In Cultivating International Clients, Riggs Went Down a Perilous Path

Augusto Pinochet at a ceremony in Santiago in 2003. He resigned as president of Chile in 1990, and resigned as commander in chief of the country's military in 1998. (Martin Thomas -- AP)

Yet such sentiment only explains what happened at Riggs to a point. There was nothing in itself illegal about being Pinochet's personal banker. But illegally helping him hide his money is another matter. (Riggs pleaded guilty in January to failing to report suspicious transactions by Pinochet and another client, Equatorial Guinea.) Riggs's failure appears to have required a culture and environment where multiple people dissociated their own ethics from their conduct, whether out of fear of being perceived as not a team player or some other reason, said Jeffrey A. Sonnenfeld, associate dean of executive programs at the Yale School of Management. Sonnenfeld said he thinks corporate corruption is often a byproduct of broader cultural problems within a company.

"There's a deeper, darker set of issues in these breakdowns," Sonnenfeld said. "People know right from wrong. You don't need morals training to know what you're doing is wrong. There's often a group-think mentality, where the notion of diffusion of responsibility sets in. It's often coupled with a super-charged confusion of the group, where it becomes impossible to consider alternatives or voice dissent."

A 2003 survey of 100 senior and mid-level Riggs managers asked pointed questions about the Riggs culture. Current and former Riggs executives familiar with the survey said the results had a common theme: a "fear of expressing opposing views" said one; "don't stick your neck out" said another. The survey was summarized by sources familiar with the results. Henry D. Morneault, a Riggs executive vice president who joined the bank in 2001 and has worked with Allbritton for more than 20 years, told internal Riggs investigators in an interview last September that Riggs had cultural failings with respect to its high-profile international clients, such as Pinochet. He attributed the culture, in part, to his boss, Allbritton.

International banking, which Allbritton doted on and had the most direct participation in, had a "systemic problem" with compliance with regulations, including anti-money laundering laws, Morneault told investigators. In the international division, employees also lived in "fear of reprisal and of losing their jobs" if they lost a client, Morneault told investigators.

Morneault, according to sources with knowledge of the interview, attributed this fear directly to Allbritton, saying employees conducted business "never wanting to upset the chairman."

Morneault, through a Riggs spokesman, declined to comment.

The person directly responsible for the Pinochet account, Carol Thompson, was considered a star by Allbritton, according to current and former executives at the bank. She ran her Latin American group "like a small fiefdom. She was feared," said one person familiar with the division's operations. She tightly controlled information about her clients. According to Riggs documents, she reported on the Chile and Pinochet relationships directly to Allbritton, often making an end run around her direct supervisor, Raymond M. Lund.

Thompson left the bank in May 2000 to join her husband, a state department employee who had been assigned to Argentina. When she left, Allbritton, according to internal bank documents and current and former bank officers familiar with the transaction, authorized a special $25,000 bonus for Thompson. Riggs kept her on the payroll during her two years in Argentina, though she only made a few client calls. She returned to Riggs in 2002, only to quit in June 2003 as the company began implementing new compliance measures in international banking.

Through her lawyer, Thompson declined to comment.

Pinochet was not the only controversial client the bank wooed. Its largest international account was for the oil-rich West African nation of Equatorial Guinea and its ruling family, which has been widely accused of human-rights abuses. The manager of that account, Simon P. Kareri, was also considered a star at Riggs until he was fired in 2004 as part of an investigation into fraud involving those accounts.