Banking Criminals in Very High Places

The UK bank Barclays admitted altering its books for more than 10 years to hide hundreds of millions of dollars from countries such as Cuba, Libya and Iran.

In May, ABN Amro, now part of Royal Bank of Scotland Group, agreed to pay $US500m to end allegations that it helped Iran, Libya, Sudan and Cuba evade US sanctions by “stripping” the identities of transactions to conceal the countries from which they originated.

Last December, Credit Suisse Group paid $US536m to settle similar violations involving transactions with Iran. In early 2009, a unit of London-based Lloyds Banking Group paid $US350 million related to similar charges by US and New York prosecutors, who accused the bank of masking the origin of payments from Iran and Sudan.

The $331m settlement-agreement of criminal charges is an embarrassment for Barclays, which became a major player on Wall Street by snapping up the collapsed US operations of Lehman Brothers in 2008 and has been trying to burnish the UK bank's reputation on both sides of the Atlantic as a good corporate citizen.

A federal court filing said Barclays “accepts and acknowledges responsibility for its conduct and that of its employees”. US officials said the bank altered payment messages or deleted information about sanctioned countries. More

Another Subprime Class Action Dismissal: Plantiffs in for a Tough Road Ahead?

Last week Los Angeles federal district court judge John Walter dismissed a class action against the three top officials of the now defunct Downey Savings and Loan Association. In a concise 17-page ruling, Judge Walter found that the plaintiffs, represented by lead counsel Coughlin Stoia Geller Rudman & Robbins, failed to show that the defendants had made materially false or deceptive statements; failed adequately to plead scienter (despite evidence from 13 confidential informants and indications that the defendants had violated accounting standards); and failed to show loss causation. Two of the individual defendants were represented by Morrison & Foerster; the third by O'Melveny & Myers.

The important question is whether a pattern is beginning to emerge. Two huge subprime class actions--against Countrywide and New Century--survived motions to dismiss last fall. But they are beginning to seem like outliers. There was a dismissal of a Delaware derivative case against Citi board members and the dismissal of a securities class action against Impac Mortgage Holdings.

Judges in all three of the recent dismissals seemed strongly disinclined to hold defendants responsible for stock slides that could be attributed to an industry-wide collapse, absent clear evidence of fraud or intent to deceive. If that thinking turns out to be pervasive in the judiciary, plaintiffs are in for a tough road ahead.