A federal judge yesterday approved requiring Riggs Bank to pay a $16 million criminal fine for its failure to abide by federal anti-money-laundering laws and lambasted the bank as "a greedy corporate henchman of dictators and their corrupt regimes."
In January, Riggs pleaded guilty to one count of failing to file reports on suspicious transactions by two former clients, former Chilean dictator Augusto Pinochet and leaders of the corruption-plagued West African nation of Equatorial Guinea, which was once Riggs's largest customer. At a hearing yesterday, U.S. District Judge Ricardo M. Urbina approved the negotiated sentence for the guilty plea between Riggs and the U.S. attorney for the District of Columbia.
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Riggs National Corp.
For a quick overview of Riggs Bank's legal problems, the status of various investigations and more, check out a Riggs primer compiled by washingtonpost.com.
Urbina ruled that the amount of the fine was appropriate given Riggs's relative size and its extensive cooperation with prosecutors over the past year -- cooperation that the government said will probably lead to prosecutions of individuals. Nonetheless, Urbina sharply criticized the institution's behavior between 1994 and 2003 as it was outlined by prosecutors. "There is no way of measuring the amount of harm and atrocities and human rights violations perpetrated by Pinochet and Equatorial Guinea as a result of the enabling criminal activity by Riggs Bank," Urbina said. Riggs is one of only three government-insured financial institutions to be convicted of violations of the Bank Secrecy Act, the federal law designed to prevent money laundering in U.S. financial institutions.
"Riggs regrets its failure to file accurate and timely suspicious activity reports with respect to its Pinochet and Equatorial Guinea accounts," said Mark N. Hendrix, a bank spokesman. "This resolves the investigation into the company and enables us to complete our upcoming merger."
PNC Financial Services Group Inc. in Pittsburgh plans to complete its $654 million purchase of Riggs in May. The deal, which grew out of Riggs money-laundering compliance troubles, will result in the end of the storied Riggs name and the expected elimination of several hundred Riggs jobs. Riggs has closed the international and embassy banking businesses at the heart of the scandal and done away with nearly all of its foreign-government-related accounts.
In addition to the $16 million criminal fine, Riggs last year paid a $25 million regulatory fine, $8 million to settle a Spanish criminal action related to Pinochet, and $2.7 million to settle a civil shareholder lawsuit. Former chairman and chief executive Joe L. Allbritton and his son, Robert L. Allbritton, also a former chairman of the company, agreed to pay $1 million in the Spanish settlement.
U.S. Attorney Kenneth L. Wainstein said the investigation is ongoing. Government sources said the case has turned to the conduct of individuals associated with the suspect accounts. Only one former Riggs executive, former Equatorial Guinea account manager Simon P. Kareri, has been personally identified in other court actions as a subject of the investigation. Riggs, in Securities and Exchange Commission filings, has said "current and former employees" are the subject of various governmental investigations.
Former Riggs executive Carol Thompson managed Pinochet's accounts from 1994 until she left Riggs in 2003.
Separately yesterday, Riggs released its 2004 results. The company spent more than $100 million last year on civil and criminal fines and legal settlements as well as lawyers, consultants and auditors to deal with the scandal.
The result was a $98.3 million loss in 2004, compared with a $979,000 profit in 2003. In the fourth quarter, Riggs lost $57.8 million, compared with a $6.9 million loss in 2003's fourth quarter.
Without the legal fees, fines and settlements, Riggs would have posted a small profit. The high legal expenses were the primary reason Riggs and PNC agreed to chop more than $4 a share off the merger price agreed to in July, ultimately agreeing to $20 a share after a brief legal fight in February.
Joe Allbritton, who resigned as a director last May, used the company's former jet in 2004, the SEC filing said. His personal use of the Gulfstream V, which is the subject of investigations by the Department of Justice and bank regulators, cost the company $189,000 last year.
KPMG LLP, Riggs's auditor, gave Riggs an unqualified opinion about the accuracy of its financial statements, but noted several weaknesses in the company's internal controls, according to its annual report filed yesterday with the SEC. Weaknesses included high turnover in Riggs's internal auditing staff, the limited amount of time Riggs's new regulatory compliance program has had to prove its reliability, and mistakes Riggs made in tax-related accounting.
Hendrix said the bank has taken measures to improve its staffing and corrected the tax-related accounting. He added that the company is confident in the new regulatory compliance program instituted last year after regulators criticized its anti-money-laundering compliance.