washingtonpost.com  > Business > Industries > Financial Services

Quick Quotes

Correction to This Article
A Jan. 17 Washington Business article about Riggs Bank incorrectly said that business ties between directors and a bank are unusual. Such ties between banks of Riggs's size and their directors are common.
Page 3 of 3  < Back  

Riggs Directors Silent As Scandal Unfolded

Marshall, who left Riggs in 2000 to become an independent consultant, said: "I was not trying to be lackadaisical toward the issues at hand. I was trying to drive the discussion towards a discussion of the policy and the roles and responsibilities of the committee."

When Allbritton joked about regulators, no board members expressed disagreement, according to sources who have listened to the tapes. Sources who were present at the meetings said many directors were friends with Joe Allbritton, and several had known him for decades and were accustomed to his jokes.


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)

_____Related Articles_____
Riggs Directors on 2 Boards Share Personal Ties to Allbritton (The Washington Post, Jan 17, 2005)
_____Post 200 Profile_____
Riggs National Corp.
_____Related Coverage_____
Inquiry Into Use of Riggs Plane Expands (The Washington Post, Jan 19, 2005)
Move Indicates Criminal Charges Likely Against Ex-Riggs Executive (The Washington Post, Jan 11, 2005)
Riggs Negotiating Settlement With Justice Department (The Washington Post, Jan 5, 2005)
Special Report: Riggs Bank

Allbritton spokesman Paul Clark said Allbritton's comments were often in jest, and shouldn't be taken to imply Allbritton had a dismissive or mocking attitude toward bank regulators or compliance with anti-money-laundering laws. "Everybody says something regrettable at one time or another," Clark said. "And taken out of context such comments can be misread."

In December 2003, the OCC told Riggs Bank management and its board of its concerns about accounts held by Equatorial Guinea and its ruling family, accounts that held hundreds of millions of dollars of revenue obtained from oil companies doing business in the west African country.

The OCC warned the board and Riggs managers that the deposits exposed the bank to financial and reputational risks. Regulators also raised questions about the independence of Simon P. Kareri, Equatorial Guinea's account manager at Riggs, who had close ties to the ruling family.

Allbritton, still smarting from the OCC action that led to the Pinochet accounts being closed the year before, told the OCC examiner that Riggs had no intention of closing the accounts, according to the Senate permanent subcommittee on investigations report. Although Robert Allbritton would later tell the subcommittee that the majority of the board felt otherwise, no one spoke up at the meeting with regulators, according to sources familiar with the meeting.

The voluminous record of the directors' actions compiled by the Senate subcommittee, released recently, contains only one report of a board member openly challenging Riggs management. Christopher Meyer became a Riggs National Corp. director in late 2003 after leaving his post as British ambassador to the United States. He joined the board just at the time the OCC began to express concern about Riggs's Equatorial Guinea accounts. At a Jan. 21, 2004, meeting, Meyer said Riggs should get rid of the country as a customer, citing well-known corruption of the country's ruling family.

Minutes of the board meeting show that Hebert assured Meyer and the rest of the board that its dealings with Equatorial Guinea were not a problem. However, a month later, in February, Riggs's security and compliance chief David B. Caruso uncovered a potential fraud by and a number of suspicious transactions in the accounts. Those discoveries ultimately would lead the OCC to notify Riggs on March 2 that it intended to fine the bank.

Many of Riggs independent directors, including Meyer, were unaware of that development until a March 22 board meeting. Meyer was angry, according to minutes of the meeting and people who were present. He felt that Robert Allbritton and Hebert had failed to keep the board fully informed. He quit several weeks later in frustration, according to sources familiar with the circumstances. Publicly, Riggs said Meyer didn't have enough time to serve on Riggs board.

The boards of the bank and its holding companies have become more active over the past year, hiring a seasoned team of internal investigators and firing several employees. The directors solicited buyers for the bank, and announced a deal under which Riggs be acquired by PNC Financial Services Group. That deal could be derailed by further investigations of the bank, since the purchase agreement allows PNC to walk away if there are "material adverse changes" in circumstances. If the PNC deal goes through as originally agreed to, the Allbritton family's collected holdings will be worth close to $300 million.

"The Riggs boards are focused on assuring that Riggs prudently and effectively addresses all issues facing the company and its businesses," said Mark N. Hendrix, a company spokesman. "The boards recognize their responsibility and fiduciary duty with respect to the enterprise and are committed to continuing to act accordingly."

The boards often meet once or more a week now to review efforts to remedy regulatory problems and to hear about what Riggs's internal investigation is finding.

The directors want to avoid surprises like at the May 2004 meeting, when the OCC and the Financial Crimes Enforcement Network, a Treasury Department agency that collects information about possible crimes at financial institutions, presented the company's two boards with the consent order fining the company for violations of the Bank Secrecy Act.

Although the boards knew the fine was coming, board members were caught completely off guard by its size and the tough language in the Financial Crimes Enforcement Network consent order. "Absolute shock," was how one senior bank executive described a May 13 meeting at which H. Rodgin Cohen, the bank's regulatory counsel, presented the boards with the consent order.

While some members raised concerns about the language of the proposed settlement, in the end, all board members agreed to sign the consent order unchanged.

"It was like a two-by-four right between the eyes," one person present said.


< Back  1 2 3

© 2005 The Washington Post Company