and usually a murderer; the drug addict
walking the street is one of his victims. But thanks to
Breuer, we're now in the business, officially, of
jailing the victims and enabling the criminals.

This is the disgrace to end all disgraces. It doesn't
even make any sense. There is no reason why the Justice
Department couldn't have snatched up everybody at HSBC
involved with the trafficking, prosecuted them
criminally, and worked with banking regulators to make
sure that the bank survived the transition to new
management. As it is, HSBC has had to replace virtually
all of its senior management. The guilty parties were
apparently not so important to the stability of the
world economy that they all had to be left at their

So there is absolutely no reason they couldn't all face
criminal penalties. That they are not being prosecuted
is cowardice and pure corruption, nothing else. And by
approving this settlement, Breuer removed the
government's moral authority to prosecute anyone for any
other drug offense. Not that most people didn't already
know that the drug war is a joke, but this makes it

Why HSBC "money-laundering" is Mostly about US Bullying 
Foreign Policy
by Juan Cole
Informed Comment

The "money-laundering" scandal about British bank HSBC
is a mixed picture. On the one hand, bank officials
laundered money for Mexican drug cartels, allegedly
knowingly, which only pond scum would do. Still, the
cartels are only in business because the US government
irrationally opposes legalization of innocuous
agricultural products such as marijuana (the US goes to
bat for Big Alcohol all the time, and actively pushes
exports of sure-to-kill-people tobacco products, but if
64,000 Mexicans have to die in Washington's "war on
drugs," too bad).

On the other, HSBC's dealings with Iran and Syria were
not illegal in the UK and only "illegal" in any sense
because the United States is, as Felix Salmon rightly
says, is taking advantage of the dollar's position as
the world's reserve currency to bully third parties into
a financial blockade against countries it doesn't like,
such as Iran.

The Press Association reports:

Salmon's analysis explains why the US did not seek
criminal prosecutions against HSBC. It wasn't that the
bankers were too big to fail. It was that the US
insistence that all the banks around the world not do
business with countries like Iran is unreasonable and
not backed by international law, and had the US
bankrupted HSBC over its financial bullying, it would
have drawn the ire of a lot of powerful people in the UK
and Europe who know exactly what is going on.

Look into all this very carefully, and you'll find the
US Senate at the bottom of this attempt to strong-arm
foreign banks into complying with arbitrary US financial
blockades. And look into it a little further, and you'll
find that the unregistered foreign agent, the American
Israel Public Affairs Committee has a lot to do with
pressuring the Senate to embarrass and fine HSBC. The
bank, whatever the moral failings of its executives, is
a minor victim in the Tel Aviv-Washington conflict with


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