Judge approves Barclays deal with Justice Dept
A judge who questioned whether Barclays Bank PLC was getting off too easily nonetheless approved a deal on Wednesday that will likely enable the financial institution to avoid prosecution on allegations that it engaged in US$500 million in illegal transactions with banks in Cuba, Iran, Libya, Sudan and Burma for more than a decade.
Under the arrangement with the United States (US) Justice Department, Barclays will pay US$298 million - half of it to the US and the rest under an agreement with the Manhattan district attorney's office in New York.
In exchange for the London-based bank's ongoing cooperation, the two criminal charges the bank faces will be deferred and ultimately dropped, as long as the financial institution demonstrates that it is complying with US laws.
US District Judge Emmet Sullivan expressed concern that no one working at the bank was charged criminally and that the US$298 million would come out of the pockets of Barclays' shareholders.
It looks like the bank is "getting a free ride here; that is what the average person probably concludes," Sullivan said.
Justice Department attorney Kevin Gerrity said the deferred prosecution agreement represents a fair and appropriate resolution of the case, balancing the serious nature of the criminal charges and "doing the right thing".
Gerrity said "we looked very hard" to find individuals at the bank who engaged in the alleged criminal conduct.
"There was no paper trail?" asked Sullivan. "Senior management has to know who is responsible. Some-one has to mastermind this."
Gerrity said senior management did not know of the misconduct until 2006, and disclosed it to the Justice Department. Low-level employees carried out the transactions and it became a question of whether they lacked criminal intent, David Braff, an attorney representing the bank, told the judge.
"We did not find anyone" who engaged in criminal conduct, Gerrity said.
Sullivan declared that "I am not trying to micromanage" the Justice Department, but the judge suggested that prosecuting the bank might have brought pressure to bear in terms of uncovering who was responsible for the alleged criminal conduct.
The judge said at the outset of the court proceeding that he was unfamiliar with deferred prosecution agreements like the one he was being asked to approve. His deep scepticism of the deal turned to acceptance over the course of the hearing, which lasted over an hour.
The Justice Department uses deferred prosecution agreements as an in-between option to obtaining the conviction of a corporation or declining to prosecute altogether.
The bank was accused of violating the Trading with the Enemy Act and the International Emergency Economic Powers Act.
According to court papers in the case, Barclays concealed the transactions that it carried out with banks in the countries, which were under US economic sanctions.
The papers stated that as early as November 1987, banks in the sanctioned countries directed Barclays not to mention their names on payment messages sent to the United States. The papers also said that Barclays' operating procedures educated employees on how to bypass filters designed to flag incoming payment messages involving sanctioned banks.