The US Justice Department is seeking tough criminal penalties against European giants Credit Suisse and BNP Paribas as prosecutors aim to demonstrate that no institution is "too big to jail." BNP Paribas chief executive Jean-Laurent Bonnafe acknowledged at Wednesday's annual meeting that a fine could be "very significantly higher" than the $1.1 billion it has set aside to settle charges it did business in Iran and other countries under US sanction.
"The situation is obviously difficult," said Bonnafe. Officials at Credit Suisse last week said he bank was working to resolve a criminal probe on enabling US taxpayers to evade taxes through secret bank accounts. Credit Suisse has set aside $810 million to resolve the case, but reports have said the bank could end up paying $2 billion.
The crackdown on the two European giants follows major federal settlements with J.P. Morgan Chase, Bank of America and other large US banks over myriad violations. "There is no such thing as 'too big to jail,'" Attorney General Eric Holder said earlier this month. "When laws indeed appear to have been broken - and the evidence supports the allegations - a company's size will never be a shield from prosecution or penalty," he said.
But in similar cases, US banks have been fined heavily but not forced to plea guilty. For example, the Justice Department won a record $13 billion settlement from J.P. Morgan Chase last year to settle myriad charges over fraudulently labelled mortgage-backed securities.
In January, J.P. Morgan agreed to pay $2.6 billion to settle criminal charges its lax oversight enabled the multibillion-dollar Ponzi scheme of Bernard Madoff. The bank acknowledged a lengthy statement of facts outlining the wrongdoing and signed a deferred prosecution agreement. But in neither case did J.P. Morgan have to admit the charges.
Moreover, the Justice Department has not criminally prosecuted any senior bank officials in the mortgage securities debacle, a decision that US Judge Jed Rakoff suggested could be "one of the more egregious failures of the criminal justice system in many years." One reason prosecutors have been loath to force guilty pleas until now is the fear of that a conviction could trigger dire consequences, such as the withdrawal of a bank's charter to operate, endangering jobs and threatening the economy.