In October 2002, the directors of Riggs Bank received an internal memorandum listing $1.9 million in suspicious cash withdrawals by former Chilean dictator Augusto Pinochet from 2000 to 2002 -- the board's first official notification of a relationship that bank regulators were investigating.
The directors did not question the nature of the bank's relationship with Pinochet, who only a year before had eluded a Spanish criminal indictment on genocide and torture charges, according to sources who have seen minutes and transcripts of the meeting. No internal procedures were changed. The board took no action.
Riggs Bank Chairman Joe L. Allbritton in an exchange with a stockholder at the company's annual meeting in 1992. Allbritton resigned as chairman in 2001.
(Bill Snead -- The Washington Post)
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The directors of the bank, much like their counterparts at the bank's holding company, deferred to the management team picked by the bank's chief shareholder, Joe L. Allbritton. Within 18 months, Riggs would be embroiled in the most extensive money-laundering scandal in modern banking, fined $25 million and damaged so severely that it would be forced into a merger.
In a number of corporate scandals in recent years, boards of directors have been criticized for not aggressively monitoring the activities of management. Earlier this month in separate actions, directors of WorldCom Inc. and Enron Corp. agreed to pay millions of dollars of their own money to settle class-action lawsuits seeking redress for fraud that occurred on their watch, highlighting the issue of director responsibility.
At Riggs, the directors at the bank and its holding company did not confront the huge risks connected with Riggs international banking relationships. The boards followed the lead of Allbritton and his wife, Barbara -- both directors who were often openly derisive of efforts by regulators to improve oversight of its international banking operations.
The information in this article was drawn from internal Riggs documents released by a congressional investigation, public records, transcripts of board meetings and sources familiar with the directors' actions. The sources spoke only on the condition that they not be identified because the bank is the subject of ongoing investigations.
Joe Allbritton ran Riggs for 20 years, until 2001, and helped court Pinochet as a client. Riggs also provided banking for the dictator of Equatorial Guinea and with embassies from countries designated as "non-cooperative" with international anti-money-laundering efforts.
Despite such "high-risk" clients, efforts by independent directors to make sure the company was complying with anti-money-laundering rules were cursory at best, according to the account that emerged from sources and documents, and challenges by outside directors to Riggs management -- headed by Joe until Robert L. Allbritton assumed control in 2001 -- were almost nonexistent.
A director, speaking on the condition he not be identified, said he considered Riggs "Joe's bank." In his view, since Allbritton controlled 40 percent of it, Riggs was his to run as he pleased within the reasonable limits of federal regulation and shareholder interest. The director added that many Riggs bank and holding company directors did not recognize that there was a huge money-laundering risk involved in international and embassy banking. Those views were echoed by other board members and executives and advisers to Riggs directors.
That hands-off attitude toward the bank's money-laundering compliance may have been reinforced by the company's chief regulator. The Office of the Comptroller of the Currency (OCC), from 1996 until 2002, repeatedly told Riggs Bank directors that the company was making "progress" with its anti-money-laundering procedures.
