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Riggs Bank Hid Assets Of Pinochet

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#1 markber


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Posted 30 October 2004 - 08:39 AM

Riggs Bank courted business from former Chilean dictator Augusto Pinochet and helped him hide millions of dollars in assets from international prosecutors while he was under house arrest in Britain, according to a report by Senate investigators.
The report also says the top federal bank examiner in charge of supervising the District's largest bank kept details about Riggs's relationship with Pinochet out of the Riggs case file. That happened a few months before the examiner retired from the government and joined Riggs as a senior executive. The examiner, R. Ashley Lee, denied the allegations to Senate investigators.

The Senate report also said Lee recommended, while still working for the government, that the bank not be punished for failing to take steps designed to prevent money laundering.

The report, which includes the first account of Riggs's dealings with Pinochet, is the latest blow to an institution that once billed itself as "the most important bank in the most important city in the world." In May the bank agreed to pay $25 million in civil penalties for what federal regulators called "willful, systemic" violation of anti-money-laundering laws in its dealings with the embassies of Saudi Arabia and Equatorial Guinea. Several other federal investigations continue into the bank's activities, and Riggs has hired investment bankers to explore a sale of the company.

Senate investigators, who spent more than a year looking into Riggs, found that the bank attempted to use offshore and other accounts that were misleadingly named to obscure their connection to Pinochet. In documents required by federal regulators, for example, the bank referred to Pinochet not by name but as "a retired professional" who held a "high paying position in public sector for many years."

Senior bank officials, including former chairman and chief executive Joseph L. Allbritton, were part of an effort to win Pinochet's business and were familiar with the activities in his accounts, the former dictator's legal status and efforts to seize his assets around the world, the Senate report says.

In addition to its account of Riggs's relationship with Pinochet, who was held in Britain after an indictment in Spain on charges of "crimes against humanity," the Senate report provides new details about Riggs's dealings with Teodoro Obiang Nguema, the dictator of Equatorial Guinea.

"It's a sordid story of a bank with a prestigious name that blatantly ignored its obligations under anti-money-laundering laws," said Sen. Carl M. Levin (D-Mich.), the ranking minority member of the subcommittee whose staff oversaw the investigation. "And it took our regulators five years to act in any substantive way. . . . They tolerated Riggs failures and tolerated their dysfunctional AML [anti-money-laundering] program."

Riggs officials declined to discuss the Pinochet allegations. The bank said a written statement that it has taken steps to improve its compliance with federal bank regulations. "It is clear that Riggs did not accomplish all that it needed to," Riggs said. "Specifically, with respect to the improvements that were outlined by our regulators, we regret that we did not more swiftly and more thoroughly complete the work necessary to fully meet the expectations of our regulators. For this, the Bank accepts full responsibility."

The report raised the possibility of further legal and regulatory problems for Riggs. But a former federal banking enforcement lawyer, speaking on the condition of anonymity because he did not have access to the examination reports and other source materials for the subcommittee's report, said such cases can be difficult for prosecutors because to be found guilty of criminal wrongdoing, a bank has to have known that a customer was using an account for illicit activity.

The report by the Democratic minority staff of the permanent subcommittee on investigations provides new information about Lee's role as a federal examiner, which is already under investigation by the Treasury Department's inspector general.

In interviews with subcommittee investigators, Lee denied that he prevented information about Riggs's relationship with Pinochet from being included in bank examination reports. Lee did not respond to requests for comment that were made through Riggs. Lee's lawyer, Gilbert Schwartz, who specializes in banking issues, declined through a spokesman to comment yesterday.

But based on interviews with others, the report concludes that the top federal bank examiner at Riggs might have become "too close" to the bank to be an effective watchdog during his four years overseeing the bank, from 1998 to 2002, when Riggs was repeatedly failing to take steps required by laws designed to prevent money laundering.

Yesterday a source with knowledge of the matter who spoke on the condition of anonymity said that the inspector general has subpoenaed the bank's phone and meeting logs in an effort to determine, among other things, whether Lee attended meetings with his former agency since he joined Riggs -- which could be a violation of government ethics rules.

The report found that Pinochet's deposits at Riggs varied from $4 million to $8 million, held in several personal and corporate accounts. A "senior delegation" of bank officials traveled to South America in 1996 to solicit business, including Pinochet's, the report said.

Pinochet has been linked to corruption, illegal arms and drug trafficking, and the disappearance or murder of thousands of political opponents during his reign, which began with a 1973 coup and ended in 1990. Pinochet was found unfit to be extradited to stand trial in Spain in 2000 and was allowed to return to Chile, where he still lives.

According to the report, in July 1996, about 18 months after opening a personal account at Riggs, Pinochet was indicted by Spain on charges of genocide, terrorism and torture against Spanish citizens during his rule. A Riggs subsidiary in the Bahamas then established two companies, Ashburton Co. Ltd. and Althorp Investment Co. Ltd., both putatively owned by trusts set up by Riggs.

Nowhere on the trust or company documentation does Pinochet's name appear, though he and his family were the ultimate beneficiaries, according to investigators. Ashburton held the most Pinochet money; it had a $4.5 million balance when it was closed in 2002, the report said.

The report said Riggs concealed its relationship with Pinochet from regulators. In 2000, when the Office of the Comptroller of the Currency asked for a list of clients' accounts controlled by foreign political figures, Pinochet's was not on the list. In 2001, an OCC examiner happened upon a report about Althorp and asked about the beneficial owner. The examiner was told, according to his notes from the time, that the account was for a "publicly known figure" and added that Riggs's chairman, Allbritton, "knows" the customer. Pinochet's name was never offered. Not until spring 2002 did the OCC discover the Pinochet accounts, when an examiner demanded an explanation for coded references to cashier's checks that had been mailed or delivered to Pinochet.

The report states that Pinochet's account manager, Carol Thompson, sometimes spoke directly with Allbritton about Pinochet's accounts. According to OCC documents cited in the report, a Riggs officer told OCC examiners that "Mr. Pinochet has a relationship with the Chairman of Riggs."

According to the report, Lee recommended to his superiors at the OCC that it not take action against Riggs in 2001, despite three successive examinations that detailed deficiencies in Riggs's adherence to rules designed to detect money laundering. Lee said that Riggs officers had promised to remedy the problems, but the report concludes that he did little to ensure that corrective actions were carried out.

Two other bank examiners told Senate investigators that in 2002, a month before Lee was approached by Riggs about a job, he "specifically instructed" them not to include the Pinochet findings in the OCC's electronic database. Lee told the investigators that the examiners under him may have been "confused" about his instruction to ensure the privacy of the Pinochet matter. The examiners disputed that, saying Lee's instructions were "clear," the report says.

The subcommittee report also laid out new details of Riggs's relationship with Equatorial Guinea and of transfers into the accounts controlled by the country's dictator of millions of dollars of deposits made by U.S. oil companies. The West African country's government has been cited by the State Department and various nongovernmental and human rights groups as one of the most corrupt in the world.

A spokesman for Sen. Norm Coleman (R-Minn.), chairman of the investigations subcommittee, said Coleman agrees with the findings of the report but not a recommendation that oil companies be required to publicly disclose all payments to foreign companies or individuals. The spokesman said Coleman wants to hear from oil companies before endorsing that suggestion and therefore withheld his signature from the report.

Coleman spokesman Tom Steward said, "We agree with 99.9 percent of the report."

In addition to the Pinochet and Equatorial Guinea accounts, the subcommittee found others "equally troubling," including more than 150 Saudia Arabian accounts. The full Senate Governmental Affairs Committee, as part of a larger look into terrorist funding, is probing those accounts and has subpoenaed records from both the OCC and from Riggs.